Should I sell?
Hello everyone,
I bought my 4 unit building for $175,000, Saint John NB, in 2019 I could sell it now for $450,000. Rents together are $3400 each month. A home run i would say.
Im moving to San Diego next year and want to buy a house hack but its insanely expensive. I have analyses paralysis and have no idea what to do.
Do I sell and pay capital gains and dump the money into a different market or do i refi and buy something else ? Should I be a private lender since rates are so high?
My gut says don't sell and keep buying but just feeling very stuck. Help!!! any advice would be amazing!!!
Thank you
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That is a tough decision. It's hard for anyone to give advice on such a personal decision, but I'm almost always in the position of never selling. Especially when it's a good deal like you have. This is only exaggerated not that mortgage rates are higher. If you can make something work in SD without selling I'd try to do that.
That is a tough decision. It's hard for anyone to give advice on such a personal decision, but I'm almost always in the position of never selling. Especially when it's a good deal like you have. This is only exaggerated not that mortgage rates are higher. If you can make something work in SD without selling I'd try to do that.
I always go with my gut! Even if it changes after a mindset shift lol.
But a lot of hardcore investors dont have this problem because when you are familiar with your market and your returns, the decision can simply be broken down to a matter of what is the best business decision for you. So if you take the 300k you have in equity and invest that somewhere else, how will the returns compare to if you hold on to the quadplex?
Also factor in the stress of doing a rehab / finding a deal as well as the stable income (as long as you know you have good tenants right now).
I think refinancing would be a better option. But if I were in your shoes, I would keep the quadplex, hire a PM since I'll be out of the state and then run the numbers on what I could do if I pull some equity out with a refinance.
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Would you be able to do a HELOC on the property & utilize that for a down payment on your San Diego house hack? With such a great cash flowing property, I would be very resistant to selling. If there's ways to tap into the equity, I'd rather go that route vs. selling for the gains.
I have a great friend @Nicholas Coulter who can help in the San Diego area. He just started house hacking himself down there.
@Amanda Scheller, @Eric Yu, that's what I was going to advise, link up with a real estate agent who focuses on house hack acquisition. They'll be able to help and point you in the right direction to see if it's even possible to house hack based on your current position and market conditions. Are you currently house-hacking the Saint John property?
I won't be able to get a heloc. It is not my permanent residence. so i have to look at other options. I can just use the property to help get a higher mortgage.
let me know if you have any ideas.
Thanks again
Sell if the profits can level you up. Hold if you can still grow without selling it.
Could you not get a HELOC if you were to use one of your units as your permanent resident? Simply leave a unit vacant, have your mail sent there, keep the address on your driver's license, and get a roommate to help offset costs.
@Amanda Scheller Since you are able to house hack with as little as 3.5% to 5% down one suggestion would be to buy your first place in San Diego and hold on to the 4plex....If after your first purchase you feel good/confident about going to the next purchase, at that point you can consider selling the 4plex to purchase your second property in San Diego.
My general rule of thumb is to not sell if you are able to access the funds in some other way such as a HELOC, cash out refinance, second mortgage, etc. The last property I sold in San Diego was a single unit which I traded up (through a 1031 exchange) to purchase a 4plex....I could not tap into enough equity solely through a cash out refinance (typically 75% LTV) to make that purchase, so I had to sell.
I will also be selling a second property this spring, also a single unit (SFR), since I stripped a good amount of equity from it a couple years ago through a cash out refinance to purchase a triplex. Now this property doesn't have enough equity left to pull out more money through a cash out refinance to purchase another multifamily so I'm going to have to sell to access all of the equity left to purchase a 2-4 unit.
Again, I'm not a fan of selling unless that is the only possible way to access enough equity for the next purchase and the next purchase should be bigger/better otherwise no point in selling for the sake of doing so to buy another similar property/location.
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I'm not expert in Real estate, but from a business perspective, if you sell, you'd have to pay capital gains tax. The capital gains will be subject to (450k-175k) =275,000. Not sure how much they'd tax you, but I imagine NB Capital Gain is at 50%. On the other hand, you could refinance at 60% market value, you could pull out 270K without the burden of Tax, your house will still have good cashflow with the mortgage of payment on 270k.
@Amanda Scheller What did you end up doing? In a similar position but I'm not moving outta state..
Hey @Amanda Scheller, what did you ending up deciding on? Personally, I'm a fan of getting my equity to work as much as possible for me.
A good trick to achieve this is the return on equity calculation. It is your net cashflow divided by your net proceeds (minus realtor and other fees).
Eg. 12,000 net cf per year / 250,000 = 4.8% ROE
I ended up just keeping it. Buy and hold was my main goal. Im still trying to figure out what my next move is. i want my money to work hard for me.
@Amanda Scheller smart! I have a building worth mid 400’s that I owe 180k on. Cash flows me about $1k but I’m a keep it. The 10 year affect of appreciation and principal pay down is crazy
People very rarely regret holding long term. It may not be how you planned it, but you won't regret it.
Hey Amanda, fellow Vancouverite here with properties in Ontario. Whoever told you that you can't do a heloc because it's not your principal residence is wrong. I have two rental units with a heloc on each. Happy to introduce you to my bankers who can do it for you, although with rates where they are...
House hacking is a great strategy if you are planning on living and staying in San Diego. Another option is to invest in a better performing US market and rent in San Diego.
Have you looked at othe rmarkets?
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Selling a property in St. John, NB has very promising prospects for future returns. Therefore, assessing the purposes from selling off assets or holding on to them, refinancing will diversify the assets in your portfolio while exploring house hacking in San Diego will assist you to exploit everything possible. This means that there will be realization of capital gains if you sell however this might create some liabilities on taxes.
Investing in different markets and property types diversifies your portfolio. Conversely, a real estate advisor or financial planner will assist you in making informed decisions that align with your long-term goals.
Good luck!
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Why house hack? The ideal investment and ideal place to live are rarely the same place. If purchase price doesn't make sense in San Diego, rent there and save the money to invest in a market you know and works out on paper.