Sell cash flowing condo to buy 4-plex(s)?

3 Replies

I currently own a condo in San Diego that I purchased for $82k around the bottom of the market in 2009.  It cash flows at $4k per year, so it has been a pretty good investment for me.  The price today is around $180-200k according to Zillow/Redfin/Realtor and I have a meeting with a realtor later this week to discuss what I could get for it.  I still owe $50k on the mortgage.

I now live in Phoenix and have been researching different real estate options for the past couple of years.  I would like to start buying B and C level 4 plexs' around the Phoenix and Mesa area that are in the $150-200k range.  My strategy (if you want to call it that) is buy and hold.  I'm looking to supplement my income, and use it to buy more properties down the road.

I figure by selling the condo, and the $50k I have in savings I can start putting $40-50k down payments on places before the rate hike happens later this year.  If there is anything I'm missing, or if anyone has any advice good or bad I'd like to hear it.

Thanks

@Bud Dwyer Hey Bud, 

Have you thought of a cash out REFI? That way you can keep most of that cash flow in San Diego and still get future appreciation in California Real Estate. I'm not a fan of selling a good cash flow property. 

Also if you plan to live in one of the units in a 4 plex in phoenix you could get an FHA loan with 3.5 % down.

just a thought,

Good Luck, Joey

Selling the condo looks like a good call.  A long vacancy, repair or special assessment could easily wipe out cash flow - and as a percentage you are looking at only about a 2% return on equity.

House hacking might not be a bad option.

  

@Bud Dwyer , I think both options may be good. You will definitely have more down payment cash if you go the route of the sale, but you will have to pay long term capital gains unless you performa 1031 exchange. A refi would likley get you enough to buy one or two financed properties in the Phoenix area. I sold my triplex there last year for about $110K and the 3 units generated about $1200/mo in gross rents. If you can buy FHA, it may make sense to pay the capital gains taxes and just buy the first owner occupied property, then buy an "investment" property. If you already own your primary residence and can't go FHA, I would consider the 1031 plan.

Both @Joey Dwyer and @Jesse T. make good points above.  San Diego property is always a good long term investment, especially if you can maintain cash flow.  However, condos aren't the most efficient way to own investment property and an assessment would hurt cash flow, but you will likely have plenty of equity to tap again in the future as well.  Maybe think of it as your future retirement residence when you "burned out" (literally) of the Phoenix heat :)

If you want, I can run comps for you too for comaparison.  Just message me

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.