To sell, or not to sell?

2 Replies

Looking for some advice.  We recently moved into a new primary residence leaving our freestanding condo vacant.  The condo is worth roughly $360k.  Our 1st mortgage is for $144k @ 4%, and we have a 2nd through a private party for another $150k @ 8% that we use for our flipping business (3 flips under our belts.)  We can get about $1,800 per month in rent for it.  Without the private party 2nd we would have a nice cash flow of about $700/month, but we need that money to continue our flipping business.  Should we just sell the condo so we can get rid of the $12,000/year we owe in interest on the 2nd?  Or should we keep it for the future cash flow and continue paying the 8% interest only payments on the second?

Originally posted by @Marc Silva :

Looking for some advice.  We recently moved into a new primary residence leaving our freestanding condo vacant.  The condo is worth roughly $360k.  Our 1st mortgage is for $144k @ 4%, and we have a 2nd through a private party for another $150k @ 8% that we use for our flipping business (3 flips under our belts.)  We can get about $1,800 per month in rent for it.  Without the private party 2nd we would have a nice cash flow of about $700/month, but we need that money to continue our flipping business.  Should we just sell the condo so we can get rid of the $12,000/year we owe in interest on the 2nd?  Or should we keep it for the future cash flow and continue paying the 8% interest only payments on the second?

 If your business is flipping, I'd protect that first. I wouldn't do anything to inhibit the ability to do flips. As an agent, you already know there are other costs than just paying of the liens when you sell your Condo. I would do a quick spreadsheet of all costs of keeping the Condo and I'd bet I'd be inclined to rent out the Condo and use all the money to stay active in flipping. (Actually, I don't flip anymore, I simply buy houses Subject To and sell to Tenant buyers without the expense and risk of flipping but that is another story.)

Keeping access to a line of credit is important for growth.  There is an important question though.  Is your 150k 2nd line currently out?  Or is the balance paid down?

It could be time to trade up for a larger line of credit.  Talk  to a few local banks, See of any are interested in giving you a 3x or 4x revolving line of credit based off your cash on hand.  Explain you have a home you will be selling. You would have up to 150,000 or more in cash from the sell.  You could land a larger unsecured line of credit if your financials hold up. 

You can offer a number of terms to help them to approve you. You can offer them to hold that cash in a 1 year CD. You could allow them to approve each acquisition under the LOC. You could offer to hold a small equity position in each acquisition. It is all negotiable so go ask!

A +500k line of credit would help your filling business right?   

PS.  CD's are able to be borrowed against if you needed to access that CD.

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