Hi Bigger Pockets, Military investor here needing assistance. Thanks in advance! I’ve ran the numbers on multiple calculators but I’m still not confident I’m analyzing my 3 properties correctly. Bottom-line is that I’m trying to figure out if I should sell or hold. Two are rented and one is my Primary Residence which I will be moving out of due to military orders to New Orleans this summer (though all were a primary residence at some point). As a Buy and Hold investor, I’m not prone to sell, but I think the math may be telling me that I have a at least one-to-two Fix and Flips on my hand.  

Here are the details with additional numbers in the photo:

9122 Oshad Lane, Springfield, VA (current Primary Res, available for sale/rent in Summer 2021)

Purchase Price: $352,000   |    Total Invested (closing costs, down payment, rehab): $100,000 not financed

After Repair Value (ARV): $480,000 |   Left on Mortgage: $330,400

If rented, Monthly Cashflow: $225 (taking into account all expenses including CAPEX & Vacancy)

9132 Everett Court, Springfield, VA (currently rented until May 2021, could continue renting or sell)

Purchase Price: $320,000    | Total Invested (closing costs, down payment, rehab): $55,000 not financed

After Repair Value (ARV): $405,000 |     Left on Mortgage: $289,000

If continued to rent, Monthly Cashflow: $100 (taking into account all expenses including CAPEX & Vacancy)

3345 Haverhill Rowe, Lawrenceville, GA (currently rented until May 2022, could continue renting or sell)

Purchase Price: $94,000    |    Total Invested (closing costs, down payment, rehab): $29,000 not financed

After Repair Value (ARV): $260,000 |     Left on Mortgage: $68,837

If continued to rent, Monthly Cashflow: $350 (taking into account all expenses including CAPEX & Vacancy)

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Thanks for any insight you can provide on my situation!  I'm still not confident enough on my ability to analyze (especially with the weirdness that comes from already owning them, multiple refi's, and all used as Primary Residence at some point).   I very much appreciate all the guidance and motivation this community has provided.

Jeremy, 

What is your long term goal? You state that you are a buy and hold investor, so why not hold on to these, looks like you could pull some equity out and use that to fund your next purchase. John Schuab’s book , building wealth one house at a time would be worth a look.

Cheers

Originally posted by @Matt Ziegler :

Jeremy, 

What is your long term goal? You state that you are a buy and hold investor, so why not hold on to these, looks like you could pull some equity out and use that to fund your next purchase. John Schuab’s book , building wealth one house at a time would be worth a look.

Cheers

Hi Matt,  thanks for the reply and for the book recommendation!  My long-term goal is cashflow for when I retire from the military, but I'm wondering if, for example, the 9132 Everett is better as a Fix and Flip instead of a long-term rental based on the cashflow vs the short term gains of only living in the home for 8 months.  You're right my equity position is pretty good (in my limited opinion) so I could tap them for more, but my concern there is that they certainly wouldn't cashflow if I took equity out....but that's me looking at each property individually instead of as a collective which is likely how you are looking at them.

Jeremy,

Look at the long game. Not many buy and hold investors say” wish I had sold that “

Over time you will pay down the note and enjoy the benefits and the residents will help you achieve your goals!

Originally posted by @Matt Ziegler :

Jeremy,

Look at the long game. Not many buy and hold investors say” wish I had sold that “

Over time you will pay down the note and enjoy the benefits and the residents will help you achieve your goals!

I appreciate that!  I sold my first one and wish I hadn't in retrospect.  I didn't want to do the same thing this time, but I also didn't want to disregard what the math was saying.  Have a Happy New Year.

The Cashflow in your VA homes is not too great, especially if your goal to hold for Cashflow. I think ultimately it depends what the opportunity cost of selling would be. If you found another property to buy with the proceeds where the Cashflow was better then I say go for it. But if you don't find something better than hold them. Cashflow positive and paying off the loan with your tenants Monet beats stuffing the proceeds in your mattress waiting for a better opportunity.

@Jeremy Vought any primary you’ve lived in 2 of the previous 5 years is worth *thinking about selling* due to the 121 exclusion of capital gains tax, ie you can profit up to $250k on a primary and pay $0 in taxes. Do you intend to keep buying properties in different states, seems complicated to me unless you plan to scale in one or more of those cities, otherwise management can be very tricky. Having said that, if you are investing in areas with decent price appreciation potential, they are at least break even and you don’t need the cash it doesn’t hurt to hold. You can always convert equity to cash flow in the future. Personally I would much rather have low cash flow with strong appreciation potential than strong cash flow with low appreciation potential. That’s my $.02. Buy great properties and hold but not sure what your goals are. Happy to jump on a call sometime to discuss. I have nothing to sell. And thank you for your service to this great country.

The question for me would be how much equity can you pull out vs. selling. If you're able to pull out enough equity without going into a place of negative cash flow then it's probably worth keeping. Obviously you want that equity to invest so I don't think just leaving the equity in those properties makes sense. But in similar situations I've been able to pull enough equity out either through refinancing or portfolio loans that it's made sense to keep the properties. I lean toward keeping all properties, but it's more of a personality preference than anything else.

However, if it wasn't for refinancing I definitely would have sold my primary residence.

@Stephen E. , thanks for the insight.  With the little cashflow in my Virginia homes I wouldn't really be able to pull equity out of those without going into negative cashflow on them (even though there's a good amount of equity to tap).  I could certainly pull out some equity from the GA home and still be able to have positive cashflow.  I also lean toward keeping properties, but I also didn't want to miss out on cashing in on the appreciation from the market and my rehab.  If I calculated correctly, the amount of time required to rent the property to make the amount of profit if I sold it was something like 30 years or more.

Difficult decision. Timing the market is a difficult beast, inexact at best. The market will likely go lower than it is now, but one day it will certainly be higher.

One thing NOT to take into consideration is how much money you put in. The only thing to think about is how much you could take out and what next step makes the most money. The amount of money put in is a meaningless statistic, good for grading yourself but no actual relevance when it comes to deciding what to do next.

Originally posted by @Stephen E. :

One thing NOT to take into consideration is how much money you put in. The only thing to think about is how much you could take out and what next step makes the most money. The amount of money put in is a meaningless statistic, good for grading yourself but no actual relevance when it comes to deciding what to do next.

Never heard it put that way regarding your total investment put in and to not take it into consideration. That flips the script a bit as I was originally focusing on the ROIs which certainly take into account the total investment in. Totally see what you are saying though. Over time, I'll be able to continue to tap the equity in those homes to invest in other things. Saw that in my GA home. Had it paid off for a year and then tapped it for $80k to get into one of my VA homes. Still cash flowing in GA nicely and it got me another property (with plenty of equity). Thanks for making me see this another way.

I'm looking forward to moving to New Orleans.  Belle Chasse homes are barely coming on the market but that's where'd we'd like to live.  
  

Let me know when you arrive. We'll get coffee and talk real estate!

@Jeremy Vought

I'd look at this from two points of view, long term and short term. 

1 Long Term. As has been said before, what are your goals? Rentals last longer than mortgages. Looking at your cashflow today misses the larger point of what will they cash flow when you retire. To answer that question you'll need to to figure out rent and expense growth. 

2. Short Term. Say you sell, what will you do with the money? From cash flow alone, you are getting between 3-6% on your properties, which in this environment is much better than you'll get if you park the cash in a savings account. Taking into account mortgage pay down and appreciation, you are knocking on the door of 10% annual return. Not too bad. 

Do you have another investment option that will yield greater than 10%? 

Best of luck and S/F

@Jeremy Vought if you refinanced your Springfield properties to 30 year fixed, could you get cash flow?