Hold or Sell Multifamily with High Appreciation?

[Manco Snead]

Greetings good people,

I'm looking for some feedback on the decision to sell or a hold a duplex I've had for 6 years. In short, it cash flows very well ($1000/month, partly because I put 40% down), is in a desirable and growing town in an excellent neighborhood with increasing rents and I have never had problems getting tenants. The market has become very inflated. 

Price paid for property: $265k

Potential selling price: $600k

I hate to mess with a good thing in considering selling, but I am wondering what the most advantageous strategy would be. An implication of selling is that to reinvest I would need to buy out of the area, likely out of state.

Any thoughts are much appreciated.

[Joe Villeneuve]

Sell it faster than you can re-read this post.  Faster if you can.

That 40% you put down, to get higher CF, is an illusion.  All you did was pay for that "higher cash flow" upfront.  Realize that your cost is completely restricted to what comes out of your pocket...like your DP.  The more that comes out of your pocket, the more YOU paid for the property...and, the longer it takes you to get a profit.  Profit comes after you recover your cost.

Her are your numbers:

1 - Your cost was 40% DP, or $106k
2 - Your recovery comes from your CF.  $12,000/year.
3 - Recovery period =~ 9 years.  That's way too long.
On the other hand, you have $335k in cash (hidden in equity) just waiting (and dying) for you to put it into play.  Go out an use it as a 20% DP, and buy a property, or properties) worth $1.675M (yes you read that correctly).  Imagine what the accumulated CF could be from that.