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Question

For single family dwellings it’s a sellers market right now. If you were smart enough or lucky enough to capitalize on buying properties 5 years ago then your property has most likely appreciated in value. Even if you haven’t fixed it up or rehabbed. For those of you in this position. The question is...do you sell that property that has now appreciated? Or do you keep that property and rent it out?

Example: if you bought a property for $60K then rehab cost of $60K...now property will sell for $210K

Or

Rent will be around $1200-1300/mo

What would you do!?

Example: if you bought a property for $60K then rehab cost of $60K...now property will sell for $210K

Or

Rent will be around $1200-1300/mo

What would you do!?

Jason D. · Answer

@Mason Clinger I could make a ton more than $500/mo with $90k cash, so I would sell. But my market is different than yours, so you have to decide what you can do with the money

Marcus B Hsu · Answer

it depends imho. If you are getting positive cashflow, hold on to it. If you sell and buy a new place, u'll lose money on closing cost, realtor fees, vacancy during buying/selling etc.

i would only sell if you want to move to a different state where cash flow /appreciate is better, or if you want to avoid a potential scenario you see coming that's bad (i.e. housing crash that would hurt a lot in your state) or if you have so much equity in it you think you can scale up, ie. buy several SFH with it and still get +ve cashflow, or buy a quadplex with it.

i did a similar analysis earlier on a property i purchased in 2015 for $200k, it's now worth $280k, and i did nothing to it. Decided to let it rent out since i have good renters. Looked into doing a cashout refi but it would translate to a negative cashflow, and not enough equity to buy multiple units w/ it.

Mason Clinger · Answer

@Bevla Reeves I am looking at the long term strategy. I have been wanting to Brrr properties as the book by David Greene talks about. In order to do so I would like to free up as much capital as possible so that I can buy a new property and fix it up then rent and refinance...in that order.

I have also had a few people ask me if the market is good for selling or keeping your investment rental properties? Sell while it’s high and then hope for the next down turn to buy, buy, buy

Mason Clinger · Answer

@Eric Mitchell if you have projects you need help with I have many contacts and resources. I pretty much have an in house team for just about any aspect of renovating a house including abatement services!

Also if you ever come across any properties that can fit the brrr method I am very interested!

Eric Mitchell · Answer

From what I've been seeing here in town, I think that you could use that equity to benefit with a better return. You mentioned that you read the new BRRRR book, and I agree with the fact that if you use that equity from selling and put that into BRRRR properties then you could potentially keep using that money to get more and more properties under your belt. Do you do most of the rehab yourself? That must help with the rehab costs. Whether you decide to sell or if you'd rather keep the single family, a HELOC is always a good option as well.

Also, are you looking for more contractor projects? I have a few investors that I'm working with that are trying to find investor friendly contractors (like David Greene refers to in his book).

Mason Clinger · Answer

@Stone Jin thanks for the input...I’ve been running the numbers on different situations and I think I’m leaning towards selling the house myself and use the cash for other deals or just build new investment properties new

Stone Jin · Answer

@Mason Clinger, it doesn't have to be hold or sell.  You can cash out refi or heloc and use that capital to fund future purchases.  Sounds like you can pull out quite a bit however it will just kill your cashflow.  It's just a math question you have to answer, if you pull out 60K at 5.5%, can you invest it to get 9%, if so why wouldn't you profit on the spread.

However just looking at the ratio between rent to purchase price, the ratio is not very strong meaning you likely can get better cashflow if you just sold it and became a private money lender at 10%.  10% of 150K equity is 15K a year vs cashflow of 500 a month is $6K.

I'm in the same position on several properties where my return on equity is garbage.  So I've thought about your scenario a lot recently.

Good luck!

Bevla Reeves · Answer

@Mason Clinger  I'm not sure about your market, but here in Phoenix Arizona, I see a pretty balanced market.

It isn't a sellers or buyers' market and that homes are pretty much selling for what they're worth.

A lot of sellers are just now reaching a point where they actually have equity again after losing so much of it during the 2008 crash, so many have only a small amount of equity.

But it's a good time to sell, especially if you force the equity by doing high-design remodels! ;)

Bevla Reeves · Answer

@Mason Clinger Is your long-term investment strategy passive income or cash?

Theresa Harris · Answer

@Mason Clinger  It depends on your local market.  I know in city 1 where some of my rentals are, I couldn't do it in the current market conditions.  In city 2 where I live, I could do it.

If you don't have any extra capital to invest, don't want to move towns and the house is in good condition, I'd leave it.

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