Should I sell or rent out this property

Question

Hello,

About 8 months ago I purchased my first property that I am currently living in. I would like to start accumulating rentals, trying to cut down expenses I have decided to either rent or sell my current place.

Renting

Positive cash flow of $150/month

Only have $10,000 into this property giving a 40% Roi with the loan pay down

Selling

Bought this property at 82,000 with current market prices I could get 100,000- 120,000.

Should I sell for the profit and roll it into another property?

Account Closed · Answer

@Gavin Mckinley one year I had to replace the water line from the road to the house, that was $1,500. I just had some deck work done that was about $1,000.00. But typically yes, cleaning, switching over utilities, and covering a full mortgage or partial for the month is the biggest. Next planned expense will be replacing carpet will LVP.

Account Closed · Answer

@Gavin Mckinley my property rents $400 over mortgage PITI expenses. It already has new hvac, appliances, roof. In theory it cash flows $400. Maintenance hear and there and once a year turnover has me about net zero. Meaning any capex expenses if they come up will be out of pocket. Just some numbers for you.

Joe Villeneuve · Answer

You tell me.  The amount of CF you need is based on your needs...not just an arbitrary number that sounds good.  Your overall plan for investing has specific criteria for this based on your own financial needs...not anyone else's.

That $200 and $200 you're holding back will equal a total of $4800 at the end of the first year and less than $10k at the end of two years.  Assuming nothing happens that demands you use any of that money before the end of each of those years, what will that money actually cover?

Gavin Mckinley · Answer

@Bill Ward Would that once a year turnover being your bigger expense?

This property should go for $545 over mortgage PITI. I had initially factored the capex & vacancy into my numbers giving the $145

Gavin Mckinley · Answer

@Joe Villeneuve Even with putting aside 200/m for vacancy and 200/month for ￼ maintenance you think I will run into CF problems? What kind of cash flow should I be looking for from a property?

Joe Villeneuve · Answer

Yes.  Cash flow is low...negative CF waiting to happen.  EQuity can get you morethan one property of you use it as down payments.

Greg Scott · Answer

Congrats on a good start.  Here are some thoughts....

Your current ROI is more like 6%.  (Cash flow / Equity in the Property)

I would look first to doing a cash-out refi.  Not sure about Canada but here rates have come down a lot so you might be able to take cash out AND improve your cash flow, which would be a real win-win.

If a cash-out refi is not feasible, can you find another deal like your first?  If so, sell and buy 2 or 3 more like the first one.