Decision point on EaDo SFH rental

6 Replies | Houston, Texas

Hello all. Long time lurker, first time poster. I'm at a crossroads with an EaDo SFH rental and would like some of your input. I've been holding it since 2012. It's been a good ride, however rents have stagnated and I'm eager to move the equity elsewhere. The way I see it there are three options: 1. Sell 2. 1031 exchange into a small multifamily 3. Continue holding.

If I sell today I'll be hit with depreciation recapture and capital gains. I'd prefer to 1031 into something else, however I'd have to find the deal first (slim pickings at the moment). If I hold and ride this stagnation period out, things may improve in a few months. I'm leaning towards option 2, as the tax hit would be significant (15-20k) and I don't see rents going much higher for several years in EaDo.

What am I missing? Looking forward to reading your thoughts.

Hard to say without more numbers. How much is it cash flowing?

If you’re ready to move on, it is worth your time to 1031 it I think. Pickings may be slim if you are limiting yourself to inside the loop, but you can find some solid duplex to 4plex in surrounding areas.

I feel like option 2 is always the goal, IF you can find something better and worth your time/efforts. I agree, there is a supply glut in EaDo. Lots of land and room to build. Great area to live, but I think not that great to invest. It does has potential to appreciate, but it will be awhile. Low interests rates aren't helping the situation the right now

You have something decent right now, the question is whether you can find something better at the moment. And like you said, it's slim pickins' in Houston

Something else to perhaps consider is refinancing? This is extrapolating from the BRRRR method, where you get gains from rehabbing, then refinance at an appreciated/higher value to get some extra money back to use towards the down payment of the next project. In this case, you don't have increased value from rehab, but just appreciation from buying at a good time.

Unfortunately, I don't know enough about refinancing to tell you if this something that can be done in this particular situation. It probably depends on how much appreciation you've had. Hopefully someone that has experience with BRRRR can chime in.