Investor · Lockport, IL · Member since 2010 · 5 posts · 0 votes
I have a single family home that I've been renting for the last five years. Currently my mortgage payment is $800 and expenses another $200 a month and I receive $1,600 a month in rent, so I profit $600 a month. Here's my question. The home is starting to require repair that could really affect my profit, so I'm wondering if it's time to sell while the market is hot and inventory is low. I currently owe about $95,000 on the property and could probably sell it today somewhere between $200,000-$225,000. So there is another part to this equation. I completed a SAM loan modification (Shared Appreciation Modification) that states I will need to pay 25% of any appreciation on the property if I sold or refinance. With that said, is it worth selling or continue to hold out to build up more equity in the property.
If you really feel that the market could turn, you may be better off taking the money and running. I am a proponent of striking while the iron is hot and taking what is available today as tomorrow's riches are never promised. Doing some rough calculations, if you sell the property for 200k, that leaves 105k in gross profit. Take about 8% off that for closing costs and commissions and you have about 97k. Take off 25% from that total and you're left with about 72k and change. Ask yourself this question: How long will it take you to gain 72k from rental profit on that property if you have to do some repairs? If the money is there today, you can take it and then try rolling it into another property via 1031 exchange and not pay any taxes on your profit should you complete the 1031 in the allotted timeframe.
Thanks for the reply. I called the mortgage company and was told that any capital improvements made to the property will be credited as well. With this new information, I'm considering making some of these improvements to increase the value of the property to potentially $265-$280. The updates, which would include a new garage, would cost about 30-35K. I think your comment about taking what is available today as tomorrow's riches are never promised is key. Additionally, I am a Realtor so I would also save some monies in terms of a commission payout. Am I being greedy?