Sell a great rental or continue renting?

Question

With this hot market it’s tempting to sell. I have a house/duplex in an incredible market that is a great rental that I never thought of selling. But seeing what a house sold for next door is causing me to reconsider. Rental brings in about $2,200 net income (P/I, utilities) not including cap Ex nor vacancy. However based off the numbers I am seeing of houses selling, I am sitting in about $450,000 gross profits off a selling it. Maybe upwards of $550k. Anyone got advice?

Winston Covington · Answer

Aaron, it depends on your goals. If you're younger and looking towards building up your portfolio, it might be time to sell and 1031 exchange your way into more property.  If you're older and since you really like the performance of this investment, you might consider using that positive cash flow to pay it off sooner.  What's more important, cash flow or appreciation ?

Aaron Eveland · Answer

Thank you for the insight. Rather than a cash out refi, I am doing the Heloc route. I leverage a Heloc to buy a small condo a few months ago and plan on cash out refi-ing the condo, closing out my heloc, and getting a new heloc with the huge amount it has appreciated. What are your thoughts about pro v cons on that strategy. But I still have the idea in the back of my mind of selling it and wait to deploy a huge amount of capital very strategically. Hahaha.

Winston Covington · Answer

Ok, with that in mind I would take advantage of current interest rates...refinance pulling some cash out and go buy another property.  You have sufficient equity to pull out a strong down payment while still having your existing property provide you with a good amount of positive cash flow.

Aaron Eveland · Answer

Thank you for your response Winston. My goals were to acquire buy and hold properties that cash flow, ideally in locations that likewise have appreciation. For this specific property I should have 2 years of residency to not need the 1031 exchange. I’m young(ish) and want to grow my portfolio but the insane appreciation is having me reconsider my strategy. I’m still committed to my original strategy of buy/hold investments, but seeing the neighbors house sale for 1 million is distracting my focus.