Need advice on what to make my next move

[Troy Iversen]

Hi so I bought a 1 bedroom apartment in 2015 for 170k. It has gone up about 40k since I bought it and I have a tennant living in it. I put 22% down 15 year mortgage. Tennant is almost paying for the full amount of mortgage. I have about 80k saved up for my next deal. Should I sell my apartment and use that money plus what I have for a property with more units, or keep my apartment and just buy a second place with what I have saved? Thank you

[Denis F.]

Hi, run the numbers for both scenarios and think about your long term goals and risk tolerance:

1. You sell the condo, you pay transaction fees and may not get the highest sales price if the tenant is locked in a long term lease. You will have to pay taxes on the condo gains. You will save yourself from HOA concerns long term and be able to pull all your cash together for the biggest loan/property you can afford. You'll then have all invested on a single property so your risks will be concentrated. You may go up to something like $550k with 25% down, check what you could get for that amount and whether it fits your cash flow and other criteria.

2. You keep the condo and put up with the HOA. Your new investment is smaller but you now have 2 separate properties possibly in 2 different parts of the city. Management is a bit more costly but risk is spread. You can only go up to $320k with 25% down... can you get something that fits your criteria at this price?

I went with the 2nd option myself because I am conservative and like to keep some equity in each of my rentals. Option 1 is higher risks/higher returns as long as the market doesn't drop.