Hello all, need a little help here. I purchased a 4 bed, 2.5 bath home 6 years ago in a good neighborhood in Los Angeles near a university and semi close to the beach. If I were to sell it this year, I stand to make anywhere from 250-300k$ on it. I am currently renting it out for $1500 cash profit after expenses.
My question is would it be better to hold onto the property and wait for more appreciation or sell now, cash out and buy another property or two closer to the beach?
I have nearly gutted the whole place and it has a lot of the features that I love. I also feel there maybe a decline in the housing market in the oncoming years. Thanks for the help.
You're definitely right. Gotta consider market cycles. Looks like we may have another 2 years before everything takes a different direction. Appreciation already slowed down A LOT. The predictions for my area for example are less then half of the two previous years.
If you know you won't be holding the property long term, better sell this year. I'd wait for May/June though.
What would you do with the money is the question? If you can invest it better, consider it.
Tough choice ....
It really depends on your goal and dreams. Do you have a better place to put the money? Are you still in the capital gains window etc?
Here's a detailed article I wrote on the subject.
Sounds like a tough decision. I own 2 rentals near a university and bank on rental income and never have an issue with renting it out. I could also sell these houses for a lot of money and invest elsewhere. Instead I decided to take a HELOC out against it and use that money to invest further in my real estate career. Maybe look into that option. Just my 2 cents.
I think with my expenditures for fixing the place up I'd still be under the capital gains window. I do have a renter in there now for 16 more months, and am more than willing to wait out the storm of fluctuations with home prices. With the money i'd be looking to buy more of my dream location by the beach. Possibly on a 1031 with one or two properties if I can find a deal.
Or should I sell high and rent for a year or so?
If it is a solid rental in a solid area with solid renters then rent it!!!! Use the property as leverage for loans on other properties.
Using a stock index may help aid your decision. S&P 500 is at an all time high and recently wedged sideways. Monday-Wednesday we will know if the trend continues or if it breaks out and continues to the moon. If it breaks out positively then rent it. If it doesn't then sell it.
Each set of advice may give you a different answer. Pick one that you like and follow it to the nth degree. Makes decision making easier. (if you choose the second choice then know that my stop is 1865 before I consider it a downtrend)
It all depends on your long term goals. If you want to grow quickly you need to flip if you want to grow experience with "passive" income renting it would be a good way to build up experience.
@Jerad Bailey , my recommendation (without hearing more details) would have been to sell, but I don't think you'll have the success you are planning on.
Here's why, and maybe you can provide more details if my assumptions are wrong: it sounds like you purchased this home to live in it but for some reason are renting it out now. Or at least that's how it sounds based on how you say it has the features you love and how you want to get more of your dream location. And if your profit would be $250K+ (I'm interpreting "make" to mean profit, not gross sales price), then I presume the sales price has to be at least $600K. Sounds like it would be a great profit on a "flip" but you are going to be trying to sell an income property since you state it has a tenant for the next 16 months. Houses in that price range rarely represent good buy and hold candidates so you would have to find someone who was banking on more appreciation. It might provide you some cash flow based on current expenses and any debt, but the new owner would have much higher debt expenses to account for everything you did to improve the property as well as appreciation since you bought it, plus it may be reassessed significantly increasing the property taxes, so they probably won't have much positive cash flow especially compared to a regular down payment on a property of that price.
But please provide more information so we can give better advice. What did you buy it for? How much did you spend to fix it up? What is it currently worth? How much is the gross rent? What are the expenses you are including when you talk about your monthly profit?
I bought the home in 2009 for 575$ and put about $55k into the remodel. I can most likely sell it for $850 but possibly higher if I put a little more money into it. I net about $1300 after taxes, maintenance, and time. The neighborhood is a great place for families and all around people are tearing down homes to build larger newer ones.
@Jerad Bailey , as I said previously, you basically have an awesome "flip" that would have created a huge profit for yourself, but the issue is the tenant in the house for 16 more months. You can't market it for the typical reasons a family would want a house (i.e. great features and location) because a family can't move in. Since it can't be enjoyed as a family house, anyone purchasing it would have to consider the income it produces and I'd expect to get WAY less than what comparable owner occupant houses would get.
I can only presume you chose to rent it out rather than selling because you were thinking/hoping/planning on more appreciation, but you have a lot of equity tied up for the income you are describing.
The way I see it, you're between a rock and a hard place. If it were me, I'd try to figure out a way to get the tenant out (legally and ethically) and sell and use the proceeds for a property or properties that have better ROI.
Just my $0.02
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