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Updated 18 days ago on . Most recent reply

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Cade Speroni
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First property, Keep or sell?

Cade Speroni
Posted

Hello all thank you for the help!

We just finished renting out our old house for the first year and cannot decide if its better to keep as a rental or sell, get the equity, and move that into a better cash flowing property and setting us up for a better spot financially. The house is in the far suburbs 2188 sq ft, 2 story, 4 bed 3 bath 2006 build, 2.5% interest, bought with VA loan 0% down. Purchase price $225K, estimated value $370k.

Total mortgage $1480

Property management fee $200

Additional insurance (home warranty) $80

HOA $37

------- Total cost: $1760

Rental income: $2000.

------- Net: $240 per/month


With this property, I REALLY love the 2.5% rate and know we will likely never see that again. We have a lot of sentimental love for the home. We are active military and will be moving a lot so the local property manager is a must. With the location we doubt we will be able to raise the rent, and not anytime soon. We don't have a lot of cash reserves to cover any emergencies that insurance may not cover, but there is a lot of equity in the home. We are thinking the best option would be to sell the house, get a large emergency fund set aside, AND have money set for the next property to fix and flip or just down payment to get a better cash flow (once rates come down some more). But with the 2.5% interest rate are we crazy? Is our risk tolerance just to low? 

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Jaycee Greene
#3 Real Estate Success Stories Contributor
  • Real Estate Consultant
  • St. Louis MSA
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Jaycee Greene
#3 Real Estate Success Stories Contributor
  • Real Estate Consultant
  • St. Louis MSA
Replied
Quote from @Cade Speroni:

Hello all thank you for the help!

We just finished renting out our old house for the first year and cannot decide if its better to keep as a rental or sell, get the equity, and move that into a better cash flowing property and setting us up for a better spot financially. The house is in the far suburbs 2188 sq ft, 2 story, 4 bed 3 bath 2006 build, 2.5% interest, bought with VA loan 0% down. Purchase price $225K, estimated value $370k.

Total mortgage $1480

Property management fee $200

Additional insurance (home warranty) $80

HOA $37

------- Total cost: $1760

Rental income: $2000.

------- Net: $240 per/month


With this property, I REALLY love the 2.5% rate and know we will likely never see that again. We have a lot of sentimental love for the home. We are active military and will be moving a lot so the local property manager is a must. With the location we doubt we will be able to raise the rent, and not anytime soon. We don't have a lot of cash reserves to cover any emergencies that insurance may not cover, but there is a lot of equity in the home. We are thinking the best option would be to sell the house, get a large emergency fund set aside, AND have money set for the next property to fix and flip or just down payment to get a better cash flow (once rates come down some more). But with the 2.5% interest rate are we crazy? Is our risk tolerance just to low? 

Hey @Cade Speroni, welcome to the BP Forum! Your risk tolerance is YOUR risk tolerance...there's no too high or too low...it's what you want it to be.

But I hate to be the bearer of bad news, but if you can't raise your rents or lower your expenses, then you need to sell ASAP IMO. Also, this property is now an investment property so the phrase, "sentimental love", should be removed from its description...that's a recipe for financial disaster! 

I would look into doing a 1031 exchange for a different property that can support itself in terms of cash flow. You have to move on from the 2.5% interest rate - it's like a dinosaur...it's extinct ;-)

  • Jaycee Greene
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