sell or don't sell

11 Replies

I'm new here so if I am posting this in the wrong place please let me know.  I have a question about a duplex I recently bought.  I paid 78,000 for it about four months ago.  It is currently rented for 600 month for each side.  I could probably paint and put in new flooring and get  700 each side.  I'm positive cash flowing a couple hundred bucks a month right now.  I had a realtor call me yesterday wanting to know if I'd sell the property.   I know I got a steal on it.  I mentioned that I felt it was worth 110-120,000.  My question is if I could get anywhere near that would you sell? Realistically I think I could get 105 or so for it.  I don't necessarily need the money and I'm relatively young and it is paying for itself.  What would you do?

If you don't need the cash, this is math question sort of like a word problem in Algebra I. 

What's your ROI now? (annualized) cash flow+tax benefit+appreciation+principal reduction/total investment.

If you can get a higher ROI in another deal, move on.

Medium lion smcc cap no backgroundSteve McCondichie, SMCC Capital LLC | [email protected] | 770.683.1239 | http://smcccapital.com

@Brent Davis , you have discovered the question all Real Estate Investors must ask themselves at various points in their journey.

Initially, I have some questions for you?  1) Do you wish to be a RE Investor for the long haul?  Do you wish to invest by being a landlord?  3) What would you do with the realized profit -- if the answer to #1 is "yes", presumably you would reinvest the profit into another property.  Answer those three questions and you might be on your way to answering the Sell or Keep question.

Personally, I seek properties at a price and in a certain condition, that could provide me with a significant profit if I chose to sell them soon after purchasing and rehabbing them.  Yet, I don't sell.  But, that's purely a personal decision.  Other investors in my situation would sell without thinking twice, if they could double or triple their investment in six months.  Different strokes and all that jazz.

Good luck in making your decision!

I have 20 rental units so I am familiar with the rental game.  I've spent about the last five years flipping a couple houses a year.  I am also a second grade school teacher and father of three.  So I have a busy life.  I had decided I was going to steer away from flips and focus more on my rentals.  However, this sort of fell into my lap.  I've done absolutely nothing to this property.  I would probably take the profit and reinvest in another property or pay off an existing note.

I wouldn't sell based on that unless you have it mortgaged to the hilt and have no cash flow. You think that you can (realistically) realize about $27k on the property. After you are finished paying fees you are down to $20k. If you have anything less than $600 in monthly carrying costs, you are going to realize that $20k in 3 years in cash flow and (assuming no depreciation) still going to get $20k out of it selling. Where else do you know that you can double your money in 3 years safely? 

I had completely forgotten that I had been on here two years ago!  I've always listened to bigger pockets podcast.  I thought you might like an update on the property.  I did not sell it.  I currently owe about 60,000 on the property.  Each side is rented for 650.  Tenants pay all utilities.  Property taxes are appx. 1800 per year.  I'm glad I didn't sell it.  I'm looking forward to the current tenants moving so I can bump the rent up a bit more.  

If you decide to sell, hold it for a year first.

If you sell after owning for a year you will be taxed at capital gain rate 15%.

If you sell within a year it will be regular income rate - close to 30% depending on your bracket.

You should try to find a way to pull out your equity to reinvest. The opportunity value of your equity is killing your cash flow. The property will soon, if not already, be a liability.

Thomas. I understand what you are saying with trying to reinvest the equity. However, it is cash flowing around 500 per month I think. What do you mean by it soon will become a liability?

@Brent Davis it's been two years but I think you're still right to hold onto it. You originally said, "I know I got a steal on it." This tells me you couldn't cash out the equity and get a better deal with your money. 

You got a good deal and it's working for you. Why fix something that's not broke?

Medium copy of logo 03 aw sqr clrNathan G., American West Realty & Management | [email protected] | (307) 587‑9608 | http://www.rentcody.com | WY Agent # 12499

Originally posted by @Brent Davis :

I had completely forgotten that I had been on here two years ago!  I've always listened to bigger pockets podcast.  I thought you might like an update on the property.  I did not sell it.  I currently owe about 60,000 on the property.  Each side is rented for 650.  Tenants pay all utilities.  Property taxes are appx. 1800 per year.  I'm glad I didn't sell it.  I'm looking forward to the current tenants moving so I can bump the rent up a bit more.  

 Thanks for the update! I always enjoy it when people come back and tell us what happened :)