Hold or Sell Aurora, CO rental in SE Aurora 80016
I currently own a rental in the 80016 zipcode in Beacon Point close to Southlands Mall area, which is 4 bedroom 3.5 bathrooms, 2600 sq feet . I am debating on selling this or holding it. I purchased the home for $335K in Feb 2013 and moved out in June 2016. The house is worth about $450K and we rent it our for $2,650 a month. My monthly loan pmt with insurance and taxes is about $1700, so the monthly cash flow is great. It is a newer house and the tenants are very easy going so I have had very minimal repairs. HOA is only $140 a quarter!!!. I love this rental since it is in the same neighborhood where I live which makes it very easy to manage or show the house with vacancies. My concern is that this is an expensive rental and I know that it may be difficult to rent out when the current people move out. If I sell it before June 2019, I can avoid the capital gains tax. I am considering selling this and buying another cheaper rental, since I have a lot of equity in the home, I owe about $246K (value of home is $450K to $470K). However, the Denver market is so pricy that I have no idea how I will find a deal. I am a part time landlord that owns only 2 rentals that I manage myself and I have a full time job, so I don't have a lot of time to find deals. Should I hold or sell before 2019??? Should I try renting it for as long as I can and maybe do a 1031 exchange after the 3 year period is up??? Also, any Denver/Aurora investors investing out of state or currently investing in Colorado???
@Omar Shahid what a "good" problem to have!
Just to throw a wrench in your possible plans, the current tax proposal could change the capital gains exclusion.
You have to own and live in the home for five out of the last eight years.
If your average modified adjusted gross income in the year of sale and the 2 preceding taxable years is $250K for single taxpayers or $500K for joint taxpayers, your amount of capital gain that can be excluded will be reduced by the amount your average income which exceeds the income limits.
Will this happen? I have no idea! I'm debating about a property that I have in Reno on whether I should keep it, or sell and transfer the money to Denver (where I'm planting my roots.)
Two areas to explore:
1) Have you looked at current rental deals on the market? Do a comparison.
2) Do you have the ability to do a HELOC or refi to free up some equity to buy?
Based on what you've typed, I'd lean towards keeping it. You have a winner and it's easy for you to manage. Now, if you're a full time investor, then selling it may be better.
This is hard to put on a spreadsheet, but how much is the "Ease of management" and "piece of mind of knowing the property" worth to you?
To help give you an idea of the market, I'll send over some info and recent deals that we've done. They are straight buy and holds with 20% down.
Thank you so much Chris. I would greatly appreciate that. The deals on the market to me are just not worth it. The cash on cash return in Denver is hard to get above 10%. Haven't really explored the refi or pulling out equity. That may be an option down the road.
The mgmt for this property is easy since it is close and the tenant takes care of minor repairs without bugging me.
We are going to keep appreciating here in town, so that value will keep increasing. I'd look at pulling a heloc through westerra since they'll do rentals. Then use those funds to pickup another house.
@Omar Shahid you're welcome! I sent you the info to your BP inbox. Let me know if it doesn't come through.
We're seeing stuff upwards of 15% CoC.
What are your thoughts about out of state investing? I looked at it in the past and it's not a fit for me (I'm a control freak and like the idea of being able to drive.)
It seems like out of state would be at odds with your current self management setup with an easy tenant.