Investing: Sell or not to Sell and repurchase?

3 Replies

Hello all, 

I am asking a question because its something that has been on my mind. This year i have been cleaning up my portfolio a lot and managed to sell off a lot of the properties i purchased just before the bubble crash for some profit, so i could repurchase new rentals in better locations with better profit numbers, since most of them were negative income from 2009 tell recently.

My question is this, currently i have a Town House in Colorado that i purchased in 2009 at near the bottom of the market for 48k with 0% VA loan 6.5%, with current balance of 32K. Its a 2/2.5 unit that has been easily rentable due to location near a military base for $850/month, but since 2009 the HOA has increased from $161/month to now $286/month, so profit has been slowly reducing on the property from that aspect, secondly since 2009 we have had multiple hail storms cauising major roof damage, which resulted in a few K in special HOA fees to cover the repair cost, thirdly a few months back one of the townhouses in the area had a major kitchen fire and due to the townhouses all being wood built, it spread and burned down all 50 units in the row of units before the fire was under control. The HOA insurance is replacing all 50 units with rebuilds to equal plans and features as the origional plans and features back when built in the 60's, which is suppose to take about a year to finish.

Prior to the house fire taking out my unit, the last sell in the neighborhood of townhouses equal to my unit sold for $133,000 back in January of this year. I expect when they are finish building the new units that the value would increase from being brand new, so i have been thinking of maybe putting the unit up for sale when its completed as a brand new town house, because i personally dont live in Colorado anymore and taking the profits from that sell and apply it to a larger rental in my current local market. 

I currently live in Florida and have about 75k in cash available to purchase another rental and have been keeping my eyes out on something else to invest in local, but the profits on the below 200k houses has been terrible close to 0, but when i run numbers on the more luxury bigger houses, the numbers seem to make way more sense. 

Example: most 150k 3/2 houses in my area are only renting for $850-1000/month, depending on the location, but most of the 250k 4/3 houses in my area renting for $1700-2500/month. I think i could easily walk away from the new town house sold with 100k worth of profit, my thought is taking the 100k from sale and probably 100k from saving by then and purchase a larger 250-300k house in a luxury neighborhood and rent it out. That would leave me with a balance of only around 50-100k on the mortgage which would nearly double my rental income compared to before. I have never invested in this price range of houses, so i wanted to get some opinions from the masses on this idea. 

Key piece of information is what are your goals  / cash flow / debt reduction / more doors? 

If it's cash flow split your 150-175K into several assets and increase your cash flow.

If it's debt reduction move forward with your plan selling your unit in CO. and reinvest in only 1 door. 

More doors same as cash flow

No matter what I would definitely sell the condo in Co and increase your portfolio- lots of equity with ample opportunity to reinvest in single or multi doors.

Best wishes 

I am still learning, but just to place some numbers on the board to understand more for myself...

ill pick the 2 cheapest 3/2/2's in my area in a B+ location id be willing to invest in as a rental.

Property 1: 3/2/2 1,519sq ft $159,900 = average rent based on rentmeter.com is $975/month

Property 2: 3/2.5/2 1648sq ft $161,000 = average rent based on rentmeter.com is 1050/month

So if i sold my townhouse and put 100k toward both properties, that would place me at the following roughly...

Property 1: $975/month rent - $455/month = $520/month or $6240/yr

Property 2: $1050/month rent - $455/month = $595/month or $7140/yr

combined it would be $1115/month or $13,380/yr

Option 2:

Brand new housing selling in a A+ area near me... 

Property 1: 4/3/2 2,001sq ft $255,000 NEW = average rent based on rentmeter.com is 1800/month

Property 2: 5/3/2 2,355sq ft $315,000 NEW = average rent based on rentmeter.com is 2200/month

Property 1: $1800/month rent - $800/month = $1000/month or $12,000/yr

Property 2: $2200/month rent - $1155/month = $1045/month or $12,540/yr

Now that i placed the numbers out, seems like the 2 cheaper rentals would net an extra $1400ish a year in income.. guess i was thinking the larger luxury homes made more for some reason. 

Originally posted by @William Huston :

I am still learning, but just to place some numbers on the board to understand more for myself...

ill pick the 2 cheapest 3/2/2's in my area in a B+ location id be willing to invest in as a rental.

Property 1: 3/2/2 1,519sq ft $159,900 = average rent based on rentmeter.com is $975/month

Property 2: 3/2.5/2 1648sq ft $161,000 = average rent based on rentmeter.com is 1050/month

So if i sold my townhouse and put 100k toward both properties, that would place me at the following roughly...

Property 1: $975/month rent - $455/month = $520/month or $6240/yr

Property 2: $1050/month rent - $455/month = $595/month or $7140/yr

combined it would be $1115/month or $13,380/yr

I would not rule out the new props for the simple reason new means little or no maintenance for a 5-10 year period. On the other hand the 2 existing rentals SFR have appreciation x 2 vs 1 prop. Granted they have less value but . . . depends on overall market - location - community etc... I would talk to a local lender get some input or better yet attend any meetups in your market. Investors are very very helpful and well informed with BP IMHO more than any other meetings I have attended.

Best wishes moving forward

Option 2:

Brand new housing selling in a A+ area near me... 

Property 1: 4/3/2 2,001sq ft $255,000 NEW = average rent based on rentmeter.com is 1800/month

Property 2: 5/3/2 2,355sq ft $315,000 NEW = average rent based on rentmeter.com is 2200/month

Property 1: $1800/month rent - $800/month = $1000/month or $12,000/yr