Rental Property Investor · Dallas, TX · Member since 2018 · 7 posts · 1 vote
Hey everyone,
I'm new to BP. I recently bought a new house and have listed new old property for rent but I'm having trouble deciding if its my best option. I bought the house 2.5 years ago for 195k. I put 30k into remodel. I had it appraised 3 months ago to drop my PMI. It appraised for 255k. I have it listed to rent for 2100. My mortgage is just shy of 1500. From my understanding in Texas you can't take a heloc out on an investment property so I don't see a way to take my equity out to reinvest in a future property. So I tempted to just sell it and get the equity out to invest into a different property. I appreciate any feedback, thanks in advance!
Have you looked into doing a 1031 exchange? That may save you a bit with taxes.
It may help you to get a detailed estimate of how much it would cost to just sell the place outright. Typically you would have to pay 6% for broker fees, closing costs, taxes, holding costs, etc.
With a mortgage, selling within the first 7ish years is not great because you pay mostly interest during this time and the principal balance doesn't go down by much.
My initial thought is that you should probably hold the rental property and not sell it. I would only sell it if you are seeing better deals on the market and need the cash to buy.
Rental Property Investor · Dallas, TX · Member since 2018 · 7 posts · 1 vote
7y
@Doug Shapiro that is a good idea doing a 1031 if I find a better deal at a larger price. I did fail to mention I put 20k down and have thrown money at the principal to get my remaining balance down to 161k at the moment. I am currently leaning to rent it. Thanks so much for your input.
I'd also recommend to NOT pay down your mortgage balance. Of course this depends on what your goals are with investing and where you are in life, but typically it doesn't do much good. It just ties up more of your cash and doesn't reduce your monthly payments. That money is better used elsewhere (like acquiring another property or investing in something else).
Once you pay off a property then you'll have good cash flow (but no mortgage interest tax deductions), and you'll have significant equity in your home that is difficult to extract. Cash out refinancing and selling are options, but the refinance puts you in the same position as having a mortgage (because it is the same thing), and selling is not ideal because you end up losing 6-10% of the purchase price in just the cost alone to sell in general.