Should I sell my paid-off investment property to buy more index funds?
Throwaway for privacy. I own a single family rental house in Anna, TX, which is growing city about 40 min north of Dallas. Bought it new construction in March 2024 for 402k, paid off in full, no mortgage. My parents are semi retired and manage it for basically free so it's been a super hands off experience for me.
Only issue is the city is way oversaturated with rentals, more than half the houses in the same neighborhood are rentals too, and the single family homes prices have been steadily dropping in Dallas the last year or so. My tenant's been there since the house was new and it's been smooth until recently, they've started being more difficult. Not sure I want to deal with new tenants and re-leasing this thing into a soft market if they leave.
Numbers wise: 2025 rent was 28,200, after property tax, insurance, HOA and the token management fee I pay my parents, net came out to 16,864, so about 4.2% return unlevered on what I paid. If I sold today I'd probably net somewhere around 350-360k, so I'd be taking a pretty big loss.
I'm in my mid 20s, run a business I started in college that's constantly growing, which I would like to put my full focus on. And my time horizon is still long. Part of me thinks this capital would be way better off in my stock portfolio such as VOO where I don't have to think about it at all. But part of me also doesn't want to sell into a soft local market and eat the loss, as well as losing the tax benefits from real estate.
Curious what you guys think, happy to answer questions on the numbers, thanks in advance!