Real Estate Deal Analysis & Advice

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Conte Cuttino
  • Rental Property Investor
  • New York
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Should I Keep Or Sale for $40K profit

Conte Cuttino
  • Rental Property Investor
  • New York
Posted May 16 2022, 09:46

Hello, 

This property reno budget got out of hand but was appraised for more then expected at 191K. Home is not in a desirable location but good block so still waiting for desired rent which my property management say is high. Also my caged in AC condenser has just been stolen SMH! Feeling like that's a sign to sell on top of the low coc return. I'm thinking about reinvesting the proceeds into a better location but hate the taxes I will pay on the sale. Id like to get your thoughts on the report and my options.

Here are my options

Hold: leave 40K in the deal at 6.9% CoC Return IF I get projected rent

Sell: $41K+ profit, eat the taxes and go into better neighborhood


Should I keep or sale BP community  

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Memphis, Tennessee

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Reed Vennel
  • Investor
  • Phoenixville, PA
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Reed Vennel
  • Investor
  • Phoenixville, PA
Replied May 16 2022, 10:06

Absolutely sell!!

Consider your opportunity cost here as well. If you sell, you get the 41k profit AND the 40k left invested. Take that 80k and park it somewhere else. I don't invest in Tennessee, but I'd think you should be able to get close to 7% CoC on a turnkey rental in a nicer area where you're not sweating having your property scrapped out from under you. 

So either $2,760 a year (6.9% of 40k) and constant headaches

or $5,600 a year (7% of 80k) and a good night's sleep?

Seems like a no brainer to me.

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Conte Cuttino
  • Rental Property Investor
  • New York
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Conte Cuttino
  • Rental Property Investor
  • New York
Replied May 16 2022, 10:14

@Reed Vennel I like your thinking on that. I was definitely looking for a higher return on a buy and hold 

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Joe Villeneuve#1 Innovative Strategies Contributor
  • Plymouth, MI
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Joe Villeneuve#1 Innovative Strategies Contributor
  • Plymouth, MI
Replied May 16 2022, 10:38

Take your money and run. That equity will disappear from the CF issues and CAPEX. Take what you can get out of the property (even at a loss), and put it where you can make money with it. If you leave it in this property, you will lose more money you will need to recover (good luck). If you move it forward, you can recover the loss (so far) from this property, and have more gains, from the next.

Don't get attached to any property. Get attached to your money. You're supposed to be a REI...not a property collector.

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Reed Vennel
  • Investor
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Reed Vennel
  • Investor
  • Phoenixville, PA
Replied May 16 2022, 10:39

You could still go for a value add on the next property to get a higher return!  Sounds like you accidentally stumbled into a successful flip here.  Whether you were saved by recent market growth or had solid conservative numbers, that is a blessing I would take happily.  Don't fall victim to the sunk cost fallacy.

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Conte Cuttino
  • Rental Property Investor
  • New York
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Conte Cuttino
  • Rental Property Investor
  • New York
Replied May 16 2022, 10:40

@Joe Villeneuve Understandable Joe, I appreciate your insight. 

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Joe Villeneuve#1 Innovative Strategies Contributor
  • Plymouth, MI
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Joe Villeneuve#1 Innovative Strategies Contributor
  • Plymouth, MI
Replied May 16 2022, 10:44
Quote from @Michael R Vennel:

You could still go for a value add on the next property to get a higher return!  Sounds like you accidentally stumbled into a successful flip here.  Whether you were saved by recent market growth or had solid conservative numbers, that is a blessing I would take happily.  Don't fall victim to the sunk cost fallacy.

IF the property is worth $191k, and there is only $40k in equity/profit, that means the equity is less than 20% of the PV.  If a 20% DP (or worse 25%) was put in, where do you see the profit?  It's a loss.

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Steven Wilson#4 Starting Out Contributor
  • Rental Property Investor
  • Columbus, OH
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Steven Wilson#4 Starting Out Contributor
  • Rental Property Investor
  • Columbus, OH
Replied May 16 2022, 10:50

@Conte Cuttino If your goal is COC return, then certainly sell and invest in a place like Columbus OH where your return will be a lot better.

Another option would be to do a BRRRR, refinance cash out and take that money and invest in another property. The issue will be that your property will probably break even.

