General Landlording & Rental Properties

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Michael Ritrovato
  • Real Estate Agent
  • Fallbrook, CA
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Should I sell or keep my rental property

Michael Ritrovato
  • Real Estate Agent
  • Fallbrook, CA
Posted Jul 27 2019, 14:06

So here are the details on a rental property I currently own. I bought a single-family home back in 2007 with a VA loan. I am currently renting it out for $950/month. My mortgage is $822 but I pay $950 just to pay over on the mortgage, annual taxes are $750 and no other expenses, other than 10% management fee. It is rented out and has been rented out consistently for a while now. I have about $30K in equity in the house now. The question is... Do I sell the house and use that $30K to invest in another property to flip or hold it? Or do I just sell it and use the $30K to get out of debt. I have about $30K in debt. I'm at a loss here.

Thanks for any help guys and gals. 

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Tommy Cangelosi
  • Real Estate Broker
  • Valdosta, GA
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Tommy Cangelosi
  • Real Estate Broker
  • Valdosta, GA
Replied Jul 28 2019, 19:07

@Michael Ritrovato

SELL

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Shawn Coverdell
  • Investor
  • Clatskanie, OR
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Shawn Coverdell
  • Investor
  • Clatskanie, OR
Replied Jul 28 2019, 20:43

Sell it! You will net maybe 15K out of the 30K equity if all goes well. This will clear your VA loan. and you will be eligible for another VA loan.

Buy a nasty ugly house (that will pass VA standards) fix her up quickly and refinance it again under VA loan program. POW, you now have a bank account.

READ READ READ on this site under the Pro Forums. 

Start over. you will do great now that you know what numbers to look for. 

I don't use any of the calculators or "comps" or any of that stuff any more. Just know your area. If your payments are 600 and you can rent it for 1,300. you are on your way. 

in 5 years you should be able to give your boss his ID tag back. 

Shawn Coverdell

Homes in the Hood

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Brian Garlington#1 San Francisco Real Estate Forum Contributor
  • Realtor
  • Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility
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Brian Garlington#1 San Francisco Real Estate Forum Contributor
  • Realtor
  • Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility
Replied Jul 28 2019, 21:40

@Michael Ritrovato

Maybe I'm missing something, can't you simply raise the rent? If not....and it's an SFR....You may have enough room in your backyard to put a "Tiny House" and AirBnB the tiny house.

Or

....If you have about 30K in equity and it doesn't really "appreciate", why not refi out of it into a conventional loan.....with a better rate  and again...raise the rent and this time buy a duplex to house hack. 

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Michael Ritrovato
  • Real Estate Agent
  • Fallbrook, CA
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Michael Ritrovato
  • Real Estate Agent
  • Fallbrook, CA
Replied Jul 28 2019, 21:48

@Brian Garlington yeah looking on rentometer the rent is as high as I can take it for that area. And there isnt enough room on the property to build on to it much.

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Steve Vaughan
  • Rental Property Investor
  • East Wenatchee, WA
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Steve Vaughan
  • Rental Property Investor
  • East Wenatchee, WA
Replied Jul 28 2019, 22:30

12 years of depreciation recapture adds up.  I sold a 2007 rental buy last year that added $50k to my cap gain of $60k.  $110k in extra 'income' to report.  Then a small penalty for underpaying/not paying quarterly.  

Be sure to set aside taxes and account for realtor commissions and closing costs.  Your $30k will soon be $18. Reset your expectations and good luck with your sale!

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Greg Helbeck
  • San Diego, CA
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Greg Helbeck
  • San Diego, CA
Replied Jul 29 2019, 04:04

@Michael Ritrovato take the money and run

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Clark Harris
  • Rental Property Investor
  • California
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Clark Harris
  • Rental Property Investor
  • California
Replied Aug 2 2019, 17:02

It depends on the interest of your property, if your interest rate is high, you can sell it to pay off the debt. If the interest is not too high, you can sell it and buy another one.

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Russell Hathcock
  • Real Estate Broker
  • Mesa, AZ
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Russell Hathcock
  • Real Estate Broker
  • Mesa, AZ
Replied Aug 6 2019, 14:13
To me it depends on what your long term goals are.  I'm a fan of long term buy and hold strategy.  As I read it, your income is $950 and expenses are $979.50; so -$29.50 monthly negative cash flow.  You are paying $29.50 x 12 = $354 / year to collect $950/mo or $11,400/year and building equity.   Here are a few questions that I ask myself.  Is $29.50 hard to come up with each month?  Is spending $354 yr worth it to build the equity?  I'd spend $354 to gain $11,400 all day long.  Is it easy to sale and cash out and is it easy to pick up another property that will cash flow?  What is the age of the property and risk of large repair cost and vacancy rates.  Are the tax write offs at the end of the year worth more than $354 (you might actually be cash flowing after depreciation and tax deduction considerations).  Don't get me wrong I'd much rather have a large positive cash flow but looking at the your long term goals and overall lifetime of holding the property perceptive may have some factors that lean towards holding.  

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Anthony Rosa
  • Rental Property Investor
  • New York City
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Anthony Rosa
  • Rental Property Investor
  • New York City
Replied Aug 6 2019, 14:27

@Michael Ritrovato, IMO - Sell it and get out of debt.  Being debt free with outstanding loans takes a huge weight off your shoulders.  The appreciation is much & doesn't offset the lack of cashflow.  

Taxes $750/yr, where is the property?

Good luck and thanks for your service!