160k in equity + cash flowing rental
Investor · Austin, TX · Member since 2022 · 4 posts · 2 votes
160k in equity + cash flowing rental
Most Popular Reply
Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes
3yQuote from @Jay Dotson:
Quote from @Mason Liu:
Hey Jay, congrats on all that built up equity! Would need a bit more information on your current income, savings and investment rate, what you'd do with the sale proceeds if you sold, if you have the ability to purchase another property without selling this one, what is the potential return on investment of the next purchase or investment etc...
If you are confident in that sub market's potential to grow and appreciate in the mid to long term, I'm leaning more towards keeping it, at least for now. You're cash flowing pretty decently and the tenant is paying down the mortgage (I'm assuming there is a mortgage) while you enjoy the appreciation and tax benefits associated. As long as you save that extra cash flow towards CAPEX/maintenance items that will come up in the future, you should be fine.
Thanks so much for your feedback. That’s what I’ve been thinking as well. Not really sure if it would be worthwhile to use the proceeds for a multi family property, I guess that was more of my question.
I feel confident in the ATX market though it’s been rough the last year. I got in at a great time and still think the ceiling is high on the home. Just a question of 1 door for $700/mo and the appreciation of 1 home vs. using the proceeds from the house to go into a multi family or storage facility to have greater potential.
@Jay Dotson A couple things to think about. Give more in-depth thought about your goal and Why. The Why is important and will keep you focused on your goal of financial independence. The Goal and Why will also lead you in your decision making.
Now: Pros and cons look at your current situation.
Pros
160k equity in current property!!!!
3% loan!!!!!!
Property is turnkey and rented!
Cash flowing $700 monthly
Your comfortable with property and is keenly aware of property and tenant issues.
Now before i go into the Cons about this property, I want to interject a thought.
Let's say you did not have this current property but you had 160 cash to invest in property. If that was the case would you buy the current property for an investment. You see, since it was your primary residence you probably had a different goal in mind when you bought it. Although an easy transition from primary residence to investment property conversion, it usually is not the most effective pathway to financial independence. However, it usually is the easiest pathway.
Cons: These are more items for thoughts because I personally don't know thoroughly know your situation.
SFH usually is less profitable than a small multi-family property (duplex, triplex, four plex)
Re-deploying 160k could net you multiple properties vs your one SFH.
So here is the bottom line, Yes selling could very well move you faster on the timeline to becoming financially independent, but will mean more work and possibly stepping further out of your comfort zone compared to where you are now. If you have the time and energy to make that move then I would do it. Your tax free gain will compensate for having to acquire a new loan at a higher interest rate.
I am 68 and financially independent. I don't have the interest to increase my portfolio. I would stay put or sell and put the money in assets that don't have as many moving parts as rental real estate. However, if I was younger and not financially independent, then yes I would seriously consider selling and re-deploying the equity and i would change property type to small multi-family. But again, I don't know your desires, energy effort, goal or why. Good luck and cheers!
9 Replies
- Financial Advisor · Boynton Beach, FL · Member since 2019 · 127 posts · 80 votes3y
Hey Jay, congrats on all that built up equity! Would need a bit more information on your current income, savings and investment rate, what you'd do with the sale proceeds if you sold, if you have the ability to purchase another property without selling this one, what is the potential return on investment of the next purchase or investment etc...
If you are confident in that sub market's potential to grow and appreciate in the mid to long term, I'm leaning more towards keeping it, at least for now. You're cash flowing pretty decently and the tenant is paying down the mortgage (I'm assuming there is a mortgage) while you enjoy the appreciation and tax benefits associated. As long as you save that extra cash flow towards CAPEX/maintenance items that will come up in the future, you should be fine.
- Investor · Austin, TX · Member since 2022 · 4 posts · 2 votes3y
Quote from @Mason Liu:
Hey Jay, congrats on all that built up equity! Would need a bit more information on your current income, savings and investment rate, what you'd do with the sale proceeds if you sold, if you have the ability to purchase another property without selling this one, what is the potential return on investment of the next purchase or investment etc...
If you are confident in that sub market's potential to grow and appreciate in the mid to long term, I'm leaning more towards keeping it, at least for now. You're cash flowing pretty decently and the tenant is paying down the mortgage (I'm assuming there is a mortgage) while you enjoy the appreciation and tax benefits associated. As long as you save that extra cash flow towards CAPEX/maintenance items that will come up in the future, you should be fine.
Thanks so much for your feedback. That’s what I’ve been thinking as well. Not really sure if it would be worthwhile to use the proceeds for a multi family property, I guess that was more of my question.
I feel confident in the ATX market though it’s been rough the last year. I got in at a great time and still think the ceiling is high on the home. Just a question of 1 door for $700/mo and the appreciation of 1 home vs. using the proceeds from the house to go into a multi family or storage facility to have greater potential. - Financial Advisor · Boynton Beach, FL · Member since 2019 · 127 posts · 80 votes3y
Quote from @Jay Dotson:
Quote from @Mason Liu:
Hey Jay, congrats on all that built up equity! Would need a bit more information on your current income, savings and investment rate, what you'd do with the sale proceeds if you sold, if you have the ability to purchase another property without selling this one, what is the potential return on investment of the next purchase or investment etc...
If you are confident in that sub market's potential to grow and appreciate in the mid to long term, I'm leaning more towards keeping it, at least for now. You're cash flowing pretty decently and the tenant is paying down the mortgage (I'm assuming there is a mortgage) while you enjoy the appreciation and tax benefits associated. As long as you save that extra cash flow towards CAPEX/maintenance items that will come up in the future, you should be fine.
Thanks so much for your feedback. That’s what I’ve been thinking as well. Not really sure if it would be worthwhile to use the proceeds for a multi family property, I guess that was more of my question.
