Should I sell my Duplex now?

Question

Here’s the situation.

Bought my first duplex a little over 2 years ago in a B neighborhood in NE Ohio.

Interest rate is 3% and the payment is 2100$ a month but the house of it were not owner occupied would bring in 3200$-$3600 a month however most of my mortgage is paid for in the other side being rented.

Comps in the area are going for $400kish +- 20k or so based on how up to date they are.

I’m considering selling because I will walk away with a minimum of $100k in profit after only two years. My thought process is sell now and buy back in next year.

Looking for honest feedback. I know it’s near impossible to time the market so I don’t need to hear that just want opinions on what I should do. I’m 28 and this was my first investment property and I’m hoping if I sell the proceeds can help purchase my next two.

Ricardo Hidalgo · Answer

I would sell if you have an opportunity lined up that can give you an extra 20-35% higher equity position with better cashflow and appreciation. I have sold off all of my properties because I had opportunities for higher returns than holding them.

Rick Martin · Answer

I am not sure you could fetch top dollar with the cost of borrowing so high.

Anthony King · Answer

@Nick Weisend If you're looking to quickly scale like your profile says I would keep it and take out a HELOC while it is a primary residence and take advantage of the higher LTV. Since you lived there greater than two years you can rent it out for another 3 years and avoid capital gains if you sell within 3 years of moving out. However I would hold onto it longer and do a 1031 when your ROE gets below the return you can get if you sold and redeployed that money. Either exemption will allow you to avoid capital gains.

Once you open the HELOC I would take that money and use toward an FHA or other low down payment option on another small multifamily and house hack for 1 year. Rinse, repeat, then cash out refi each property every couple years and keep buying more and more.

Rolly Weaver · Answer

Nick,

I'd keep it for several reasons.  As you said, its impossible to time the market. A 3 percent interest rate is beautiful, too haha.

If you we're to sell, you'd 1: Have to pay for rent while you're waiting for a market correction. 2: pay the newly adjusted interested rates...Who knows how high they will be next year.

I'm keeping all my properties and saving as much capital as possible, because who know where we're headed.

Dave Foster · Answer

@Nick Weisend, If you are living in 1/2 of that duplex and renting the rest.  Only 1/2 of the gain will be tax free.  The other half is considered investment property.  However you can do a 1031 on the other half.

This might impact your decision to sit on the sidelines for a year and then buy back in.  Since you'd either have to 1031 and buy something now.  Or pay tax on $50K.  That might make that cash flowing duplex look a little more attractive in your portfolio for now.  Especially since you can rent it for another 3 years and still be able to sell and take 50% of the gain tax free with your primary residence exemption.

Lucia Rushton · Answer

@Nick Weisend $100k is before or after taxes ?

Michael Brattelli · Answer

@Nick Weisend I’m in the same exact situation with almost everything identical. I am keeping mine for the long haul. Rents are only going to increase. If you have a plan to turn that 100k into a quad or something better then yeah that might be smart but 3% is a great rate and that sounds like an awesome long term investment. I

Anthony King · Answer

@Greg R. Gotcha.

Anthony King · Answer

@Greg R. Why can't he 1031 in a year?

Should I sell my Duplex now?

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