Sell in this hot market or Hold?

Question

Hey BP! My husband and I are divided on strategy. We bought our SFH almost 2 years ago and have put $80-$85K in upgrades. We wouldn’t sell til the 2 year mark.

Scenario 1: Sell our house and profit $145K AFTER closing costs and commissions. He prefers this so our cash is liquid so we can be ready for a great investment opportunity. (Whenever that might be)

Scenario 2: Once we buy our new house, we can rent this house for $1000 over our mortgage payment. Everything is brand new so we are only putting 5% each toward vacancy, repairs, and capex which would mean we’d cash flow at $850/month ($10,200 per year).

As an agent, I don’t want to miss the hot market so I kind of agree with scenario 1. As an investor, I don’t know if it makes sense to get rid of an investment until we have another one in sight.

Thoughts?!

Ryan Howell · Answer

@Jamie Derasmo - I think it depends on how likely you are to find a better deal.  Also, maybe there is a 3rd option in between these two - cash out refinance, reduce cash flow some and take out some cash for the next property?

Theresa Harris · Answer

I agree with Ryan-can you find another property that will do better than option 2?  If you were looking to move out of rentals, then option 1 is a good as you can get the most for your money.

Yang Lu · Answer

Hey Jamie,

You're in a great situation -- nice problem to have :)

Personally, I am a fan of the second option. That is some insane cash flow! Also, it's hard to time the market... e.g. if you sell your house at the 2 year mark, you are going to rent & wait for the market to show a good deal, which is a gamble. The market may continue to go up, in which case you will end up having headaches.

Once you've saved up for your new home, and you've secured it, then you have the option of selling/renting/cash out refi & rent. I think scenario 2 makes more sense!

Good luck. Congrats!

Sell in this hot market or Hold?

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