I have a rental house in Fort Collins that I've owned for 11 years that makes me about $700 monthly over costs......It'd be sweet to sell it because I could use a pile of money, but the market there is so hard to gauge..
What are your thoughts? Sell or Hold in FOCO?
If you have a great plan that could yield you much higher returns with the profits then sell.
If not - and the house is lowish maintenance and stress then that cash flow sounds pretty good to me... Do not kill the golden goose, pay tax on the gains, and then let the rest sit in a savings account.
If 1031 enters the picture - talk to @Dave Foster
Hi Brandton, It depends on the house and the price. Can you use the money you pull out to make more than $700 a month? If you can, get out, capitalize the equity and move it to another investment. We can do a CMA and check the market for how quick they are selling.
@Brandton Manshel, Don't forget that in your calculations you won't just have tax on the gain (which might be pretty substantial given that you bought it in 2007 after things started downhill or not so much if you bought it in 2007 before the stampede started). You'll also have recapture of almost half of the homes basis at 25%. That's going to make the tax sting regardless. Doesn't tip the scales one way or the other without a lot of other factors weighing in . But you need to keep it in mind. It would tip the scales to a 1031 as opposed to a straight sale without some pretty strong motivation to liquidate - especially since you're in the real estate business.
I'd also remember that cash is slippery and has a way of disappearing. Real estate rarely leaves it's foundation and gets sucked up in other things.
@Brandton Manshel While that cash flow (assuming that 'over costs' means net positive) sounds fantastic, I'd need more info about the prop, what you bought it for, how much you owe now, what you could sell it for. Have you looked at comps in the area to see what similar homes are going for? Are you married or single (this impacts how much gain you can take tax-free, although you still pay depreciation recapture as Dave said)?
$700 net flow per month is great, but if this is a highly appreciated piece of property you could be getting more, with greater diversification. Like Dave and others have mentioned, the 1031 is going to be a powerful tool for you if you do sell, so don't skimp on the research there.
If you're willing to post some more specific numbers for the property we could weigh in with more specific advice :)
@Brandton Manshel - Reach out to @James Orr . He's an investor and broker up there and knows the market and has all the data one could want. Pick his brain!
I’m wondering what you need “a pile of cash” for? Maybe u need to look st a refinance and pull some money off the table. If u just have this one rental and are trying to get out of the business of landlording- I happen to be looking at buying in FOCO- my daughter moved there 10 years ago and is now having a baby. Maybe I should come check it out?
I sent you an earlier post- can u send me photos of your property- maybe there is some other avenue for problem solving.
I'm local to Fort Collins and have a few rental properties. I think about your question all the time.
Trying to time the top of the Fort Collins market to maximize your return vs Having an opportunity for a higher yield investment are two different questions.
The Fort Collins rental market is strong and I think will remain so for single-family homes. For real estate, I've heard projected property value growth leveling off around 3% a year up to end of 2019. If interest rates continue to rise and wage growth remains stagnant, I've seen predictions for a downward trend in property values for Denver, Boulder, and Fort Collins between 6-10%. So holding the property is pretty risk averse especially if you got in before the jump in home values we have seen the last 3 years.
I have friends who run a property management business in town and they are seeing more investors sell their rentals than in years past but they have plenty of other people investing in rentals in the area to make up the difference.
A cash-out refinance or equity line might suit your needs.
I agree with @Kevin Grinstead , can you convert it into a better investment? If not, keep it. Owners in northern Colorado have been pretty lucky in the last 8 years, a lot of properties have doubled in value in that time. You could sell and invest in another market that has better cap rates. Of course that can be risky and make things harder to manage. If you have a good investment, holding is usually better than trying to time the market.
I live in Fort Collins as well. If you're making $700 after all your expenses, I'd say hold on to that one. You're right that in our current market, you could sell it for a pile of cash, but that's a one time transaction. If it's not too much of a hastle, I'd keep it for the cash flow. In our market, the cash flow is certainly a golden goose, as Jim said.
Where in FOCO?