Is this a good investment - Sell or Hold?

Question

Purchased a villa near Tampa ~3 years ago in a good town with good schools and trying to decide if it’s time to sell or rerent... it’s an out state rental near my brother and my PM is good and tenants have been good so far but tenant just moved out. I’d use the profits to pay off HELOC and pay down another rental’s mortgage.

Purchase 125K plus 25K repairs

Would sell now ~215-220K

Owe 85K - 5% rate used HELOC from primary home

Rent $1550-1600/mo

HOA $275/mo

insurance $200/mo includes flood policy $600/year

RE taxes $200/mo

Management $155/mo

Jason D. · Answer

@Steve Janiak plenty of great deal in the tampa bay area right now. You could very easily keep your profits in the area and do very well. In fact, if you were to use a 1031 exchange, and keep the taxes deferred, you could use that equity towards a pretty nice multi-family in an appreciating area just outside the city or in Pinellas county.

Jason D. · Answer

@Steve Janiak It depends on what your goals are. I would sell because the return on equity is very low, and you could make a much better return on the profit from the sale.

Jason D. · Answer

@Steve Janiak I see no downturn in the foreseeable future here. Population is growing as fast as anywhere in the country, jobs are moving to the area, and demand is crazy high, especially for rentals.

I just moved back here about 10 months ago and I'm super excited about the future of the area.

Jason D. · Answer

@Steve Janiak you show it in your numbers. $700 before debt payment and reserves. Subtract those 2 things and your down to $200-$300/month. So you take your yearly net of $3600/yr, divide by your $130k in equity, your return on that equity is less than 3%.

I do evaluate my rentals again after they have appreciate, and I've sold 2 rentals over the past 2 years because they were no longer giving me the return I needed, and I could reinvest that into better performing properties

Steve Janiak · Answer

@Jason D. I see you live and invest in St Pete area... so you already know the area has appreciated a lot the past few years! Based on lots of money being invested into downtown St Pete and Tampa there seems to be lots of potential for more appreciation if no major recession.

Shannon Cohan · Answer

@Brian Gerlach Personally I like the Fix/Flips right now for certain areas that have higher ARVs. The lower income areas are still appreciating and will continue to in my opinion. These make better areas to hold in and get more money out in the end game.

PP depends on the area really. South Tampa and Seminole Heights flips usually start around 135K - 160K but these areas have ARVS over 300K most of the time. The more you put into these rehabs the more you'll get out. Areas like Lakeland, Brandon, Temple Terrace (near the university) and Town N Country all have lower purchase prices but are up and coming in the market. Other tried and true areas are Carrollwood, Hyde Park and Kenwood in St Pete. There's more obviously but this is just a ruff idea.

Rents are mostly above 1200 for 2/1's SF homes and above 1500K for 3/2's in the areas I mentioned above. For buy and holds I like West Tampa, Sulphur Springs and North Hyde Park. These rents will vary depending on the state of the property etc.

Hope this helps!

Brian Garlington · Answer

Maybe I'm missing something....if the tenant just moved out, can't you get another tenant in there for a higher rent amount?

Steve Janiak · Answer

@Thomas S.good point to consider where I would invest profits... thanks... just trying to understand why both of you think return is considered low... purchased 125K plus ~25k repairs and 85K loan so 65k of my own money into it. Not counting mortgage payments or reserves for future repairs I clear ~$750-800/mo so $9,000-9,600/year. I agree $1,550 is low based on new value of 220K but was good when I purchased. HOA cuts into cash flow but includes all outside maintenance roof. Do you usually reassess each rental returns and cash flow if value goes up a lot? Thoughts?

Thanks

Shannon Cohan · Answer

@Steve Janiak I agree with @Jason D. Selling will give you more options for your cash.

In regards to finding deals in Tampa they're still around but you might have to find other avenues besides a normal agent who only uses the MLS system. Ive found that off-market deals offer the best return usually. Often distressed with some work needed but the end game is better this way in my opinion.

Is this a good investment - Sell or Hold?

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