I feel confident in the ATX market though it’s been rough the last year. I got in at a great time and still think the ceiling is high on the home. Just a question of 1 door for $700/mo and the appreciation of 1 home vs. using the proceeds from the house to go into a multi family or storage facility to have greater potential.I think one thing you can do is identify a market where you may be able to uncover potential deals. If you start to notice that there is a good probability of finding a deal that will provide a greater ROI, then you could potentially look into selling. Consider closing costs on both the sale of your home + purchasing of a new property as well into that equation.
IE: If you are cash flowing $700/month now, and factor in x% for rent growth and y% of appreciation for your property, and also a gain from the loan paydown, you can figure out exactly what ROI you are achieving now. Now the goal is to find something that will easily beat that current ROI, and if it does it could make sense to either sell or get a line of credit on the existing equity to purchase it. It will be very tough, especially in today's market, but that's what that would look like.
- 3yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
@Jay Dotson that's around a 5.25% cash on cash return on the equity you have. As long as you're ok with that and don't think you can do better that's fine.
You can almost get that risk free right now so if it were me I would sell tax free, put the cash in a risk free asset like short term bonds, high yield savings or money market while I looked for my next real estate investment where I could get 10%+ cash on cash.
The Moorhead Team5140 Reviews - Investor · Austin, TX · Member since 2022 · 4 posts · 2 votes3y
Quote from @Jordan Moorhead:
@Jay Dotson that's around a 5.25% cash on cash return on the equity you have. As long as you're ok with that and don't think you can do better that's fine.
You can almost get that risk free right now so if it were me I would sell tax free, put the cash in a risk free asset like short term bonds, high yield savings or money market while I looked for my next real estate investment where I could get 10%+ cash on cash.
Thanks Jordan! Appreciate the feedback and perspective!
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
How much money is that equity, that is just sitting there losing you? How many deals are you missing out on due to it being un-used? If your goal is to grow, you need to access that equity.
- Investor · Austin, TX · Member since 2022 · 4 posts · 2 votes3yHi Eliott! Thanks for your feedback. Mind if I schedule some time on your calendly to pick you brain to learn more about the specific types of deals you would be looking for?
Quote from @Eliott Elias:
How much money is that equity, that is just sitting there losing you? How many deals are you missing out on due to it being un-used? If your goal is to grow, you need to access that equity.
- 3yMichael PorchePro MemberRental Property Investor · Boise, ID · Member since 2017 · 220 posts · 101 votes
Hey @Jay Dotson! Depending on what you can do with your 160k of equity. If you buy another investment that makes a considerably higher return than it currently does, then that would be the move I would make. If holding it makes a stronger return until you can find something that makes a larger one, then make that move.
I think the most important thing to consider is that if your goal is financial freedom, like most of us, then you need to measure the current return on a cashflow basis and appreciation basis and see how it compares. If you can do considerably better elsewhere with the same amount of effort, then I would sell to move it. - Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes3y
Quote from @Jay Dotson:
Quote from @Mason Liu:
Hey Jay, congrats on all that built up equity! Would need a bit more information on your current income, savings and investment rate, what you'd do with the sale proceeds if you sold, if you have the ability to purchase another property without selling this one, what is the potential return on investment of the next purchase or investment etc...
If you are confident in that sub market's potential to grow and appreciate in the mid to long term, I'm leaning more towards keeping it, at least for now. You're cash flowing pretty decently and the tenant is paying down the mortgage (I'm assuming there is a mortgage) while you enjoy the appreciation and tax benefits associated. As long as you save that extra cash flow towards CAPEX/maintenance items that will come up in the future, you should be fine.
Thanks so much for your feedback. That’s what I’ve been thinking as well. Not really sure if it would be worthwhile to use the proceeds for a multi family property, I guess that was more of my question.
I feel confident in the ATX market though it’s been rough the last year. I got in at a great time and still think the ceiling is high on the home. Just a question of 1 door for $700/mo and the appreciation of 1 home vs. using the proceeds from the house to go into a multi family or storage facility to have greater potential.@Jay Dotson A couple things to think about. Give more in-depth thought about your goal and Why. The Why is important and will keep you focused on your goal of financial independence. The Goal and Why will also lead you in your decision making.
Now: Pros and cons look at your current situation.
Pros
160k equity in current property!!!!
3% loan!!!!!!
Property is turnkey and rented!
Cash flowing $700 monthly
Your comfortable with property and is keenly aware of property and tenant issues.
Now before i go into the Cons about this property, I want to interject a thought.
Let's say you did not have this current property but you had 160 cash to invest in property. If that was the case would you buy the current property for an investment. You see, since it was your primary residence you probably had a different goal in mind when you bought it. Although an easy transition from primary residence to investment property conversion, it usually is not the most effective pathway to financial independence. However, it usually is the easiest pathway.
Cons: These are more items for thoughts because I personally don't know thoroughly know your situation.
SFH usually is less profitable than a small multi-family property (duplex, triplex, four plex)
Re-deploying 160k could net you multiple properties vs your one SFH.
So here is the bottom line, Yes selling could very well move you faster on the timeline to becoming financially independent, but will mean more work and possibly stepping further out of your comfort zone compared to where you are now. If you have the time and energy to make that move then I would do it. Your tax free gain will compensate for having to acquire a new loan at a higher interest rate.
I am 68 and financially independent. I don't have the interest to increase my portfolio. I would stay put or sell and put the money in assets that don't have as many moving parts as rental real estate. However, if I was younger and not financially independent, then yes I would seriously consider selling and re-deploying the equity and i would change property type to small multi-family. But again, I don't know your desires, energy effort, goal or why. Good luck and cheers!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.