Calling out to all Buy and Holders. I need some expert advise as to whether I should sell my property or rent it out. Let me lay out the scenario...
I bought a home about a year ago for $140k with every intention to flip it. I live in the property and have put appx $25k into renovations and also put 20% down on the initial price so I'm into the property appx $58K out of pocket. I could sell the home for around $220k right now which would leave me with a very decent return but I'd really like to get into the buy and hold business. I could rent the unit for around $1,300 - $1,400 which I realize doesn't meet the 2% rule but I should still have decent cash flow. I have enough cash in the bank to basically do the same thing to another property but will be all dried up after that. I realize I could re-finance and pull out appx 80% of my equity but that would drastically lower my cash flow and I don't think it would be worth it at that point.
In summary, I would really like to sell the property to pull the cash out so I have more investment capital for my next venture, but I feel like I will just run into this crossroad on the next project as well. At what point should I put off the short term gain in order to realize the long term benefits of buy and hold?
Your help is appreciated!
I would say flip it. The rental rate is not all that attractive. You just may have some operating expenses on top of that
If you sold it you could sell it out right or do a 1031 exchange.
You could also get some units that may make more sense when you sell the property.
For stronger monthly cash flow.
If you decide to sell and do not do a 1031, I would suggest considering keeping the home as your primary residence until you meet the two-year threshold so that you won't have to pay capital gains tax on the gain.
I'm not clear on whether this is your primary residence or if you bought it solely as a rehab property. If it is your primary residence (or becomes your primary residence), and you can say that you have owned it and lived in it as your primary residence for at least 24 months out of the last 60 months, then you and your wife would get $500,000 in capital gain tax free. If you acquired it as a rehab and intended to flip it quickly, then you do not qualify for 1031 Exchange treatment because you had the intent to hold for sale as opposed to held for investment. If you can show that you had the intent to hold for investment (as opposed to held for sale), then you could qualify for 1031 Exchange treatment.
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