All Forum Posts by: TD Wolf

 I paid off the entire balance before the ballon payment was due. So I don't have a mortgage.

I don't have a loan but I'm $175k in. How do I calculate the IRR on that?

@Brian Garrett: I'm $175k total investment. 

Ok, so there's a whole back story (and tons of lessons learned--see more on that below) wrapped up in this question, but it  essentially boils down to this:

I started a flip in April with a hard-money loan. It started out well but it was clear from pretty early on that the builder was going to be way behind the initial schedule. Fast forward to August and the place was finally ready to list (even though the contractor bailed before it was over I was protected because the renovation money was held in escrow and only dispersed upon completion of the different phases of work). 

I've dropped the price from $220k down to $180k over the last three months. If I sell it for the current asking price I'll break even. So, now it's November and snow will start falling and there will be even fewer buyers in that area (the prime market to sell is April to August) so I'm facing a dilemma: do I rent the place out and start getting a steady cash flow or do I hold on until spring and hope to sell it for enough to break even or earn a little profit?

More facts on the deal:

• It's located in Maine near lakes and a ski mountain (35 mins from Portland), but houses tend to sit on the market there for a while due to a small pool of buyers.
• I have a candidate lined up to rent the place at $1450/mo plus utilities with good income, credit, etc.
• Only expenses are taxes ($2200/year) and insurance ($1600/year) as I now own it outright 
• If I put it on a year lease (which is what renters want in this area) I'll be back in this position in a year from now and could extend the lease or sell it.
• The house was extensively renovated so this is the only time it will ever be "new." 
• I don't necessarily "need" the cash that's tied up in it but that is a big chunk of money I could potentially invest elsewhere (but without a known rate of return like I'd get on this place).
• The property is 2 hours from where I live so I need to find a property manager.

Interested in any and all perspectives on this and happy to answer additional questions if they help paint the picture.

@Mike Abramowitz great feedback, thanks for your insights. I think your point about the CAP rate is a really good one to consider. Instead of the dismal CAP rate I'm getting in Medford, I could reinvest the sale proceeds (roughly $300k) into one or several more modest properties with higher CAP rates.

That aligns better with my long term goals, too, as I want to expand my portfolio and diversify my holdings. Also, on a more practical note, some of my "savings" are actually tied up at the moment on a flip I'm doing in Maine. Hoping to be out of that one by fall at the latest. Knock on wood.

@Josue Velney The sleeping well at night point cannot be forgotten. My current thinking is to continue with the plan we're on--i.e. making some final cosmetic improvements to our two-family in Medford and listing in about a month--and if we hit our sale target we will reassess at that point in time.

Overview: This is my first post so thanks for hearing me out. I own a two-family in Medford (near Tufts, Davis Sq, Mystic Valley Parkway) and am considering selling soon--or not. Trying to figure that out. The motivation for selling is to generate capital to use on the next investment(s) and to possibly get more space for me and my family. I bought in Somerville in 2009, Medford in 2014, and am now seeing that insane growth trajectory start to bleed over into other towns--and I want to get in ahead of the curve again like in Somerville and Medford.

Background: I bought the house in 2014 and invested about $30k in the past two years while living in one unit and renting the other. It's now worth at least $200k more than we paid (plus we will get back our original investment--i.e. the 20% downpayment). The rental income greatly subsidizes our mortgage payment. If we were to rent both units, we would clear about $2000/month over our mortgage payment. If I sell the place, I need to find somewhere else for me and my family to live...Somewhere with more space perhaps and near a commuter rail? Ideally, I would be able to keep the house, rent it, AND buy another house but that would drain all my savings.

What would you do in this situation? Options:

1) keep living in one unit and renting the other. Pro: Affords us the luxury of having someone else pay for most of our mortgage. Con: our money is "tied up" in the property and we don't have the space we need with a young child.

2) rent both units and collect $2000/month in profit. Pro: steady cash flow. Con: have to drain all savings in order to make the downpayment on another house to move to. Or rent for a while...

3) Take the money and run. Pro: would produce lots of capital to invest in another property or two. Con: be back on the competitive buyer-side of the market.

Any and all advice is welcome! Also, if I can provide any more background, insights, etc that would be helpful, please let me know.