Should we sell? What would you do?

[Anthony Torres]

I have a property that I am thinking about selling. It's a great no-hassle single-family property. We purchased it for $10k down, a few years ago (owner occupied) at a great price as a foreclosure - no significant renovations - and it cash flows over $450 per month. I recently applied to drop PMI and found that it was valued at $265k and we owe about $165k - so $100k in equity. Not bad for a first deal :-)

The plan would be to take that money and reinvest for more cashflow. 

I heard that when you buy a property, you look at ROI but when you hold a property, you look at ROE. The ROI was great but a Return on $100k equity is not great.

I have heard that it's difficult to get home equity loans on investment properties but have found a few options. I could take out up to $44k for 5-6%, or $35k for 8-9%.  These seem a little pricey and I can't access much of the $100k. 

If I sell, I imagine I'll be able to get around $80k-$90k after fees and closing costs. I'll lose the $450 in monthly cashflow - but I can take $80k and buy a $400k property with it. If I can expect a 12% ROI on the $80k, the cashflow would be $800 a month. (Is this reasonable?)

I heard on a recent BP podcast that the economy is showing signs that it could make a down turn within a couple years and that investors should be hoarding money to buy up as much as possible when property values are low. 

What would you do?