I have a single family rental in upstate NY that's currently occupied up to November 2020. I purchased the place back in 2016. Depending on the market, if I sell once the tenants lease is up, I should walk away with roughly $60k. I'm trying to figure out the best option to maximize my real estate portfolio, should I sell and reinvest in more rentals from the sell or should I do a HELOC, and continue to rent it while looking to purchase another rental from the HELOC money?
I Appreciate any and all advice.
Doesn't make sense to sell a rental to buy more rentals unless it is performing poorly, refinance in some way is probably the best option whether that is a HELOC or a cash out refi.
I think a 1031 exchange would be a great option as well. I'd be happy to chat with you on this more!
You should base your decision on your current return on equity and potential return on equity doing other deals. If you are only getting 6% annual rate of return on that 60k and could be getting 12% on another deal, you should definitely sell and move your money to better performing properties.
@Terence Goodman , Late in the market cycle is a great time to be sitting on a heloc. Sure the easy answer is to sell and 1031 but I'd never tell you to do that until you examined your goals, the inventory out there and held that against the actual performance of your property.
If that property is meeting your goals then sitting on a heloc lets you wait for a great buying opportunity at no cost to you. And you don't have the time constraints.
The time to 1031 is if it doesn't meet your goals or you have to sell to get the next property that does. It may be the right time. But it may not.
@Terence Goodman sell it and buy a small family property. i have one single family in my portfolio and it pales in comparison, performance wise, to the multis. i’ve never sold any real estate, but am getting ready to sell this one. it just doesn’t perform as
well. i will take the money and buy a multifamily.
If you sell and the goal is to buy another property then make sure to 1031 exchange it.
Hi @Terence Goodman ,
What is the approximate value of the single family home? That will make the amount of equity more relative once you determine your debt to equity ratio. As @Dave Foster stated, I would recommend that you identify your goals and reasons for wanting to sell the single family. If the single family is performing (ROE, cash flow, appreciation) it may be worth considering using a HELOC as a down payment on your next purchase. There are three main benefits for doing so:
1. Provide access to additional funds for a multi family purchase
2. Having less equity in the single family should improve your ROE (Return On Equity)
3. Reduce your exposure from a liability perspective. Having $60K in equity means that if you were to be sued you have $60K of equity up for grabs in this one property. If you can leverage that equity in the form of favorable debt that can then be used to purchase another property, you are reducing your risks.
Hope this is helpful.
I appreciate all the advice folks!
I’m looking to sell around summer fall 2020. If the markets mirror 2019 markets, then I’ll list it for around $240k-$250k, with a projected $175-$180k left on the note.
I’d like to be as strategic as possible with the profits and either re-invest in a duplex or possibly buy 2 single families for around $70k-120k a piece. Guess I have my homework cutout for me.
P.s. started and growing a real estate portfolio partnership with someone would be a nice strategic plan too.