Should I rent this Denver condo out or consider it a flip?

[Devin Keener]

In 2019, I purchased a one-bed condo in a very desirable area for 237k. It's worth $330-$350k now. I'm also building a $598k home in the Denver Metro Area that is currently estimated to be valued around $650k at close. 

My condo would only cashflow about $300/month and it's got about $125k in equity in it. The problem is that $300/month seems like nothing to me as a trade off for that $125k in equity. I can make more per month on a stock dividend portfolio with much less capital. I have read the book on real estate investing - and given the rising rates, high home prices, and bid wars, I can't find any other deals to leverage that $125k into in my "farm" area that would make sense unless rents went up 30% overnight. Rental rates just haven't caught up to the equivalent mortgage cost. 

Some things my fiancé and I have thrown around are selling the condo and rolling the equity into the new build and considering that as our first future rental instead (live in it a few years then rent it and buy another home). We could cash flow much more on a home than a one bed condo. We could also just keep the condo and slowly increase the rent and pay down the loan. 

I just don't really know what the right BRRRR method is now that I can't roll that condo equity into any deal that makes sense.

What would the seasoned investor do here?

[Steve K.]

Quote from @Devin Keener:

In 2019, I purchased a one-bed condo in a very desirable area for 237k. It's worth $330-$350k now. I'm also building a $598k home in the Denver Metro Area that is currently estimated to be valued around $650k at close. 

My condo would only cashflow about $300/month and it's got about $125k in equity in it. The problem is that $300/month seems like nothing to me as a trade off for that $125k in equity. I can make more per month on a stock dividend portfolio with much less capital. I have read the book on real estate investing - and given the rising rates, high home prices, and bid wars, I can't find any other deals to leverage that $125k into in my "farm" area that would make sense unless rents went up 30% overnight. Rental rates just haven't caught up to the equivalent mortgage cost. 

Some things my fiancé and I have thrown around are selling the condo and rolling the equity into the new build and considering that as our first future rental instead (live in it a few years then rent it and buy another home). We could cash flow much more on a home than a one bed condo. We could also just keep the condo and slowly increase the rent and pay down the loan. 

I just don't really know what the right BRRRR method is now that I can't roll that condo equity into any deal that makes sense.

What would the seasoned investor do here?

 You're not just getting $300/mo cashflow from the condo. You're also getting appreciation, principle pay-down, and tax benefits (most likely, depending on your tax situation of course). Consider all that towards your ROE as well. I believe that stocks are ~30% inflated right now based on P/E ratios, so I wouldn't sell and put that equity into stocks personally. Plus $125k in a high dividend yield stock is only going to spin off about $300/month in dividends at best anyway, so it would be a wash (at best) from a cashflow perspective. With transaction costs factored in, probably a set-back. I also think rents will begin to catch up to property price increases/mortgage amounts here soon, and any cash-flowing property is hard to come by these days. So I'd hold the condo if it rents well (low turnover, low maintenance, attracts good tenants) especially if it is in a good location for appreciation. Keep capital gains taxes in mind as well (primary residence exempt up to a certain amount if you've lived in it for 2 of the last 5 years).