Vancouver, WA · Member since 2015 · 3 posts · 0 votes
New to BP, awesome site.
We own a small single-family home in the Kent area which is south of Seattle. We live in Vancouver, Wa so we are at distance.
The question is would now be a good time to hold the property and continue renting?
Invested $245k
Market value- $240k
Rent $1,100
Taxes $308
Net cash flow $792
Net 3.88% annual return
Or sell the property and use the proceeds to provide private lending. What is a realistic cash flow and net % return on net $225k?
Should I consider appreciation also?
Thanks
If you're making positive cash flow my recommendation is to keep it and lend out your equity (through HELOC). Private lending gives great cash flow, but no appreciation. Having both gets you the best of both worlds :-)
If you're making positive cash flow my recommendation is to keep it and lend out your equity (through HELOC). Private lending gives great cash flow, but no appreciation. Having both gets you the best of both worlds :-)
@Duncan Bagley@Nghi Le is right. There is no reason to sell your property if it is cash-flowing. The decision about whether or not to pull out equity to be a hard money lender is dependent upon your financing of the property now. Do you have a mortgage payment? Will it still cash flow even if you take out a HELOC? How well do you know the people you will be lending to? What is your lending criteria? Can you take the hit if they are unable to pay back the money and you have to take legal action?
In short, we need more info before we can answer your question accurately. Help us so that we can help you!!
Thank you for the responses. We do not have a mortgage loan, we own out right. So the cash flow listed is net. It will not cash flow if I take out the equity in a loan to reinvest. I know the person I will be working with for private lending. We could take action if needed to if they failed to make their payments. My math indicates I could increase my current cash flow by 2.5 times and have more liquidity. Overall gain appears it would be similar to holding at current cash flow and equity rate.
Typically folks will use these 3 rungs of how good your investment is.
1) If its cashflowing
2) If you are cashflowing with 50% expenses rule
3) If you are cashflowing at least 200 dollars/month with 50% expenses rule
I think your current situation is very bad and not a prudent use of leverage and you money. Calculate your ROI and you money is extremely lazy making single digits returns. I would sell (cash in the crazy appreciation) and re-leverage into prudent 80% LTV rentals. I'm selling my Seattle rentals to 1) take the money off the table and 2) put into rentals that a better rent to value ratio.
Rent of $1,100 is a bit low. Any way to increase the rent?
Kent is further away from Seattle, so the chance of it appreciating beyond 2006/2007 values is somewhat slim. If you can lend your money as a private lender, or re-invest those proceeds elsewhere (in higher cash flow investments or flips), that may much better.