So, long story short, I moved into another property without having to sell my previous =) My plan was initially to rent the condo out. If I rent it now, I will clear 600 monthly after all expenses. I do know some assessments will come down the line and cut into that 600. For some reason I cant get past the extra $600 a month. Also I'm sure there is some emotional attachment to the property as well.
OR
I can sell the condo and will clear close to $100,000. But now I wont have the extra income. Although I will have money to invest, finding deals where I can clear $600 are difficult to find.
With the extra $100,000 what are some ideas to invest?
Would just like some thoughts or different perspective based on your experiences. Much appreciated for your input.
@Richard Miller I have been investing in rentals in PBC since 2014. My only regret is that I sold two of them over the past two years. I will need quite the pullback in the market to purchase at the prices I acquired them. Anything I could try and buy now won't cash flow nearly as well. I've been investing out of state the past two years.
If you want experience managing a rental, you could use this condo as your guinea pig to get the experience over the next 2-3 years and then sell the property to avoid capital gains. Must live in it 2 out of last five, so you have a few years to work with. Or just keep it and refinance out to free up some $$$ a couple years from now.
Cash flow is great - do you want to manage a tenant though? What about scaling, are you planning on adding more, or is this intended as one part of your overall investment strategy?
There are many options if you have capital. Plus you may qualify for the capital gains tax exemption for primary residence sales (talk to a CPA, terms and conditions apply!)
The "right" option for you depends on your goals and preferences. If you're short on time and don't want to manage tenants, you might want to look into syndications, notes, or turnkeys.
Yes, I would like to scale and add more properties and manage a tenant. I would like to gain the experience. That is were I am stuck. If I keep it, scaling may take longer than I would like. My goal is to get into multi family units. So, I was just figuring with the extra cash, I would be able to make some moves. Here in South Florida, I find it difficult to make anywhere near $600 cash flow, so that's kind of where I am at.
Thank you very much for your reply, much appreciated!
I am an investor/Realtor in Palm Beach County. I would definitely consider reinvesting! Where in South Florida are you located? At $100,000 and $600 per month in cash flow, you are only getting a 7.2% cash on cash. I know of a few duplexes in Palm Beach and Martin County where you can get close to 12% cash on cash.
The duplexes are usually not in HOA's or condo associations so you don't have to worry about that taking away your profits or any assessments. However, they are typically older with older roofs and A/C's that could eat into your investment.
@Richard Miller I have been investing in rentals in PBC since 2014. My only regret is that I sold two of them over the past two years. I will need quite the pullback in the market to purchase at the prices I acquired them. Anything I could try and buy now won't cash flow nearly as well. I've been investing out of state the past two years.
If you want experience managing a rental, you could use this condo as your guinea pig to get the experience over the next 2-3 years and then sell the property to avoid capital gains. Must live in it 2 out of last five, so you have a few years to work with. Or just keep it and refinance out to free up some $$$ a couple years from now.
Profit in real estate comes from three sources...monthly cash flow, principal reduction, and appreciation. Cash flow is only one piece of profit.
Check out the section 121 gain exclusion on the sale of your primary residence. If you have experienced a lot of appreciation, convert the property to a rental, and then rent it out for 3+ years, you lose the capital gain exclusion on the appreciation.
The $600/mth is irrelevant if it does not include all costs, including cap ex reserves.
It's hard for us to comment on sell vs keep as we don't have the figures to assess whether or not the condo is a good investment. $600/mth could be awesome or awful depending on your equity and the property value.
@Kyle Funnell I am located in Broward County. I really like Martin County, I look in there a lot. I actually just moved into an older home and it was an absolute beast. Wasn't working with much, so I did a lot of the work myself along with some good guys I know. Even doing it that way, a lot of money went into making it nice and very basic.
@Mitchell Jaworski Yes, that is what I am kind of worried about as far as finding something else. That sounds like a good plan as far as gaining experience and then selling. I am going to look into the capitol gains tax. I have been trying to actually get a HELOC, but I have been denied quite a few times, especially with everything going on. I may look into refinancing, I would like to be somewhat liquid in the next coming months so if something pops up I can jump on it.
@Mike Dymski I will check out the section 121. I must educate myself on the capitol gains tax. I didn't even think about it until it was said on here.
I will cash flow $600 dollars after taxes, hoa, mortgage, insurance are all paid. Tenant would pay electric and water.
I have a little more than $100,000 in equity. The property is valued around 145,000. I am not too sure how much more the property will appreciate over the next 5 years.
Got it. The $600 will drop when you add in cap ex, maintenance, and a vacancy factor (in addition to management fees as you should get "paid" for that work).
That leaves a fairly low ROE. Would need to factor in mortgage pay down and predictable appreciation to the return calculations.
Getting a few hundred in cash flow with 70% equity in the property is not too hard to find.