Should I Sell or Rent

Question

Hi All,

I am having a tough time deciding what to do with my current situation and figured I would throw it out to everyone here.

I am an agent so it makes a lot of this much easier in terms of saving fees and navigates sales.  My wife and I are closing on our new home and are left with our current townhouse.  We bought it a year ago for $260,000 on FHA.  The current market value is $295,000.  With the mortgage payments, taxes, HOA, it is $1960/month plus $85 if we rent and use a property management company.  I can rent it for $2000-2300 if we go that route.

I am looking to get into multi family and build a portfolio with the goal being apartment buildings.  I am in my second year of being a 1099 contractor so as of the Spring 2017 I can start qualifying for mortgages and refinances again.  With the above info would it be wise to rent it out or sell?  If I rent do I refi and pull equity for a new purchase?  Should I sell and just go after 2 duplexes in the 150k range?  If more info is needed let me know, thanks!

Ryan Johnston · Answer

It was a new construction and completed June 2015.  Everything is new.

Matt Jones · Answer

@Ryan Johnston Only if you thought there was a very likely chance of strong appreciation and you want to make an appreciation play on that property.  I'm an agent with less than two years of 1099's as well and if I'm not living in a property and it's not making me substantial cash flow I won't hold on to it.  Without easy bank financing I'd rather have the cash at this point and rely on my ability to put together new deals that will have a better rate of return.

One question about your townhouse, how old is it and when were the major appliances(including heat & air) last replaced?  If everything is new then your maintenance and repair costs could be low enough to make this worth holding for a few years.  If not, I see the maintenance eating up any profit you might make and maybe more.

That's just my take on it, plenty of other BP folks may see it differently but as an agent I want great deals or I'd rather have the cash, at least until bank financing is a viable option.

Ryan Johnston · Answer

Thanks @Matt J.  If i could only set the unit for $285-290 and then assuming 3% for a buyers agent commission, would that change your thoughts at all?

Matt Jones · Answer

Personally, in your situation I would sell. It sounds like your condo is unlikely to cashflow much if at all after you figure in CapEx and you would probably rather have the cash to put down on another property next spring.  Being an agent you will likely come across better deals than the condo and might be happy to be more liquid and able to jump on them.  Good luck with whichever route you choose!