Sell and invest or rent my home

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Sell and invest or rent my home

Melanie Collins
Member since 2021 · 18 posts · 2 votes

Hi there.  

I have a house I have owned for 18 years. I have about 700k equity in the home in Lakewood, Colorado  and am trying to figure out the best decision to sell or buy.

I want to invest in flips and brrrs and think that selling would give me more opportunity to invest in multiple properties at a quicker pace.  I am not attached to the home and would be flexible once sold to live around the country and buy in other markets as well.  My other thought is to take the equity from the home and buy one place and start the process of investing but this would be at a slower pace.  

The rent now would be $3400 approx which 50% rule would leave us with a roi of 100$ a month. This is my primary residence and can deduct 500k and more with remodel costs for a low capital gain payment. I believe Colorado will continue to grow but not sure how much more. Bidding wars are common in my neighborhood with 100k over asking price is very common.  Which my 700 k could potentially be even higher.  

Thanks for the help

Melanie 

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Andre Galaviz
Rental Property Investor · Denver, CO · Member since 2021 · 63 posts · 36 votes
4y

@Melanie Collins, my wife and I are considering selling to purchase two properties and make one of the two our primary for the next year. The the other option is a duplex, if we can find one with enough sq ft. You mentioned potentially investing in another market. That is a longer term goal for us as well, just cutting our teeth in our own backyard, as recommended a lot by others more experience than us. As @Stuart Grazier said, sounds like you have "many options!"

Ultimately, we are leaning towards a sale to extract the equity and invest in two properties outside of Denver. 

A few people mentioned cash out refi, but is that still a viable option with the rates increasing? Maybe meaning for BRRRR, or flips... We thought about a cash out refi, but looking closer, we would be using funds for down payments, so it would just increase our rate and reduce the amount of cash we would have access to for our purchases.

I'll be interested to hear which way you go. Good luck!

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  • Scott JohnsonBusiness Member
    Specialist · Greenville, NC · Member since 2019 · 673 posts · 408 votes
    4y
    Quote from @Melanie Collins:

    Hi there.  

    I have a house I have owned for 18 years. I have about 700k equity in the home in Lakewood, Colorado  and am trying to figure out the best decision to sell or buy.

    I want to invest in flips and brrrs and think that selling would give me more opportunity to invest in multiple properties at a quicker pace.  I am not attached to the home and would be flexible once sold to live around the country and buy in other markets as well.  My other thought is to take the equity from the home and buy one place and start the process of investing but this would be at a slower pace.  

    The rent now would be $3400 approx which 50% rule would leave us with a roi of 100$ a month. This is my primary residence and can deduct 500k and more with remodel costs for a low capital gain payment. I believe Colorado will continue to grow but not sure how much more. Bidding wars are common in my neighborhood with 100k over asking price is very common.  Which my 700 k could potentially be even higher.  

    Thanks for the help

    Melanie 


     Why not use a cash-out refi to pull out some equity and use that? Unless you have another place to live, I probably wouldn't sell your home. Up to you, though.

    [email protected]
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  • Stuart Grazier
    Investor · Parker, CO · Member since 2016 · 550 posts · 389 votes
    4y

    @Melanie Collins You have so many options to choose!! I'd be happy to jump on a call sometime to discuss some great ways to capitalize on your equity and put it towards some other investing strategies. I'm local to Denver and invest in Colorado and out of state for diversification. 

    0Reply
  • Bill MacFarlandBusiness Member
    Limerick, PA · Member since 2021 · 28 posts · 3 votes
    4y

    Rising interest rates and availability of homes on the market are certainly considerations right now. I have a lot of frustrated buyers right now and sellers on the fence because they are considering selling but don't want to lose their current low rate by buying something new (IF they can find what they are looking for).

    [email protected]610-299-4400
    Bill MacFarland Realty57 Reviews
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  • Melanie Collins
    OP
    Member since 2021 · 18 posts · 2 votes
    4y

    Hi guys, I guess I missed explaining one part of our plan. We do have a van we will live in and travel after selling. We are also interested in buying a piece a land and putting a tiny home on it for when we are not traveling international. We like to be gone from he country 6 months of the year and we do not plan on buying again in the Denver area unless it is a flip or multi-family, so we are not in the need of purchasing another home except as an investment.

    I am now researching different loans instead of conventional ones as I am not working at the moment and my husband is nut it is not enough to qualify for a conventional loan.

    1Reply
  • Melanie Collins
    OP
    Member since 2021 · 18 posts · 2 votes
    4y
    Quote from @Stuart Grazier:

    @Melanie Collins You have so many options to choose!! I'd be happy to jump on a call sometime to discuss some great ways to capitalize on your equity and put it towards some other investing strategies. I'm local to Denver and invest in Colorado and out of state for diversification. 


