There's alot of question to ask, but now my main concern is should i hold or sell my first investment.
Definitely sell. Unless holding is a better option for you based on your goals.
It really depends on your financial situation... If its going to tie up all of your funds I would try to sell. If your in a position to buy several more it might make sense to hold on to it.
Determine your "Return on Equity" versus your "Return on Investment", based on the net investment that would be available if you sold your property. Here's an example:
You have a $100K property with $50K in equity that generates an annual net income of $5K. Your ROE is $5K/$50K = 10%. If you sold your property and had $5K in selling costs, your equity would now be $45K. Can you invest your $45K and get an ROI of $5K (11%)?
This is the basic method to determine whether you should keep or sell your property. As your property increases in equity, the REO will tend to decrease (unless your net income keeps pace with the appreciation of your property and the principle reduction of any loans). Normally, once you've owned a property with a 30-year amortized loan, the REO begins to decrease relative to taking the equity and investing in a new investment around year 12, because of the rate of your mortgage payment that is decreasing your principle balance. it's easiest to understand this if your graph the remaining loan balance by remaining years and look at the curve.
I hope the concept of REO versus ROI helps you.
God Bless You!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing