Selling duplex to capitalize on equity?

Question

So a little bit of a rundown, I purchased a duplex in early 2017 for for 299k i used a fha loan. I currently owe 285k on the property and similar homes are selling in The 450-460k range is this to much to pass up on? I don’t need to sell the property it currently produces a 12% cap rate (if i move out) my plan is to buy another investment property which i almost have enough for a down payment. so i guess it’s really a matter of will the profit help me purchase more investment properties a bit quicker however ill be losing a great investment property in the mean time. It’s a very tempting paycheck just want some feed back, Thanks.

Carmen Dettloff · Answer

Hi @Thomas Santos,

I think you have to look at your total return. If you sell for $460k and you have to pay $15k in renovation to get it market ready, and you have to pay 6% commission. Then you will walk about with 417k. I am not sure what state you are in, but you might have excise tax on top of all the other fees.Then you have got subtract out what you owe. So 417k - 285k = 132k. Are you planning a 1031 exchange? If not, then you have to pay taxes on the sale.

Then ask yourself what you are going to put that money and what return you get. Let's say you get 8% COC and 18% IRR on new deal. And see how that compares with what you are getting now. I don't know exactly what you are getting now. If you provide more information I can run specific numbers (you can also PM me).

Can you do a cash-out refi? Or a HELOC? And then use those proceeds to reinvest?

Best of luck!

Carmen

Thomas Santos · Answer

@Carmen Dettloff, thanks for the reply I live in Mass, i have essentially renovated the entire house. The real estate agents assured me it would sell quickly. I definitely have the option to refi and use that to purchase another property. With the interest rates I’m thinking the refi might be the best option. I am just getting into the investment real estate game and bouncing the idea of some like minded people is what i need.