San Jose, CA · Member since 2017 · 69 posts · 25 votes
There is a lot of discussion about how to approach appreciation in RE investing, but say you got lucky. Then what?
My specific situation is that I have a property that I purchased for $300K, is now worth $600K, and still has $280K financed at 3.675%. Monthly rent is at about $2600. What would you do? Sell or cash out refinance if you are trying to expand your portfolio for financial independence? To throw a wrench into the equation, the property qualifies for primary residence tax exclusion until mid year.
Apart from my personal situation, I'm also interested to hear people's opinions on selling vs refinancing to grow their wealth in general. So, what do you do?
I would sell it immediately to benefit from it's increase in value. There is no way, as a investor, I would ever rent a 600K property for $2700/month. That is a terrable investment.
San Jose, CA · Member since 2017 · 69 posts · 25 votes
8y
Since I got such great feedback from the community the least I can do is provide an update:
We sold our San Diego property in May, right before our tax exemption deadline. After several months of late hours, many calls, a few flights, trying to get in family time with cups of coffee in hand, while working a full time job we are currently in contract for a 6 unit building that is all 2bd/1bth units that are rented for ~$550/mo each for $220K. With $5-$10K into each unit I'll be able to get ~$700-800 a unit. Down the street the property manager I plan to use is renting similar sized units for this amount.
Assuming I ran all the numbers right for estimated expenses buying this property cash should provide me with over double the cash flow (had a mortgage on the sold property) , elimination of ~$300K of debt, and money left over to purchase more properties. I lose out on what ever appreciation that the sold property is still experiencing (~$17K in 2 months... :/ ) but this new property will serve a great stepping stone for managing and purchasing larger OOS acquisitions hopefully while continuing to make money.
There's info like capex's and deferred maintenance that are due that I haven't provided details on and reflected in the purchase price, so the deal is not as great as the rent and purchase numbers alone, but I don't think I'll loose money. Getting paid to learn is not so bad.
Next step, try and figure out how to scale efficiently...