Hold or Sell

[Bryan C.]

Should I keep my rentals w/ mortgages or sell them and reinvest $$$ on cheaper rentals w/ no mortgage.

I own 3 rental properties w/ 3 mortgages....

I am trying to figure out if it is better to keep my 3 properties or sell and invest the proceeds into cheaper rentals.  I have a mortgage w/ each property and selling them will pay off all mortgages and bring in $100k+ to reinvest.

I currently have 13 yrs left on mortgages @ 4% fixed rates

Income:

3 current properties income = $5300/mo

Expenses:

PITI = $3960/mo (principle paydown = $2100/mo)

Prop Management = $530/mo

Repairs = $530/mo

Vacancy = $530/mo

Total expenses = $5550/mo

NOI:

($250)/mo   or ($3k)/yr

That means I pay $250/mo out of pocket but I get $2100/mo in principle paydown...

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If I sold the 3 properties I would have $100k after all closing costs etc to reinvest into real estate.  I can get 3 cheap rentals @ $33k/each - rents $800/mo each.

Income:  3 new properties x $800/mo = $2400/mo

Expenses:  

Taxes = $300/mo

Insurance = $200/mo

Prop Management = $250/mo

Vacancy = $250/mo

Repairs = $250/mo

Total expenses = $1250/mo 

NOI = $1150/mo or $13.8k/yr

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Todays value of 3 current properties = $550k - $575k

Mortgage balance for 3 properties = $410k

Estimated value after 13 yrs = $650-$670k

Subtract $40k ($3k/yr x 13 yrs) for out of pocket expenses = $610k-$630k

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3 New rentals estimated value after 13 yrs = $60k x 3 = $180k

NOI $13.8k/yr x 13 yrs = $180k

I didnt factor in that I can use the NOI from the rentals to reinvest and purchase 1 additional rental every 2 yrs @ $27k w/ rent @ $700/mo ($350/mo addition NOI)

It appears to be better to keep the 3 properties and just deal with having 3 mortgages until they are paid off.  I would like to get everyone's input here, because I think that I am missing some info on the new rental side to properly compare the 2 options.

Please provide feedback and point out where I am off....