Should we sell or hold?

Question

Hi Everyone, I know this is a frequently asked question but our situation is a big unique.

We bought a cool condo in the Boston area almost 3 years ago.  We just moved out of it and are trying to figure out whether to hold it as a rental or sell it.  It's a cool space with lots of character which means it may not be for everyone.  1 bedroom /1 bath loft space.

The issue is that it is non-conforming so the only financing option is an ARM with 20% down from one local lender.

Currently it generates $2500/month cashflow via AirBNB and will generate $1000/month cashflow with new longterm tenant.

If we sell within 3 years we get to avoid capital gains taxes and walk away with modest appreciation. If we hold, we get good appreciation and interim cashflow but the property becomes more challenging to sell because of rising downpayment  and interest rates.

It's a very unique property so we think it will take a while to find an interested and qualified buyer.  Our other fear is all the trapped equity.  If we keep this and pay it off it is unlikely we could do a cashout refi or a HELOC (yes we have researched this and the answer is no), but it would cashflow $2000-$3000/month.

What would you do?

Craig Curelop · Answer

@Julia Green - Having a property in Boston that cash flows $1,000 to $2,500 a month?! That seems like a great asset to have. I'd hold onto it as long as you can.

Boston is a coastal city that will likely fluctuate quite a bit. As long as you can hold on through the downturns, which it seems like you can, I see no reason why you would sell it unless you want to invest in something bigger?

Alex M. · Answer

@Julia Green What about Boston's new airbnb regulations capping the # of nights you can rent it?

Thomas S. · Answer

Without knowing all the numbers on the property, value, equity, rental rate, HOA fees ext. there is no way anyone can give reliable advice based only on the info you have provided.

All we have is your opinion on the property meaning advice is not grounded in facts.

Cash flow of $1000/month is based on what. Yesterday, today or 20 years int th efuture.

Jeremy Roberts · Answer

@Julia Green - It seems you didn't have any issue renting it out. As long as it cash flows and rents easy, not only will you build equity and get past any downturn, but lenders should be able to help you leverage that equity. Although, I haven't heard of lenders turning down a loan because of a property's layout. Why would they?

Dan K. · Answer

@Julia Green -- As I'm sure you know, the Airbnb gravy train could come to a screeching halt if the the city adopts regulations. In addition, your home owner's insurance and HOA may not allow short-term rentals.

As others have said, you could get around the capital gains with a 1031.

I'd shop the loan around. The lending market is quite competitive these days and you might be able to find a 30-year fixed if you have the personal income to support the loan.

Without knowing the particular details on the unit it's hard to give a full opinion, but if it's in Boston proper, even an unusual unit should sell relatively quickly at the the right price.

Aaron K. · Answer

@Julia Green as mentioned by @Craig Curelop if it cash flows $1000 a month it already has seen appreciation and you would probably have no problem selling it to an investor.

Julia Green · Answer

@Aaron Klatt exactly my point.  If the comps show that everything else is selling but we cannot because of restricted financing options then we cannot take advantage of the very real appreciation that's happening all around us.  Do we forego that and just live with the cashflow?

@Craig Curelop the hope is that we can continue to invest in more properties.  We bought this place as a forever home with no thought of investing.  Luckily it can cashflow but the exit strategy is where we are failing.  We could take the proceeds from the sale and invest in 2-3 multifamilies an hour away.

Should we sell or hold?

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