     Would love to chat Stuart!

    0Reply
  • Melanie Collins
    OP
    Member since 2021 · 18 posts · 2 votes
    4y
    Quote from @Scott Johnson:
    Quote from @Melanie Collins:

    Hi there.  

    I have a house I have owned for 18 years. I have about 700k equity in the home in Lakewood, Colorado  and am trying to figure out the best decision to sell or buy.

    I want to invest in flips and brrrs and think that selling would give me more opportunity to invest in multiple properties at a quicker pace.  I am not attached to the home and would be flexible once sold to live around the country and buy in other markets as well.  My other thought is to take the equity from the home and buy one place and start the process of investing but this would be at a slower pace.  

    The rent now would be $3400 approx which 50% rule would leave us with a roi of 100$ a month. This is my primary residence and can deduct 500k and more with remodel costs for a low capital gain payment. I believe Colorado will continue to grow but not sure how much more. Bidding wars are common in my neighborhood with 100k over asking price is very common.  Which my 700 k could potentially be even higher.  

    Thanks for the help

    Melanie 


     Why not use a cash-out refi to pull out some equity and use that? Unless you have another place to live, I probably wouldn't sell your home. Up to you, though.


     I tried this in 2020 and they would not touch me due to my lower income. I have excellent credit and no debt but my income was low so I guess I could look into a commercial loan based on assets and rental income.

    0Reply
  • Paul Riley
    Investor · Philadelphia, PA · Member since 2020 · 82 posts · 36 votes
    4y

    Hi @Melanie Collins,

    My initial thoughts were what was mentioned previously, you could cash out refi and keep the house as a rental.

    After reading further, even if you were able to refinance, you may not want to manage the property with your travel plans.

    It may be fitting to sell the property and then invest the money in more passive strategies like private lending on RE deals, syndications or performing notes. That way, you can travel without many of the property management headaches.

    My favorite niche is Performing RE notes. You get monthly cashflow like a rental, but are not responsible for property management and repairs.

    0Reply
  • Andre Galaviz
    Rental Property Investor · Denver, CO · Member since 2021 · 63 posts · 36 votes
    4y

    @Melanie Collins, my wife and I are considering selling to purchase two properties and make one of the two our primary for the next year. The the other option is a duplex, if we can find one with enough sq ft. You mentioned potentially investing in another market. That is a longer term goal for us as well, just cutting our teeth in our own backyard, as recommended a lot by others more experience than us. As @Stuart Grazier said, sounds like you have "many options!"

    Ultimately, we are leaning towards a sale to extract the equity and invest in two properties outside of Denver. 

    A few people mentioned cash out refi, but is that still a viable option with the rates increasing? Maybe meaning for BRRRR, or flips... We thought about a cash out refi, but looking closer, we would be using funds for down payments, so it would just increase our rate and reduce the amount of cash we would have access to for our purchases.

    I'll be interested to hear which way you go. Good luck!

    1Reply
  • Ricardo Hidalgo
    Real Estate Agent · Member since 2019 · 569 posts · 257 votes
    4y

    If the rates limit the cashflow to a bare minimum profit or break I would sell. No need to increase risk if you'll have the money after taxes from the sale of your home to buy 2 more. 

    Since rates are high, I am selling all my flips to continue to move the money because I need to cashflow 500-800 a month minimum to keep a rental. Be careful of the amount of leverage you take on and see what your cash on cash return will be after refi. 

    The majority of the money being made right now is in the appreciation not necessarily the rental income. 

    0Reply
  • Melanie Collins
    OP
    Member since 2021 · 18 posts · 2 votes
    4y
    Quote from @Paul Riley:

    Hi @Melanie Collins,

    My initial thoughts were what was mentioned previously, you could cash out refi and keep the house as a rental.

    After reading further, even if you were able to refinance, you may not want to manage the property with your travel plans.

    It may be fitting to sell the property and then invest the money in more passive strategies like private lending on RE deals, syndications or performing notes. That way, you can travel without many of the property management headaches.

    My favorite niche is Performing RE notes. You get monthly cashflow like a rental, but are not responsible for property management and repairs.


     Sounds interesting, would love to learn more. 

    0Reply
  • Melanie Collins
    OP
    Member since 2021 · 18 posts · 2 votes
    4y
    Quote from @Ricardo Hidalgo:

    If the rates limit the cashflow to a bare minimum profit or break I would sell. No need to increase risk if you'll have the money after taxes from the sale of your home to buy 2 more. 

    Since rates are high, I am selling all my flips to continue to move the money because I need to cashflow 500-800 a month minimum to keep a rental. Be careful of the amount of leverage you take on and see what your cash on cash return will be after refi. 

    The majority of the money being made right now is in the appreciation not necessarily the rental income. 


    0Reply
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