To Sell or not to sell

12 Replies

Hi Everyone,

I just bought a new home and looking for advice on the best option for my existing home would be.  I live in the SF Bay Area and my current home can rent out for $3500 roughly and I have a mortgage payment on it for about $1600 a month with a balance of 410k.  Do I keep it and rent it out or sell it and use the proceeds to buy something else that can provide me with more cash flow?  This home can probably sell for $1m right now.  My ultimate goal is to continue to reinvest my real estate income into more properties down the line?  There's probably tons of things I haven't considered and some info that I haven't shared either, but I hope this is enough to get the ball rolling on this discussion.  I'm hoping to benefit from the vast experience this community has to offer.  Thanks in advance.

HI @Victor Chan , thanks for sharing. If the goal is to build a portfolio, in my humble opinion I'd consider holding it, refinancing to pull out equity and invest in other properties. I am not a lender, but can put you in touch with my NorCal lending team. They can run you through the options and benefits of both renting/selling. As you might imagine, since it's David Greene's lending team they have a ton of experience.

Hope this helps!

@Victor Chan

Sell if:

You don't want to be a bay area landlord

Finishes are new and the house does not have hardened features appropriate for renting

Hold if:

You want to be a bay area landlord

House has older finishes and value wouldn't suffer from additional wear and tear.

The amount of risk you take on by renting would be significant and under no circumstances should you hold long enough to lose your step up in basis. You can make much much much better cash flow with 590K, so I think this one is better sold.

@Victor Chan $3500 rent on a $1mill property is not a good return. I would sell the property now while the market is strong. You should also benefit from not paying capitals gains taxes on the profits up to $250k if you are single and $500k if you are married (check with your CPA on this). I would then reinvest the proceeds in better yielding properties. 

@Victor Chan , If you lived in that house for 2 out of the last 5 eyars this is your chance to sell and take $500K of profit tax free.  If there's more than $500K of profit then rent it for a year and then sell take the first $500K tax free and 1031 the rest.

Always pull money out tax free and reset the clock.  Even if you want to reinvest in that area.  Tax free is the trump card!