To rent or to sell??

Question

Hey guys,

I currently own a rental property I live in, and will be moving to Florida in the near future. At that time I will transition into a full time flipper, and accrue rentals along the way. My current predicament is weather I should sell or rent my property.

Property info:

4 bed 4 bath

1,700 Sq ft

9 miles north of Denver Colorado

150,000 in Equity

.45 acers

corner lot

mortgage is 1,150 per month

would rent for 2,100-2,400 per month

Holding and renting real estate can provide a great opportunity for cash flow, however being in another state has me worried about issues that could arise. Also if I dont sell I wont be able to get all the equity out of the property. If I were to rent the home out, what would be the best way to take some equity out of the house, a home equity line of credit or refinance?

This decision is a crutial one for me as it could set me up to succeed, or it could be a huge hindrance. Any insite would be greatly appriciated. If I havent provided enough information please let me know and I would be happy to give you the necessary information.

Bill S. · Answer

@Brandon Henderson another vote for sell. The whole long distance, newbie landlording thing is loaded with potholes. The only reason not to sell is if there is some possibility that you would want to move back here in the next few years. Going in and out of our market will likely leave you way behind the eight ball.

Ben Wilkins · Answer

@Brandon Henderson - With an income of $2400 per month, assume 50% toward PITI expenses - that brings you down to $1200. Take another $1150 out for mortgage.

I suggest selling based on just those numbers.

You have a bit of equity in the property, so sell and use the sale to purchase a rental unit closer to your new residence in Florida (or house-hack). This way you avoid some taxes by reinvesting, you avoid the issue of owning real estate in another state (which isn't a bad thing, but doesn't sound like something you want to tackle right now), and you stay in the renting game.

Account Closed · Answer

@Brandon Henderson Sarasota is beautiful, definitely one of the best beaches in FL. I'm not familiar with the market there, but I'd be very interested in learning how things are over there. I'm originally from Miami and now living abroad and I'm also trying to determine which Florida markets to invest in. So far Tampa and Jacksonville make the most sense for me since I'm looking for fix, buy and hold. Orlando is another one to keep an eye on.

Account Closed · Answer

Hey @Brandon Henderson it sounds like the BP community has spoken. Cash out and you have a solid starting advantage in FL. Where exactly are you planning on moving to in Florida? And what market are you looking to begin full-time flipping?

Matt M. · Answer

Are you coming back to Denver? If not, I'd sell, collect my chips, and move on. That equity will help you get going on your new ventures.

I live a few miles West on the other side of Federal, so I know the area well. I used to live in Northglenn and wouldn't be too excited about having a rental over there especially if you're moving out of the State.

Luke Miller · Answer

@Brandon Henderson I'd sell and buy in Florida. Probably much better opportunities for a cash flowing property. If you can find BRRRRs down there, your profit from this sale could be your "BRRRR endowment" and set you up for several less expensive properties where you actually live. Just my $.02

Ralph R. · Answer

@Brandon Henderson    @Bill S.   I know that area well but from 10 years ago. It's near the castle shaped motel. My concern would be tieing up 150k and getting such a low return on your money, plus a $300,000 house should rent for closer to $3000 a month to be worth doing.  You won't find good tenants in that price range. I know Denvers market won't do that right now too.  Were I in your shoes I would sell and buy better producing properties elsewhere. If you sold a rough figure would give you $126000 net after sale and no Capitol gain. ($300000-$24000 selling cost- $150000 loan pay off = $126000)   With $126,000 you could buy 4 - $100,000 dollar rentals using a 25% down payment and still have $25,000 left for down payment on your primary home. 4 - $100,000 rentals should yield 900-1000 each gross rents or $3200-$4000 a month in gross rents. $25000  down payment will buy you a $250,000 dollar primary home in Florida using a 10% down payment. I don't know why you would keep that house and dig up another down payment out of pocket.  Take the remaining $1000 and buy a couch to relax on while the rent checks are finding their way to you LOL. RR

Brandon Henderson · Answer

@Ralph R. It sounds like you are familiar with the area. The property is in Northglenn, right off I-25 & 104th. Even with the exponential growth the Denver area is seeing, I certainly don't want to take any appreciation into account when making this decision. The property is worth $300,000 to $320,000. The estimated rent rate was derived from a few property managers I called. I certainly appreciate your analytical outlook.

Christopher Brainard · Answer

@Brandon Henderson

If you've been living there for a few years, I would sell the property and take the owner occupied tax exclusion on it and use those funds for your flipping in Florida. After you figure in your taxes, insurance, capex, repairs, property management, vacancy, etc, you're going to find that probably eats up half your rent, leaving you with very little cash flow.

-Christopher

Brandon Henderson · Answer

Account Closed That's great to hear, I am excited to get down there and try those beaches out for myself. How have you been able to determine what areas are good for buy and holds vs fix and flips?

To rent or to sell??

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