Need Help - Hold or sell to invest in multifamily

Multi-Family and Apartment Investing
4yFollow

Need Help - Hold or sell to invest in multifamily

Nerlande Joseph
Miami, FL · Member since 2022 · 41 posts · 19 votes

 corrected post - "I currently own the condo not owned as previously stated" - Condo is in Miami, FL

I own a condo 3/2 and 1/2, 2 stories; bought pre-construction and closed in 09/20 (first deal). Condo is currently rented until September 2022 with $400 gross cash flow (no maintenance so far since condo is new). I am thinking about selling and use the money to buy a duplex or 3-4 multifamily units. Here are the specs:

25% down portfolio loan 5-year arm (bad rookie idea) at 4.625% (next increase 10/2025). I can't do a HELOC on the investment and I don't want to refinance to get cash out as the interest rate on the new loan would be too high. The condo appreciated about $100K at the low end of the estimate as of today's estimation. I have about $160-190K equity which will net me a good amount of cash after fees and closing cost.

That is my only source to continue investing - I don't want to touch my house which has a 2.75% interest rate, although I have some equity there too. I really want to tap into a small multifamily as I now want to dip both feet into rental investing while still keeping my full-time job, off-course.

Thank you so much for the help

2Reply
18 views

Most Popular Reply

Percy N.
Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 905 votes
4y

@Nerlande Joseph, as I understand it, you have a few options (and more):

- Sell the condo, pay the taxes, invest the rest

- Sell the condo and do a 1031 exchange into another investment property

- Sell the condo and put the gains into a QOZ investment

- Move into the investment property for 2 yrs and make it your Primary residence and the gains (up to $250K/$500k if filing jointly) will be tax free.


So a lot depends on the tax outcome you desire (consult your tax professional).

From the sale, you can look for a SFR or smaller MultiFamily or I would even look into being part of a Multifamily syndication, where you are passive, but collect decent cash flow and have upside.

Doing a 1031 exchange into a small property is possible with $150-$200K but doubtful anyone will allow a TIC into a larger deal for that small an amount.

Hope that helps.

1Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 905 votes
    4y

    @Nerlande Joseph, as I understand it, you have a few options (and more):

    - Sell the condo, pay the taxes, invest the rest

    - Sell the condo and do a 1031 exchange into another investment property

    - Sell the condo and put the gains into a QOZ investment

    - Move into the investment property for 2 yrs and make it your Primary residence and the gains (up to $250K/$500k if filing jointly) will be tax free.


    So a lot depends on the tax outcome you desire (consult your tax professional).

    From the sale, you can look for a SFR or smaller MultiFamily or I would even look into being part of a Multifamily syndication, where you are passive, but collect decent cash flow and have upside.

    Doing a 1031 exchange into a small property is possible with $150-$200K but doubtful anyone will allow a TIC into a larger deal for that small an amount.

    Hope that helps.

    1Reply
  • Nerlande Joseph
    OP
    Miami, FL · Member since 2022 · 41 posts · 19 votes
    4y

    Thank you @Percy N.

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    4y

    @Nerlande Joseph

    $100,000 appreciation will likely be less of a gain when you factor in selling costs.

    assuming there are no state taxes involved and not factoring in depreciation recapture, The tax on the $100,000 appreciation will likely result in $15,000 of taxes if you are in a middle tax bracket.
    It can increase to $20,000 of capital gains tax along with $3,800 if you are subject to the net investment income tax.

    This will help you determine whether you should do a 1031 exchange or not.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
    1Reply
  • Nerlande Joseph
    OP
    Miami, FL · Member since 2022 · 41 posts · 19 votes
    4y

    Thank you @Basit Siddiqi

    No state taxes, but I am up in the upper end of the tax bracket. I decided to keep the Condo for now; will raise rent closer to market upon renewal for an additional $100. 

    Now I am looking to do a HELOC on my primary home to finance my next deal. I can't find anyone doing HELOC on investment property which would have been my preference.

    I am currently researching my next market which I would prefer to be in Florida. 

    1Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 905 votes
    4y

    HELOCs are for owner occupied residences.

    Look for a commercial LOC from a local lender.

    They generally will only do it if it is $300K-$500K and above. 

    0Reply
  • Nerlande Joseph
    OP
    Miami, FL · Member since 2022 · 41 posts · 19 votes
    4y

    Thank you @Percy N.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free