North Miami Beach, FL · Member since 2017 · 28 posts · 2 votes
I have a property that I purchased a few years ago for $140 K now it costs close to $225 K. Currently, I use it as a rental property and it generates about $1000 per month after I pay
Property Insurance
Property Taxes
HOA fees
My question is should I consider selling it or I have good margins on it?
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
Did you buy it for cash, which is why no mortgage payment included in those expenses? $1000/month after a mortgage or from paying all cash lends to very different cash-on-cash returns.
If you have a mortgage on it already, then I would say cash out refi the property and use the cash you pull out from that equity to buy more properties with cash flow. That's how you can ultimately snowball your returns--keep pulling equity while maintaining the properties under your ownership.
But if you paid cash for that property, that changes the game some because your cash-on-cash isn't nearly as high as if it's leveraged. But it's still an 8.5% return so not bad either. If you did pay cash, I'd definitely do the cash out refi then because then you'd have the full amount to snowball off into more investment properties!
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@Wakes Andre I look at every one of my properties every year and ask myself that same question. I think the metric you are looking for is return on equity. I purchased a 4 unit in Lyons, IL, and was able to cash out refinance 6 months after purchasing the property. The property doesn't cash flow that well anymore, but my return on equity is outstanding. Even if I sold the property, I would have trouble earning the same returns if I purchased a bigger property.
If you sold this property, you would net around $70,000. Could you buy a property that would cash flow significantly better than the $1000 per month you currently are getting?
Flipper/Rehabber · Saint Paul, MN · Member since 2018 · 85 posts · 65 votes
7y
@Wakes Andre, that's a great cash flow! If you are looking for equity to purchase another property, maybe do a refi and pull some capital to use on your next deal, and still keep your performing rental? It won't cash flow quite as well, but then you get the best of both worlds. That being said, if there's an HOA and you have any fear of them barring rentals in the future, then maybe consider selling. You have more than one great option.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
Did you buy it for cash, which is why no mortgage payment included in those expenses? $1000/month after a mortgage or from paying all cash lends to very different cash-on-cash returns.
If you have a mortgage on it already, then I would say cash out refi the property and use the cash you pull out from that equity to buy more properties with cash flow. That's how you can ultimately snowball your returns--keep pulling equity while maintaining the properties under your ownership.
But if you paid cash for that property, that changes the game some because your cash-on-cash isn't nearly as high as if it's leveraged. But it's still an 8.5% return so not bad either. If you did pay cash, I'd definitely do the cash out refi then because then you'd have the full amount to snowball off into more investment properties!