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Reed Vennel
  • Investor
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Reed Vennel
  • Investor
  • Phoenixville, PA
Replied May 16 2022, 10:59
Quote from @Joe Villeneuve:
Quote from @Michael R Vennel:

You could still go for a value add on the next property to get a higher return!  Sounds like you accidentally stumbled into a successful flip here.  Whether you were saved by recent market growth or had solid conservative numbers, that is a blessing I would take happily.  Don't fall victim to the sunk cost fallacy.

IF the property is worth $191k, and there is only $40k in equity/profit, that means the equity is less than 20% of the PV.  If a 20% DP (or worse 25%) was put in, where do you see the profit?  It's a loss.

Cash in  was ~$150k, so if he sells for $191k he'd get a ~$40k profit less closing costs and taxes.

The other option he looked at was refinancing out $122k.  Less closing costs, and he'd have around $40k of his own cash left in this deal.  If he went that route he'd theoretically have $80k in equity.

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Joe Villeneuve#1 Innovative Strategies Contributor
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Joe Villeneuve#1 Innovative Strategies Contributor
  • Plymouth, MI
Replied May 16 2022, 11:05
Quote from @Michael R Vennel:
Quote from @Joe Villeneuve:
Quote from @Michael R Vennel:

You could still go for a value add on the next property to get a higher return!  Sounds like you accidentally stumbled into a successful flip here.  Whether you were saved by recent market growth or had solid conservative numbers, that is a blessing I would take happily.  Don't fall victim to the sunk cost fallacy.

IF the property is worth $191k, and there is only $40k in equity/profit, that means the equity is less than 20% of the PV.  If a 20% DP (or worse 25%) was put in, where do you see the profit?  It's a loss.

Cash in  was ~$150k, so if he sells for $191k he'd get a ~$40k profit less closing costs and taxes.

The other option he looked at was refinancing out $122k.  Less closing costs, and he'd have around $40k of his own cash left in this deal.  If he went that route he'd theoretically have $80k in equity.

IF he put 150k in cash in, regardless of the PV = 191, he was losing money from the very beginning.

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Conte Cuttino
  • Rental Property Investor
  • New York
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Conte Cuttino
  • Rental Property Investor
  • New York
Replied May 16 2022, 11:06

@Reed Vennel yes this is true I will have 80k in equity if I refi, but the coc will depend on the rent being $1700 which is above market rates

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Nicholas Misch
  • Real Estate Agent
  • Cleveland, OH
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Nicholas Misch
  • Real Estate Agent
  • Cleveland, OH
Replied May 16 2022, 16:32

I HATE to sell anything as I believe in and love long term appreciation, however how many A/C's or other items will need to be stolen for a good deal to be bad. If there is any profit at all, I would sell and use those funds (and my time) elsewhere. In the end it completely depends on your goals and desire for more work or less. Best wishes on your decision. 

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Conte Cuttino
  • Rental Property Investor
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Conte Cuttino
  • Rental Property Investor
  • New York
Replied May 16 2022, 16:36
Quote from @Nicholas Misch:

I HATE to sell anything as I believe in and love long term appreciation, however how many A/C's or other items will need to be stolen for a good deal to be bad. If there is any profit at all, I would sell and use those funds (and my time) elsewhere. In the end it completely depends on your goals and desire for more work or less. Best wishes on your decision. 


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Conte Cuttino
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Conte Cuttino
  • Rental Property Investor
  • New York
Replied May 16 2022, 16:40
Quote from @Nicholas Misch:

I HATE to sell anything as I believe in and love long term appreciation, however how many A/C's or other items will need to be stolen for a good deal to be bad. If there is any profit at all, I would sell and use those funds (and my time) elsewhere. In the end it completely depends on your goals and desire for more work or less. Best wishes on your decision. 

I appreciate that Nicholas, I have a fellow friend that’s an investor in Cleveland. I’m beginning my I look in that area as well. Hopefully there’s better situations out you can introduce me to. 

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Dave Moudy
  • Homeowner
  • Indianapolis
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Dave Moudy
  • Homeowner
  • Indianapolis
Replied May 17 2022, 10:12

If taxes weren't an issue would you pull the trigger?

Will the market stay as hot as it is and will you be able to remove other equity in the home later?

Will first house rent at desired rents?

If you don't get projected rents does your plan still work?


I would sell it and you have made 2 years worth of rents in cash and you have identified your next purchase. Congrats on the big win!

Would you rather deal with tenants or have the money which you earned on a good buy? Serviceability at scale is hard, what is the goal of the game? More houses or more money? More cash flow?

What does your roadmap say to do in your investment strategy?

If you don't know where you are going, how the heck can you get there?