SELL My Primary?

[Nick Hogan]

Hey all!  I am looking for advice, opinions, suggestions, all the above!  

I currently have 2 properties, for 5 doors, which are cash flowing about $1000 a month, after all expenses, cap ex, etc.  I would like to keep expanding, but market conditions are tough for buy and hold LTRs.  I am considering selling my primary right now, which will put $400k into my bank account after fees and taxes made on gains.  If I sell, I will rent locally, my expenses will go up from my current $2200 mortgage, to $3000-$3500 rent.  I just paid off $1500 in bills, so almost a wash.  

With $400k available to me, I have a market picked out already, that will allow me to buy 2 LTRs, about $200k down each, that will cashflow a little over $1000 a month combined.  These houses will be newer, around 2020 builds, so cap ex hopefully low.  I expect average appreciation, 2-4%.  My primary now will sell for $750k, I owe $290k, this will allow me to buy 2 $400k homes.  So I will go from owning 3 properties, including my primary now, to owning 4 properties, 3 single family, and 1 4plex.  All properties are long distance out of state.  

I am completely OK with renting, just would like to get everyone's advice or opinions.  Should I keep my primary, and keep saving, maybe I can buy another LTR in a year or two, or should I sell now?  If anyone has anything to comment, please do!

[Nick Hogan]

Quote from @Jaycee Greene:

Quote from @Nick Hogan:

Quote from @Jaycee Greene:

Quote from @Nick Hogan:

Quote from @Jaycee Greene:

Quote from @Nick Hogan:

Hey all!  I am looking for advice, opinions, suggestions, all the above!  

I currently have 2 properties, for 5 doors, which are cash flowing about $1000 a month, after all expenses, cap ex, etc.  I would like to keep expanding, but market conditions are tough for buy and hold LTRs.  I am considering selling my primary right now, which will put $400k into my bank account after fees and taxes made on gains.  If I sell, I will rent locally, my expenses will go up from my current $2200 mortgage, to $3000-$3500 rent.  I just paid off $1500 in bills, so almost a wash.  

With $400k available to me, I have a market picked out already, that will allow me to buy 2 LTRs, about $200k down each, that will cashflow a little over $1000 a month combined.  These houses will be newer, around 2020 builds, so cap ex hopefully low.  I expect average appreciation, 2-4%.  My primary now will sell for $750k, I owe $290k, this will allow me to buy 2 $400k homes.  So I will go from owning 3 properties, including my primary now, to owning 4 properties, 3 single family, and 1 4plex.  All properties are long distance out of state.  

I am completely OK with renting, just would like to get everyone's advice or opinions.  Should I keep my primary, and keep saving, maybe I can buy another LTR in a year or two, or should I sell now?  If anyone has anything to comment, please do!

Hey @Nick Hogan! Before looking at whether you should sell your primary, let's focus on the numbers for 1 LTR. If you buy something for $400k, what would you expect the rent to be?

 The market I'm looking at gets about $3000 rent for a $400k home.  

@Nick Hogan So is that around a 6.25% cap rate? With that high of a down payment, have you calculated your expected annual return (IRR)? I'm estimating it at just over 8%.

7.49% cap rate, 5 yr IRR 8.28%, CoC ROI 5.8% I pulled these numbers from the BP Rental Calculator

 @Nick Hogan So, with my CFO clients, I would then ask them the question, would you rather invest passively in the market and get an 8%-12% annual return or take on more risk and spend more time investing in real estate that is only expected to generate 8.3% annually?

 My goal is long term to get to 10 properties.  I like to be more passive, so I use property managers for my other properties, and just like to communicate with them.  I am not looking to get rich next year, instead be set up good 10 years from now is my goal, try to add 1 property a year.