To sell or not to sell

2 Replies

I’m having a hard time deciding whether or not to sell a live in flip. We’ve asked around and have been told there will be as much as a 10% correction in the next year or so in Salt Lake City Utah which would wipe out the profit we’ve built up.

We bought 3 years ago and put in 95k in repairs and 27k in interest and fees on the mortgage. Our interest rate is 3.12% on a 15 year and we pay 1700 a month plus 300 a month in utilities. In the next 7 years we’ll need a new roof and siding. We would rent it but if the kitchen sink clogs it floods a downstairs bedroom and tv room and I don’t believe it would cash flow in either case.

If we sold today at 360k after real estate commission and paying off the mortgage we’d walk away with 143k which would be a 21k profit. We’d go and live in student housing for two years (I’m a grad school student) which saves us 1100 a month compared to staying and I’d reduce my commute by about 1.5 hours each day.

we’d take that 143 and pay off all our debt and have some seed capital for the next project.

What makes me hesitate is that we have 12 years left on the mortgage and I don’t think I can get that interest rate again for a while. Part of me wants to rent it out at a wash and start saving for the siding/roof and risk that it floods. The other part of me wants to take the lessons learned and prepare for the next project while living debt free and reducing our monthly expenses. We are totally at a loss as to the best course of action. Please help!

This is a tough one. I think we all face similar decisions when owning homes with equity. Right now the real estate market in salt lake county is projected to increase 5-12% in the next year. (Depending on type of property and location) I am a real estate broker and know the market well. I am currently still purchasing buy and hold properties and even close on a single family and four plex in the next 30 days. I do not anticipate a correction of 10%. I think the market will slow down and not be as crazy and level out. However there are no guarentees of course. No one really knows. If there were a 10% correction I would be fine with it because my properties cashflow enough even if rent prices decreased it would not affect me since my intention would be to hold through it.   If your property would not cash flow as a rental I would probably cash out and purchase a property or properties that did. You could still live in student housing if you wanted but get some cashflow coming in. I would not leave your money sitting in an account if it sold. While I think it’s good to have cash reserves I also think you should have your money making money for you. In real estate, as a lender, a small business, whatever your cup of tea is or diviserfy. I personally have most of my eggs in the real estate basket and Am comfortable with that. That is all just my opinion though. Trust your gut feeling and go with that decision. Not based on what everyone tells you. I think we are often led in the direction we should go. Just have to listen ;) 

That is a great amount of equity to walk away with after only three years. I would sell now and use a portion of the equity to buy a good house hack while you are still in school (definitely don't use a 15 year mortgage) rather than paying for student housing. Then buy another in a year or two when (if) there is a correction.

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