Schools lf thought on selling or refinancing advise

[Tony Velez]

Hi,

We bought a triplex last year for $198,000 with 25% down. We have an existing mortgage of $145,000. We put a new roof on. We re did the second floor when a tenant moved out. Put new bathroom on third floor. All floors are rented with great cash flow. 

My realtor ran the comps and we are now looking at house value of $300,000 

Here is the question. Here are my thoughts. Please let me know your thoughts. I thought I read somewhere its better to sell and take the appreciation cash now and 1031 exchange.  I see BP as my mentors and I value everyones opinion. 

1- we can refi and cash out our original down payment plus more if we want.  Get less cash flow each month but have money for another down payment on another property. 

2- we can sell and profit more than double our down payment. Possibly buy another house in cash. Then refi and cash out. 

3- we can sell and use the larger down payment on a possible multi family commercial building? With partners of course

3- Your thoughts and advise are much appreciated. I love hearing other investors school of thought 

Thank you

Tony V

[Michael Seeker]

@Tony Velez - this really boils down to your personal situation and how you like to invest.

From a strictly financial standpoint, every time you transact real estate there are costs involved so if you can avoid them then you're probably better off.

Most lenders will give you 75-80% LTV. A typical sale will incur 6% realtor fees along with another 1-3% of other misc closing costs. Depending on the demand, you might also be looking at a sale price 5-10% below what you list it for (presumably close to the true value). Add all that up and a sale might cost you 20%. Why would you do that when you could refinance and cash out roughly the same amount of money and also keep the property and cashflow from it? I would avoid a sale unless you no longer want to own the property or the demand is very high in the area.

If your only goal is to raise capital (and assuming you're not towards the end of your 27.5 years of depreciation) then a refi might be your best financial play.