When to sell an older property?

Question

Hello,

What would you do? I have an investment property in DC in a, still, up-an-coming area near a University and metro. The house has nearly doubled in price. I bought it for $415k at a 3.5 rate. Currently owe $325k. The property cash flows about $500 a month, after CAPX and expenses.

Lease ended today and the house needs about $15k of work to get it ready for the next tenants. However, the house is very old, built in 1920’s (I think), but was renovated in 2006. It’s just a matter of time before I would need to completely renovate it.

The house is well located, the city continues to expand and there is always government employees and students for tenants. I’m pretty sure it will continue to appreciate. What to do?! Any DC investors have some thoughts?

Any input is much appreciated.!

Kenton LeVay · Answer

If you like the income and want to keep it, I'd say maybe consider a HELOC. Interest rates are still historically very low and it sound like you have about ($415k x 2 = $830k - $325k =...) $505k of equity! I say the HELOC because it would give you plenty of cash to pay for that $15k renovation now and you can pull the line of credit now that you could use to renovate the property when the time comes. I think lenders giving you the line of credit for 10 years is pretty standard but I'd confirm that before agreeing to anything.

I say HELOC over Cash-Out Refinance because while you're cash-flowing now, I don't know if you'd cash flow the property if you pulled out 80% LTV on a new mortgage, though you don't NEED to pull out that much if you don't want to...

All that being said if you're at a point in your life where you want to be done with it, a cool $500k (minus selling fees) seems like a nice option as well ;)

Aleksandr Spencer · Answer

@Russell Brazil Brookland near Catholic University

Russell Brazil · Answer

What neighborhood?