Specialist · Crossville, TN · Member since 2018 · 73 posts · 27 votes
I have 2 duplex's and 4 single family homes with 5 more being built. All my SFH are all 725sqft 2 bedroom 1bath on the same plat of land so they operate more like multi family rather than single family. The two duplex's I have I raised the rent once from $750 to $800 sense I purchased them but I think I can get a little more in my market. The SFH's I am building and already have are apprising at $10,000 more a door than I have in them. I am currently at $675 a door and once complete with the second half I will raise that to $725 and should have no problem getting that in my market.
My question is would I be better off to hold them while gaining equity or would I be better off to raise my rents over the next year and sell them for the cash to re invest in something else? Has anyone been in this situation?
I like your thinking, it's definitely a good question. I think it depends on what you are planning on investing the funds from the sale in. If you stand to earn a substantially higher return from the next investment, then yeah, it could make sense to sell. You could also hang on to them, refi, and invest the refi funds into the next deal...
Rental Property Investor · Merritt Island, FL · Member since 2015 · 253 posts · 178 votes
7y
so is this considered a commercial property since you have more than 5 “units” on one parcel? If so, you might consider a line of credit once stabilized so you can hang on to these AND get your next one started.
Specialist · Crossville, TN · Member since 2018 · 73 posts · 27 votes
7y
@Anthony Katsonis
Thank you Anthony!
My builder also owns a truss shop and developments subdivisions and builds about 25-30 spec houses a year. I can have everything built very cheap because he buys a lot of lumber, drywall, plumbing, shingles, and he builds all his own trusses. I also use the same cabinets, countertops, sinks, toilets, showers, doors, floors, and dishwashers. This allows me to already be ahead of the appraisal so what I would do would buy a lot larger piece of property and do the same thing on it just with a lot more units to get my price down even further. I just don't know if I'm better off to wait to build up my ROI and borrow against it in 7-8 years when they are payed off or get my ROI up now sell and move on. Thank you for any input Anthony!
Specialist · Crossville, TN · Member since 2018 · 73 posts · 27 votes
7y
@Charles Soper
Yes Charles in my county anything with more than 3 homes on the same parcel is considered commercial.
So this gives me the advantages of growth through ROI like in multi family. I know a little about lines of credit, but what are your thoughts on lines of credit? Pros and cons?
Rental Property Investor · Merritt Island, FL · Member since 2015 · 253 posts · 178 votes
7y
So there’s something to be said for having equity for cushion going into the next few years, but you need to balance that with your growth goals, which only you can decide.
As for a LOC, I like them because you only pay on what you've used and the interest rate is usually reasonable as comepared to a cash out refi leaving you with less equity and the potential to have trouble doing a Refi in the next few years when your balloon is due.