TIME TO CASH OUT? Our dillema.... OPINIONS!?

38 Replies

Some of you may have read our post last year, but in short our first rental property was victim to a fire - So we tore it down and built ourselves an awesome, waterfront home to be used as our primary residence.  Took 3 years to get through the red tape but we are moved in and refinanced.  We utitlized a private money loan from someone we found on the site as well!  

We are located in New Port Richey - outside of Tampa, FL - the market is going nuts!

Is it time to sell and re-invest the cash?  After all, this was supposed to be an investment property but "dream home emotions" got in the way.

Currently owe $440...  Have standing offers (pre-listing) at $1.25 million that will NET us about $750,000 - which is a large part of our net worth.  

We have been pulling our hair out trying to guess the market what if's.  (Especially considering the home's value limits buyers)

Is this the time to sell??  A couple local realtors said they see a slow down of offers


Put down payment on smaller home - have tons of cash left to use for down payments on other cash flowing SFH or Multifamily properties (1031 or our own opportunity fund)

have down payments for a couple of small commerical warehouses (1031) 

Rent for a year and see what the market does - keep money in our own opportunity fund or trust to avoid Cap gains

Buy another small house now - and airbnb our waterfront home - income should pay for both houses monthly debt service and then some... 

OR DO WE STAY PUT - Leave the equity alone and grow our business, use private money / banks to buy more properties when we can.

Thank you for reading and any valuable opinions!

If it were me my process would be:

1)  First check to see what sort of rent the place could command.  From that, you know your expenses, so you can estimate your cash flow.

2)  If the result from #1 is a good cash flow, cash out refi if you can (probably won't get the full $750k, maybe only like $500k), use part of the new cash to provide the cash requirement (d/p and closing costs) for a new deal, and because rent tends to be low in the Tampa area relative to home prices to buy, I'd actually rent in a cheaper area of Tampa.  Between that ocean front and a new door your cash flow should more than cover your new rent, and then you will be "virtually house hacking".  With housing payments covered and cash that should be left over after your second deal (keeping some reserve for repairs), your savings on income should be able to get up to down payment level on a third buy and hold deal fairly quickly.

3) If the cash flow from the sea side dream home isn't stellar or a cash out refi hits snags for whatever reason, then I would 1031 and re-deploy it to multiple new SFH or larger 4+ MFH.

Good luck!

This is a rare time that comes along once in a while - a chance to rake in some huge $$ from your Real Estate investment....take it and run. You can always find another 'dream home' ! And you said this wasn't supposed to be a dream home anyway, right?

Bad time to buy now, but keep looking anyway, you never know when that special diamond in the rough will popup. Rent until this crazy market corrects (it will) and then get yourself a nice personal residence and a couple of STRs. You will have plenty of time to do the research on where the STR market is hot in your area....

All good options! I already refi'd to payoff first mortgage and private money - so thats where the 440k debt comes in. Guess I could have pulled out a little more but financing solo 440k was topping out my DTI

This property can definitely cash flow as a rental - just wasn't built to be one (higher end finishes).  Would be nice to hold - maybe a $2 million dollar home 10-15 years from now, just never know! 

@Joe Young . Hello from a fellow NPR resident. I would sell the house and not rent it out. 1031 ideally into multi unit(s) that cash flow well and rent a personal residence in the meantime.

1031 is the key here since you are sitting on a massive gain on sale. Good luck!

@Joe Young , It doesn't sound like this house would qualify for a 1031 exchange since it is being used as your primary residence.

But...  Just stay in there long enough to have lived in the property for 2 out of the last 5 years before sale and you'll get the first $500K of profit tax free.  

@Dave Foster Plan is to transfer title to LLC prior to sale. I'm not married so I'd only get $250k...

And technically I've owned it / and it's bee my primary residence on paper for 5 years.  Although It was unhibatable for a bit I'm told the IRS wouldn't see that. 

Totally depends on your goals and what you want. If it were me, my goal would be to grow more wealth. If the place you're in cash flows, I'd move out, rent it out and buy a new house hack using the equity you have in your current house. I would also try to buy as many rental units as I could with the equity. Again, that's just me and my goals. If you want to just sell the place and invest the proceeds in the stock market and then live in a van, I can't say I wouldn't be jealous. Good luck with this big decision!

@Bradley Dosch definitely wealth building - mainly stuck on weather or not I sell… could save for down payments as well, but selling gives me nice kick start. 

Would my new properties combined cash flow / appreciate more then my rented big house - guess that’s one thing I need to figure out. 

@Joe Young  I'd say it depends on what you want. You could sell and use the profits to invest in more properties. Or, if you really want to live there, then stay. A cash out refi might be a good option. That way, you pull out your equity, and get to still live in the property. 

Good luck!

@Jeffrey Donis as mentioned already did a cash out - built with cash then took out $450 to pay back first / second mortgages.

that’s all the payment I was good with (single income… even though my 6 figure girlfriend has lived with me for 5 years… how does that work!!  Haha) 

@Kurt Calderone That’s what’s been keeping me up at night!  I know what I need to do…

Made the mistake of getting emotions involved and building our dream home literally with own hands!  

My agent is sending over the paperwork.  Now to find where to put the cash!

Hello Joe Young, no one mentions the Tax consideration if your new home has been your Residence for two years you can sell it Tax-free up to the limits per owner and move onto you next home. You built one...buy a lot and start building another. My Agent gave up Flips to just build one type of 3/2 block home to sell, over and over. She currently has three in Tampa with an Investor that does not want her to do the next one on her own as she now has the money to go independant.

@Michael Haynes - issue is we’d be profiting $800k and I can only exclude $250k… Zero chance I’m paying that much capital gains tax for something I earned quite literally with my bare hands.

I just got off the phone with 1031 intermediary and we might not be able to 1031 at all. My accountant advised we could switch property into an LLC prior to closing, but the intermediary said it should be rented for a year prior to prove it was a rental.

Tip toe-ing somewhere I don’t want to be. 

Hello Joe, you also have to calculate that the current Administration is going to raise Taxes and Fees on everything. They are comming after every cent that you will make that is not Tax-deferred or Tax-free. 

Originally posted by @Michael Haynes :

Hello Joe, you also have to calculate that the current Administration is going to raise Taxes and Fees on everything. They are comming after every cent that you will make that is not Tax-deferred or Tax-free. 

 No kidding. Virtually doubling the CG rate from 20% to 39.6........

Joe, you built one successfully...you can build another spec home to sell or rent as your Business. I meet guys in Tampa that want to be in that place, instead of Flipping. Either one eliminates the Tenant Problem. 

@Michael Haynes

True, just happens my money is tied up in my primary residence.  I can borrow against it / use hard money etc… Just likes that jump start from selling this one.  I’ll calculate my CG loss and see what I got left.  Might swallow my pride.

Hello Joe, you are in the middle of storm right now, without knowing all your numbers and seeing your Bigger Plan. Can you imagine how you would be if this home you built was in California where they are considering more lock downs and masks in the street with those taxes and permiting problems? Your 1031 Intermediary should have enough tax knowledge to help you get a plan of action together. "A bird in the hand is worth more than one in the bush." Try to work smarter and not harder going forward and don't overextend yourself at this time of indecision.