Hold and Rent OR Sell and Invest Out of State

[Forrest Brown]

Hey Everyone! Here is the lowdown:

Purchased an investment single family home 2bed/1bath in North Park that was well under market value due to repairs needed and being built in 1928. 

Purchase Price: $585k with a $100k down payment on a 2.7% interest rate. 

Remodel Costs $115k. It was definitely not the most judicious remodel but, a great learning experience. 

Now, we owe about $470k and the zestimate is $760k without the remodel factored in. 

It currently rents out at about a $100 cash flow including expenses. 

I want to buy out of state next but I'm debating if I should sell the home and do a 1031 exchange on another investment property? Or hold and rent as long as possible? Thanks ahead of time!

[Dave Foster]

@Forrest Brown, It is very likely that you don't have much profit in that property at all to justify a 1031.  Depreciation might be a factor if you have owned it for a while.   And if the rehab significantly ups the value that too could change things.  But as it stands it. looks like you'd have a net sale of around $704K and you have $700K invested in it.  You'll need to crunch some more numbers to get that nailed down.

So, the question comes down to do you go out of state for better cash flow or tenant law.  And leave the best appreciating market of the last 50 years.  Or do you stay with what you have knowing that monthly cash flow is only going to cover date night once a month.

Your interest rate is superb.  Which means that you are actually making quite a bit on that property in terms of loan amortization each month.  Hang on to it long enough and the tenants will completely pay off the loan for you.  You'll have had a bunch of years of free date nights (once a month).  And the property will be worth exponentially more than it is today.

There's no right answer.  Your personal situation should dictate.