Continue Renting or Sell...New Investor with 1st time analysis

[Daniel Garcia]

Hi team, I'm trying to decide if I should continue to hold my first ever investment property or cash out while the market seems hot. I just got into BP and have started learning about all the various metrics to determine if a property is "worth it" after having bought the property back in 2014, so you could say I'm a bit of a late starter. 

Simply stated: Question 1) should I keep the property or cash out and put it into another property? Follow Up: What should be the profit margin threshold to sell? 

Subject Property: 2 br/1 ba | Purchased in 2014 for $110,600 | 

Per my 1st ever comps analysis: ARV $132,000

County Tax Valuation: $168,185

Zillow Zestimate: $205,721

RE Agent Suggested Listing Price:  Pending interview a couple this week

Cap Rate: 6%

CoC: 1.9%

Monthly Cash Flow: $40

Mortgage: $657

Tenants have been in place for over 6 years before purchasing the property. Not so good property manager (kept her on when I purchased) and seems to be very close to tenants so I've been reluctant to fire the PM in fear of losing the tenant. 

I appreciate everyone's two cents, thank you for all your help! 

[Andrew Kerr]

@Daniel Garcia whats your mid term goal? What do you want to accomplish in 2-3 years? If you are trying to build properties, then why sell?

I have always taken a buy & hold approach for a majority of my REI. But my original real estate mentor told me to evaluate each property every year. If it is a challenging area, has too much upcoming capex, or you can reinvest the equity into another investment and get a higher rate of return, then you sell.

Start with what your current rate of return is? If you don't know, its time to run numbers.

If you sell, and don't do a 1031, figure you will lose 6-8% on sales costs, and then probably 15% on capital gains. If you can do a 1031, figure loosing just the 6-8% on sales costs. Does it still seem worth it? If so, are you sure you can find another investment with a higher rate of return that you are getting right now?

You can also look at doing a cash out refi to free up some of the equity, then use that cash for another purchase.