Rent or Sell- Current Rental

[Leah Hill]

I own a house in Denver that I need to continue to rent or sell. 

Purchased for $460,000 with $50,000 down, monthly payment is around $2,350, including an approx. $200 PMI that will get dropped this year.

Current rent is $3,100, which may be high with rental inventory growth in the area, I imagine the realistic rent for the home may be closer to $2,800-$2,900. 

The current value is around $550,000-$560,000 

I am considering selling because 1. I am not sure how long we will see these home prices in the specific area (about 10% appreciation/ year) and 2. The home was built in the 1800's. It is well-maintained and ready to sell, but will need some extensive work in the future including foundation work. A structural engineer took a look and said nothing is needed today, but will be in the future. I don't know if that will be in 5 years or 20. Regardless, a huge expense for a rental property. and finally 3. if the rental price actually goes down, as I believe it will, this cuts into any cash flow on the home. I would take the cash from the sale of this home and purchase another buy and hold investment property to rent with better cash flow and less costs risk.

I lived in the home initially, and have since moved, so it was not initially purchased as a rental, and I have better cash flowing properties. 

Thoughts? 

[Phillip Bicker]

Hello @Leah Hill, 

From the figures you shared, you would be able to use these funds more effectively than your current home if you like being a landlord and having investment properties. This is approximately a 5% cap rate where you can do better, especially if you invest in the Springs. You mentioned you have better cash flowing properties, so you can see the value of finding properties that are performing better than this current property. Right now you money is not utilized at its full potential with being tied up in this home. 

It will be interesting to see where our market goes, but I agree that it is a great time to capitalize on the appreciated values. If you are able to sell at $560k you would be able to clear about $60k that you could use for the next property.

Basically with knowing there could be some potentially large items to fix in the near future, knowing that you could utilize the money better elsewhere, and seeing where our price levels are right now, my suggestion would be to 1031 this property into a better cash flowing property with more stable long term values. Feel free to PM if you want suggestions of specific areas or ideas. 

Good luck with whatever you choose!