Millinocket, ME · Member since 2016 · 18 posts · 1 vote
Looking for some advice. I bought a rental property(SFH) last year and got a solid deal on it(90k), 10% less than market value and that was with a highly conservative appraiser. The market is heating up around me, I am wondering if I should try and sell after owning a year or wait and hold it for long term gains. I really think I could sell for around 120k so around 30k profit. Any advice would be helpful. I could recoup my initial investment of 25k and use the profit on this property for another building.
I would consider selling if you are very confident you can purchase another investment rental property that earns you more cash flow per door than your current property. So if you can upgrade to a duplex, then I'd say that would be a positive move. I considered doing the same thing, however, I decided to apply for an equity line of credit and am currently going through that process so I can fund my next deal.
What are your long term goals? What is your monthly cash flow like on this property?
It sounds like you put down 20% if your initial investment was 25k on a 90k house, assuming some of that was for repairs. Have you talked to a lender about doing a cash out refi? Depending how much equity you have in the property, you may be able to use that for another purchase. If your numbers are right, you might be able to get that 30k just by pulling it out of the property.
Looking for some advice. I bought a rental property(SFH) last year and got a solid deal on it(90k), 10% less than market value and that was with a highly conservative appraiser. The market is heating up around me, I am wondering if I should try and sell after owning a year or wait and hold it for long term gains. I really think I could sell for around 120k so around 30k profit. Any advice would be helpful. I could recoup my initial investment of 25k and use the profit on this property for another building.
Thanks
D
The profit margin is too low for me. You paid 90K. If you financed it, you probably paid around 5k in closing costs. If you sell it you will have to pay the realtor 6% of 120k or $7200.
112,800 - 95000 = $17,800.
You will have to pay income tax on that amount. Let's say it's 25% or $4450.
$17,800 - 4450 = $13,350
I forgot to mention that there will be carrying costs due to the fact that you will have to have your tenants move out to sell it. That could add another $1000+.
@Derek McGillicuddy What are your goals? What is the cash flow on the property? Do you expect appreciation to continue going forward? Do you have or think you can find another deal that is better long-term? There is a lot of missing information to give a complete answer! If it cash flows well and you have enough equity, a cash out refi may be the way to go - Have you looked into this?
If I sold I would not list it with a realtor. The market is strong enough that I do not need one. My initial investment was 22,500. I did pay close to 5000 in closing costs, Total investment 28,000. I make about 185/mo, which is a little lower than what I would like. I bought the property because I knew it was undervalued and had grown up in the area and know that the market is turning around and appreciating quickly. So I wasn't as concerned making 10-15% cash on my initial investment because I knew I would recoup it. If you hold the property over a year you will have to pay capital gains tax which I believe is 15%. I was thinking I could recoup my original investment and use the profit towards another deal.