Hold or sell my rental?
Hi!
I invest in a pretty low appreciation/stable market (Pittsburgh), but my preferred investment neighborhood is doing quite well for the past few years (say avg. appreciation about 5%.) My strategy is buy low, improve, and hold to rent; eventually sell for long term capital gain and reinvest all proceeds. I've bought 7 and sold 3 over the past seven years; I'm closing on #8 now, and anticipate a 4 month renovation on it.. Currently holdings with #8 will be two triplexes and three SFR. I have minimal debt, and what I have is at favorable terms.
The deal I'm debating is a house which i have $200k into, getting $2100/mo rent. RE taxes in my locale are high: I'm at nearly 5.5k/ yr on taxes/insurance; I have no debt on it; the tenant pays all utilities. Based on comps, I can sell for about $340k and net about $315k after commissions and transfer taxes. Alternatively, I can probably increase rent to $2700/mo when it renews -- that's about max.
I have no crystal ball. The house could be worth $400,000 in two years ... it could be worth $280,000 if the market cools off. I'd use the proceeds to pay off the LOC I'll use for #10's rehab this spring ($100k @ 5% variable) and reinvest sometime within the following 6 months. I would not pay off my fixed rate debt, all at under 5%. I could do a 1031 exchange, but tax rates on long term capital gains have been so good, I have been choosing to pay the (minimal) taxes based on the fact that I'm in a favorable capital gains bracket now, and I believe taxes are going up.
I'm 48 years old; RE investing is my sole income. I quit work two years ago, when my rental income after expenses exceeded my work income. I invest for both cash flow and net worth.
So -- would you hold and enjoy the easy cash flow of the rental income and ride the appreciation -- or sell and lock in the profit, and reinvest? And why? THANKS!