Updated over 2 years ago on . Most recent reply
Sell or Hold?
I have a home that I house hacked and have rented for about 2.5 years now. We didn't intend to rent it when we bought it so we ended up over-improving it, but at least it's allowed us to charge a bit more in rent. We have a sizeable amount of equity in the property and were considering cashing out of this older home and taking some time to figure out the next opportunity in the hopes of leveling up from a SFH (I still feel like I have a lot of learn before leveling up). We wouldn't have to pay cap gains, but we would get stuck with the depreciation recapture in this case. Plus we earn about $700-1000/month in cashflow and have a low interest rate, so it's hard to say goodbye to those. As the there are plenty of warnings out there that there will soon be a downturn, I'd hate to miss a future opportunity clinging to my status quo. Looking for others' experiences deciding on when to sell, especially if you didn't have another property to roll the equity into as well as in this current uncertain economic situation. Thanks!
Most Popular Reply
Leveling up implies (to me) that you want to sell this property and invest into something that will produce more cash flow and end up with a higher appreciation value. If that is your goal, then rates should not be the determining factor. The determining factor should be whether the potential property cash flows more than your current one. So, if you end up with a 6.75% rate, but the property cash flows between $1000 - $1300, then there is a possibility the new property will be a better investment. So, run the numbers on everything and compare them to your current numbers (it sounds like you are doing that already).
When to sell? That's easy...sell when your next investment will give you a better ROI than your current investment. Be patient and find the great deal. In the meantime, keep saving money for your next deal as it may be possible to keep your current cash flowing machine and add a 2nd one to it. In the future, you might "level up" by selling multiple properties in order to purchase one 5-10 multi-unit property.
Wishing you all the best