Hold or Sell in a hot market with high appreciation??

Buying & Selling Real Estate
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Hold or Sell in a hot market with high appreciation??

Nick Romano
Boston, MA · Member since 2016 · 47 posts · 7 votes

Hola BP Community-

I've been toying with the idea of selling my condo in Boston for a while now but I can't seem to come to a solution.  I bought the condo in 2013 for $525k and it's now worth about $625k.  Its in one of the hottest neighborhoods and the construction is all over the place!  Boston is still booming but of course we're heading for a slow down very soon (I think).  The property will certainly appreciate faster than almost all other areas I'd invest in over the long term.

I have a 15 year mortgage on the property and I'm currently in year 4-5, so a good amount of the interest has been paid off and most of the payments are now going toward principle creating giood equity.  

-My mortgage payment is $2900/month with a condo fee of $515/month

-The unit is currently rented for $3200/month

-Current mortgage rate is 2.625% :-) 

-Outstanding balance on the loan is $295k

-Should I re-finance into a longer term loan?  It would help the cash flow, but significantly decrease the amount that goes to principle!

-Should I pay off the loan over the next few years?

-Should I sell the property and throw the money into a cash flowing deal?  Only issue is I won't see this type of appreciation over the long term anywhere else. 

-Should I keep it as is, and pay it off over the next 10 years with about $200-$300 coming out of my pocket each month?

-Any other options?

I really appreciate any feedback on this case!  I've been thinking about this one for quite a while and just can't seem to come to a solution!

Thanks so much!!

-Nick

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Charlie MacPherson
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
8y

@Nick Romano Hey Nick, shoot me the address and let me double check your comps.  $100K in 4 years might be right, but it might be low too.  I can't remember which part of Boston you invested in, but East Boston and South Boston have really picked up a lot of steam. I think they have out-appreciated the rest of the (already expensive) city.

The real wildcard is whether Amazon picks Boston for the next HQ.  I definitely wouldn't sell until that decision is made.  If they do pick Boston, it's Katy bar the door!

If not, Boston is still a very hot market and you should be able to sell with a nice profit.

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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    8y

    @Nick Romano Hey Nick, shoot me the address and let me double check your comps.  $100K in 4 years might be right, but it might be low too.  I can't remember which part of Boston you invested in, but East Boston and South Boston have really picked up a lot of steam. I think they have out-appreciated the rest of the (already expensive) city.

    The real wildcard is whether Amazon picks Boston for the next HQ.  I definitely wouldn't sell until that decision is made.  If they do pick Boston, it's Katy bar the door!

    If not, Boston is still a very hot market and you should be able to sell with a nice profit.

    1Reply
  • Jordan Decuir
    Rental Property Investor · Katy, TX · Member since 2013 · 417 posts · 171 votes
    8y
    I wouldn’t accelerate the paydown since you already have such a low rate in place. I also wouldn’t sell because you point significant potential for increased value based on the local market. Given what you said, I would consider doing a cash-out refi to tap into that cash
    1Reply
  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    8y

    It depends on what your goals are, if you want cash flow you should either refinance or sell, if you want to continue paying down mortgage debt and building equity and bank on appreciation you should probably hold on.  Another good option if you haven't done so in a while would be to run the rental comps for the property, if the rent is below market you may be able to raise it and alleviate some of your cash flow issues while also maintaining the higher pay down rate for your mortgage.

    1Reply
  • Brandon Ingegneri
    Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
    8y

    Keep it, especially if it is in the city limits.  

    0Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    8y
    So many on this site believe in keeping your equity working hard which seems to mean leveraged to the hilt. Stressful! Looks like you have a winner so why sell? If you take equity out, you add risk and may not cashflow. We have financed all our properties on 15 year notes to get them paid off faster. Think how nice it will be to have your PI payments made to you! Even if rents recede, you’re golden. A lot of investors believe the perfect holding period for real estate is forever. (After computing sales cost, capitol gains and depreciation recapture, no doubt). Congrats and good luck...what would you do with your after tax profit anyway?
    1Reply
  • Jack Bobeck
    Rental Property Investor · Jacksonville, FL · Member since 2008 · 784 posts · 528 votes
    8y
    Nick Romano goals, what are your investment goals? Is this your only property? What would you do with the profits if you sold?
    0Reply
  • Nick Romano
    OP
    Boston, MA · Member since 2016 · 47 posts · 7 votes
    8y

    @Jordan Decuir wouldn't a cash-out refi mean giving up the low rate in place?

    0Reply
  • Nick Romano
    OP
    Boston, MA · Member since 2016 · 47 posts · 7 votes
    8y

    @Marian Smith with the profits I'd buy a cash flowing multifamily.  It wouldn't be in the city, but it would be cash flowing much more than the condo!  

    I'm looking at a property now with purchase price $365k and rents @ $3800/month (total).   With the proceeds from the sale of the condo I could almost buy this multi in cash.

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  • Nick Romano
    OP
    Boston, MA · Member since 2016 · 47 posts · 7 votes
    8y

    @Jack Bobeck my investment goals are $10,000/month in passive income.  Currently I own (mortgaged) another 4-plex, and a (mortgaged) single family home.  With the proceeds from the sale of the condo ........I'm currently looking at a property with purchase price $365k and rents @ $3800/month (total). With the proceeds from the sale of the condo I could almost buy this multi in cash.

    0Reply
  • Nick Romano
    OP
    Boston, MA · Member since 2016 · 47 posts · 7 votes
    8y

    @Aaron K. The issue is that my rent is actually a bit above market rent.  We're renting it fully furnished so we're getting a bit more...but this would definitely be the max

    0Reply
  • Jordan Decuir
    Rental Property Investor · Katy, TX · Member since 2013 · 417 posts · 171 votes
    8y
    Originally posted by @Nick Romano:

    @Jordan Decuir wouldn't a cash-out refi mean giving up the low rate in place?

    Potentially. But Given today's low-rate environment, I would refi over a longer term (amortized over thirty years) pull out a substantial amount of cash, the longer amortization period would keep your payments low and you would still get a good rate (probably nowhere near the rate you are at now on the 15-year amortization though) and go reinvest in some other property(ies). The IRR on your invested cash should significantly surpass the rate that you will be paying on the new loan. I don't know your situation of course, but that's what i would do. You are in an enviable position, great job!

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    I’ll chip in for a strategy that’s kind of in the middle of some of the others. I would sell, and 1031 exchange it into multifamily in a cheaper market. Several hundred grand would buy you a lot of units in other parts of the country, or maybe even a couple hours away. Either way if your goal is 10000 a month then you have to think bigger and in terms of units rather than properties. Here’s some basic math to illustrate that. In today’s market I can get about 200 a month on a single family rental. If I wanted 10000 a month I’d need 50 houses. That’s a lot and will take you a while to get there. Plus that condo fee is definitely eating your cash flow Hope this helps !
    1Reply
  • Jack Bobeck
    Rental Property Investor · Jacksonville, FL · Member since 2008 · 784 posts · 528 votes
    8y

    @Nick Romano With money so cheap right now, I'd use other people's money. You always need more cash for life and stuff and reserves. Hold onto your cash. 

    1Reply
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