To keep or not to keep??

Question

Hey guys,

I have a property that I purchased in 2010, my first personal property. I sold it on terms about 5 years ago, and the term is coming up in July. The buyer can not refinance, so I will be taking it back over. I am curious on what yall would do. Keep it and sell on terms or rent again, or sell it.

Here are the numbers: Keep in mind, I purchased this in 2010 with zero downpayment as well as received the $8000 first time home buyers tax credit at the time. I have 8 other properties in my name and can NOT qualify to buy anything new using traditional financing at the moment. This is why I am unsure on what I want to do.

I currently owe around $120K on it, and am 9 years into the loan. It will sell for around $150K-$155K. I am also an agent so I will save on realtor fees. I have not seen the interior of the house, but I am anticipating having to put $5K into the property to prepare it for sale or turnaround for new tenants.

Thoughts?

Michael Baradell · Answer

@Jonathan Bombaci this is where I’m strongly leaning.

Dave Foster · Answer

@Michael Baradell, The 1031 option might be available.  Much would depend on the nature of the terms.  Did title transfer or was it a land contract - the terms, Would the transfer pass the "risk of loss" threshhold - etc.  But probably worth exploring given the amount of time/gain.

Michael Baradell · Answer

@Kristel Knittel I would typically agree, however, I can’t qualify for a traditional loan at the moment. Would a 1031 apply if I purchased something on terms just as it would if I bought traditionally? I am not entirely familiar.

Jonathan Bombaci · Answer

Given the numbers I’d sell and just take the $30k. It sounds like you maybe close to being over leveraged if you can’t get traditional financing and the cashflow/ROI on this is pretty small. If I were in your shoes I’d Take the $30k from the sale of this one and reinvest it back into the other 8 properties. Put it somewhere that would allow you to increase rents or decrease expenses. It should be easy to find a value add project somewhere on the other properties that greatly exceed the $15 a month + the little bit of equity you’d be paying down with this property.

Kristel Daugherty · Answer

Ah - forgive me for misunderstanding.  I haven't sold terms before.  Other than the $5 anticipated renovation budget, what other costs are you expecting?  If it's just a short term bridge loan, perhaps hard money is an option?

Kristel Daugherty · Answer

Seems like your monthly ROI is pretty low, which means I'd be offloading it from my portfolio.

The exception would be if you can get terms that increase your ROI in the next round, since that's something you're comfortable with.

In the end, I think selling & converting the proceeds into a 1031 exchange is your best option!

To keep or not to keep??

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