Sell rental to purchase more?

Question

I have a rental property that used to be a primary residence that I have been renting for 6 years. I could probably get between 460k-480k for the property and owe 309K. It has a CoCROI of 0.89% and a monthly cash flow of $100.

I really want to start generating some monthly cash flow but am not sure if I should hold this property and get a hard money loan or sell it and use the "profits" to purchase more rentals. I have profits in quotes because I have approximately 270K in it (20% down payment + reno + mortgage payments for time I lived there).

Joe Villeneuve · Answer

Yes, yes...and (what's the word I'm looking for here....?)...YES. You have a OVER $100k buried in the floorboards in this house...wasting "its" time. As a return, your only getting $100/month...that's a whopping $1200/year...with no problems. You should be able to get that back and more if you put that "deadbeat" $100k+ to work for you. If you can't, change the market you're investing in.

You can always get your money back (in this case $100/month).  Time...not so much.  Time is money.  Don't waste the time's money anymore.

Rhonda Blue · Answer

@James Black

Yes,  I had 2 long term rentals in UT sold making 100k each. 1031 exchanged into 4 more properties. 2 in Pigeon forge, TN area  and 2 in Huntsville, AL. Income from that exchange more then 10x.

It can be stressful to move what has become comfortable. But once your on the other side looking back, It is easier and your glad you've done it. Definitely have an idea where your moving the earnings because for exchanges there are time limits!

Dave Foster · Answer

@James Black, The world is full of "accidental investors".  And it's not a bad club to belong to.  The next step for you will be "purposeful".  The question is to evaluate your own skills and desires.  And if you're looking out of state and want to work with an established team rather than run your own show from the get go then folks like @Maureen McCann with established systems and inventory will get you there.

Theresa Harris · Answer

If you refinance, your costs will go up and you won't be cash flowing.  Look at the numbers and see what happens if you sell and use that money to buy one or two other rentals.

Maureen McCann · Answer

@James Black Sounds like you know what you need to do lol - that house is doing nothing but wasting your time at this point. With the money you have squirreled away 'under the floorboards' (nice one @Joe Villeneuve) you could put down payments on 3-4 fully renovated cashflow props in AL and be getting waaayyy more than $100/month.

I'd also like to pipe in and second the rec of @Dave Foster - he really is the go-to guy here on BP for all things 1031, and you had one basically fall in your lap. @Rhonda Blue is right on the money -Tax-free reinvestment should be in your future!

Rhonda Blue · Answer

@James Black

I did just that. I found Dave Foster on BP and his webpage explained everything plus I called him after chatting a bit on the phone. Your in luck. This is the place to learn!

Andre Williams · Answer

@James Black

If you’ve built up equity on the house, why don’t you get loan over the house and buy other properties with that money? Similar with BRRRR?

Joe Villeneuve · Answer

Good.  Then you should get maximum price when you SELL it.

James Black · Answer

Their lease is up May 2020. The property is in pristine condition.

Maureen McCann · Answer

@James Black I'm about to run to a meeting but I wanted to ask a couple quick questions: how much longer on their lease and is there anything you'd need to do to the property to maximize sales price?

Sell rental to purchase more?

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