Thinking of selling a home in Decatur, GA

[Hyun Supul]

Hello all, I have a few single family houses in GA. The one in Decatur, GA has been giving me some problems. I brought this for 70K and Redfin and etc says it's worth about 200K now, giving me about 150K equity. I am thinking of selling this into a 1031 exchange. The dilemma of course is that the mortgage rate is very high now. But an option for me would be to use this for an almost-cash-deal. For example, If I buy a 200K house with a cap rate of 7% or higher, with a 75% down payment (as an example) I figure I can still significantly increase the cashflow.  Now the deals within GA with high cap rates are getting rarer. So, I am thinking of buying in other states. This is somewhat frustrating times. But I wish to find ways to increase my cashflow.

If you have any thoughts, comments or advice I would appreciate. If you know a trustworthy realtor who serves the area I would not mind a referral either. Thanks

Hyun

[Michael Dumler]

@Hyun Supul, what is explicitly giving you problems? Property condition? Mismanaged tenant? Is the asset simply not performing? While interest rates may be on the rise, keep in mind, that rents have significantly increased as well. I would first advise that you assure your rent is at market value before deciding to sell. If you believe that selling is the best route, understand, that acquiring an SFH investment for 200k is still very competitive and time-consuming. With a 1031 delayed exchange, you know you have a tight window with 45 days to identify the property and 180 days total to close. Therefore, if you'd like to purchase OOS, you need to start establishing connections with vendors in other markets well before listing the property. My last point, while it may not be anytime soon, interest rates will eventually come back down. This is a matter of if it's more important for you to potentially wait and refinance at a later time to pull your equity out or sell now in hopes of finding a better-performing asset. Hope this all makes sense and helps!

[Dave Foster]

@Hyun Supul, Look first for the why of what you want to sell. Then see how the new property answers that "why".  Another option, depending on the why, would be to do a partial exchange.  You could buy a replacement property for all cash (150K).  That solves the lending issue.  You would only pay tax on the difference between your sale and purchase.  In your case you'd pay tax on approx $50K and shelter tax on approx. $100K.

[Hyun Supul]

Hi @Dave Foster and @Michael Dumler I greatly appreciate your replies. I would not mind sharing details over private messages but let me try to share some basic answers.
 

My number one why is my wish to generate better cashflow, as the property hasn't cash flowed properly for over nine months. The property manager has been sending bills for expensive repairs like never before. As an OOS investor (I live in MA) I could not verify the validity of these bills. 

But let's assume that the problems are over, and the property starts to cashflow again. When compared to my initial investment, the ROI would be considered excellent in that case. But when compared to the equity, the return on equity would be considered mediocre at best. I believe a recent BP podcast talked about the importance of "return on equity". So IF I can find a 150K house with 7+% cap rate the return would be noticeably better than my current situation with the property. (At the current rent and fixed expense, the ideal cashflow from the property would not be much more than 4% compared to the equity.) I could consider something like buying a 600K multi family property if the numbers are right. But I understand in some markets these days even a 600K multi family property might not cashflow.

I admit I am feeling a little bit impatient after the losses. But I have life goals that I set for myself that require better cashflow sooner than later. So I may want to keep other properties for longer term appreciation and other options, but I feel I should try to see what I can to increase my cashflow this year. Thank you for your advice and thoughts.

[Dave Foster]

@Hyun Supul I sent you a pm.  We can talk privately there if you want.

[Alex Talcott]

I'll consider buying this property, especially if bundled with at least one other and if you hold paper.

[Tomer Sonsino]

Hey Hyun!

I am a Realtor/Investor in the Decatur area.

If you need any assistance determining value or anything else, please don't hesitate to reach out.

[Robert Olinick]

Hi Hyun. I am an all cash, fix and flip investor in the Atlanta area. I am also a licensed agent. if you ever have questions or want to chat about the market, let me know! 

I am not a wholesaler and can get you the best offer on your home. We will actually fix it up and sell it on market. Please give me a call anytime 470-701-9274