Sell or hold?

Question

Hi everyone!

I am fairly new to real estate investing, even though my husband and I do own 2 homes, one of which is currently leased, but wanting to get involved and I have some questions. We are constantly getting phone calls on our home in Arizona (currently leased), but we are unsure if we should even sell it at this time since our cash flow is currently - $400 a month and we want to grow in this industry. To us, selling it may push us further away, but maybe it could provide an opportunity to grow! The house is a fairly new build with solar panels, water filtration, and all the things we believe our renters love. Our interest on the house is also very low (purchased in 2020) and we would not be able to find that interest rate anytime soon.

My question is, should we sell or hold? What kind of strategies should we be focusing on? What risks could possibly be involved if we sell? Again, fairly new to investing and honestly just trying to get involved to understand what others think and grow in this amazing network!

Thank you for your time!

-Bre

Nathan Gesner · Answer

ou should only sell real estate when there's a valid reason, and that reason should be to accelerate growth or move you closer to your goals. You don't have a goal, which is why you can't determine the best choice.

Figure out what you are trying to achieve with real estate investing, then make a decision.

Breanna Mason · Answer

Thank you Theresa and @Charles Burgess ! I sincerely appreciate the insight. We have learned a lot with our first rental and we haven't had many downsides except for maintenance, but the cashflow helps with that.

You are correct that the calls are wholesalers/seller financing because of the interest rate - I believe I learned something by posting this - cash out if there is a better investment involved and don't jump into offers because they are there. Thank you again!

Charles Burgess · Answer

I agree with @Theresa Harris. Cashflow is good, and will increase over time as long as rents grow.  You only want to cash out if there is a better vehicle for investment, i.e., something that will give you a better rate of return.  Personally, I would try to pull out a HELOC (Home Equity Line of Credit) on your property to have available for future purchases/emergencies.  Good luck moving forward!

Theresa Harris · Answer

Chances are the people calling are wholesalers who will lowball you. If you are cash flowing $400 a month and have seller financing, I'm also guessing you have lower interest rates.  I wouldn't sell.

If you want to stay in rentals, the only time I'd consider selling is if you can do better with your money in another property after factoring in all of the costs of buying and selling or if you have problems with the house/tenants (eg want to buy a better type of property).  I've only sold one of my rentals so far and it was a condo I bought while in grad school. I sold it after about 20 years because I was tired of how the building was managed, there were massive (multimillion $) renos/repairs they were talking about, and the value of the condo had almost tripled. I used that money to buy two other properties.

Alecia Loveless · Answer

@Breanna Mason in my market a cash flow of $400 a month if you’re paying your mortgage and saving maintenance, vacancy, and Cap Ex as well as the other bills would be solid. A low interest rate would be a bonus. Depending on how much it’s appreciated you will likely find the cost of entry into a similar market will be much greater and at a higher interest rate and your cash flow amount may drop overall.

Also if it hasn’t been your primary residence 2 of the last 5 years you may end up owing lots of capital gains taxes on your sale unless you do a 1031 exchange which while helpful for reducing taxes has its own set of rules and regulations.

Breanna Mason · Answer

Thank you Alecia! You bring a lot of great points to this. We have been maintaining everything you've mentioned really well.

Breanna Mason · Answer

Hi Allie!

I've played a bit of it, but never actually sat down and played it. Thank you for bringing this up! I have heard so many great stories from this. :)

Allie Pfannenstiel · Answer

Bre, have you every played Robert Kiyosaki's cash flow game? I think it is such a great way to start understanding investing and whether or not you are ready to sell an asset and buy a big deal or more small deals to further your goals.

Sell or hold?

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