Selling and get $180K vs keeping for $1000/mo cashflow

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Selling and get $180K vs keeping for $1000/mo cashflow

Victor Valle
Flipper/Rehabber · Portland OR, Charlotte NC · Member since 2015 · 22 posts · 8 votes

Hello fellows, I am in a situation that I need more advice than my uncle Joe.

I have a house with my business partner with $180K in equity, if I sell, I will get $115K and some business savings of $50K for a total of $165K cash that I can put in a bigger property.

If I buy out my partner for $50K, I will ended up with the house (it has a detached ADU), equity overtime and the cashflow that generates (in Airbnb) for $1000/mo NET, but I won't have any cash to invest, unless I pull a HELOC.
Any thoughts?
Thank you!


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Brian Sparr
Real Estate Agent · Cary NC & Walnut Creek, CA · Member since 2009 · 99 posts · 84 votes
7y

Hi @Victor Valle -

I don't think you've given a complete picture to us yet ... my initial questions would be:

1) If you sell and get the $165k, what does the new property look like (as in, cost / location / prop type / cash flow)?

2) If you buy out your partner, what's the $1k/mo cash flow going towards? And please don't say Voodoo donuts :)

3) last but not least, what are your goals for this investment?  Do you need cash flow?  Are you going for capital growth?

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  • Brian Sparr
    Real Estate Agent · Cary NC & Walnut Creek, CA · Member since 2009 · 99 posts · 84 votes
    7y

    Hi @Victor Valle -

    I don't think you've given a complete picture to us yet ... my initial questions would be:

    1) If you sell and get the $165k, what does the new property look like (as in, cost / location / prop type / cash flow)?

    2) If you buy out your partner, what's the $1k/mo cash flow going towards? And please don't say Voodoo donuts :)

    3) last but not least, what are your goals for this investment?  Do you need cash flow?  Are you going for capital growth?

    2Reply
  • Victor Valle
    OP
    Flipper/Rehabber · Portland OR, Charlotte NC · Member since 2015 · 22 posts · 8 votes
    7y

    Hello @Brian Spar, thanks for your reply.

    1) The new property will have to generate cash flow, that's a good downpayment for either a multiunit or a small commercial property.
    2) Haha, no Voodoo donuts, but it will be part of my income, towards the goal to be financially free.
    3) I definitely need cashflow however I don't want to get stuck with an out of state property (Portland OR) with buried equity that for some reason I can't pull in the future.

    I guess I need to find out how far the $165K will take me, maybe I can buy one or two properties that generate $1000 or more per month in growing areas like Charlotte, or invest in new construction.

    @Brian Sparr

    @Brian Sparrundefined

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  • Brian Sparr
    Real Estate Agent · Cary NC & Walnut Creek, CA · Member since 2009 · 99 posts · 84 votes
    7y

    @Victor Valle -

    Knowing what you'd do with the $165k is the key piece ... until you have that identified, we're comparing apples to oranges.

    If you're curious what that $165k could get you in the Raleigh/Triangle metro, shoot me a PM - I'm happy to share some thoughts.

    0Reply
  • Victor Valle
    OP
    Flipper/Rehabber · Portland OR, Charlotte NC · Member since 2015 · 22 posts · 8 votes
    7y
    Thank you!
    0Reply
  • Jason D.
    Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
    7y

    @Victor Valle $1000/mo income on a $165k investment is about a 7% return.

    If you feel like you can invest than for better than 7% (I think you can), the nest thing to do would be to sell and reinvest.

    If you feel 7% is about the best you can do, or you are comfortable with, hold onto it. $1000/mo is a nice foundation to build off of

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  • Mario Am
    Specialist · Nashville, TN · Member since 2019 · 187 posts · 83 votes
    7y

    @Victor Valle I don’t know how the market in Portland is but there are areas you can get so much more than 1k a month investing 180k

    (More than double that).

    1Reply
  • Mathew Wray
    Real Estate Agent · Portland, OR · Member since 2013 · 412 posts · 219 votes
    7y

    Hey @Victor Valle

    I think Brian is right, without a little more info about where you'll put the money or your goals it's tough to say. I think one piece to add into your equation is where is the property located in Portland? To me that's a big difference. If you've got a great property that is rehabbed and in an amazing, impacted, high-demand area then there are some intangibles (yes, that's code for future appreciation) that may make you want to hang on as Portland continues to grow and develop. If the house is further out and just in an okay area then potentially letting it go could be a better choice. 

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  • Victor Valle
    OP
    Flipper/Rehabber · Portland OR, Charlotte NC · Member since 2015 · 22 posts · 8 votes
    7y

    Agree, the house is located in a good area (Rose City Neighborhood) between downtown and the airport.
    The house is a remodeled house 3 bed/2bath with a detached ADU,
    The one thing that worries me is the fact that at some point appreciation will slow down compared to other markets with faster appreciation that can use that money to for a long hold.
    So far the intention is to invest in distressed SFR to rehab and rent out, however, I like the idea of new construction and that option will require more capital.

    0Reply
  • Brad HammondBusiness Member
    Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes
    7y

    I think as a general rule, pulling money out to reinvest is usually better to create velocity.  It might be a step back in the short term but you should be able to grow and really push your ball down the hill. 

    0Reply
  • Victor Valle
    OP
    Flipper/Rehabber · Portland OR, Charlotte NC · Member since 2015 · 22 posts · 8 votes
    7y

    @Brad Hammond

    Yes, that is the direction that I will take, I am putting the house on the market next week, and look for other ventures in another market, being a landlord in Portland has way too many disadvantages, even with Airbnb.

    Thanks to all, I will update the progress.

    0Reply
  • Cory CarlsonBusiness Member
    Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes
    7y
    Originally posted by @Victor Valle:

    @Brad Hammond

    Yes, that is the direction that I will take, I am putting the house on the market next week, and look for other ventures in another market, being a landlord in Portland has way too many disadvantages, even with Airbnb.

    Thanks to all, I will update the progress.

    Victor, The opportunity of reinvesting that equity into another property will answer your questions by itself. I would say do an analysis and see what your pre-tax cashflow, after-tax cashflow, after-tax + loan pay down and Total Return (after-tax + loan pay down + appreciation) are as both numbers and percentages. Then do the same after selling the property, reinvesting it into a small multifamily and compare to your current. I do this ALL the time with my clients portfolios to decide on which opportunity improves current. 99% of the time selling the SFH and buying multifamily will improve your returns. It just depends on your goals... If you're a high earner and are willing to give up a little cashflow for capital appreciation and pay down, then exchange into a larger property. I would be happy to help you if you sent a PM.

    503-222-0282
    Constant Commercial Real Estate Inc543 Reviews
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