Opinions Wanted (sell or keep my appartment)

[Wes F.]

Hey all,

I'm Wes from the Netherlands.

Big fan of BP, love the books and podcasts. 

I would like to gather your opinions on my current situation:

Me and my wife are now living in a 4 bedroom appartment, great location, and just got our offer accepted on a new house.

I always wanted to keep our current appartment as a rental unit when we would find and buy a new house. This would be our first rental. Now I'm having doubts and I'm reconsidering to sell our appartment to take the profit, see below. 

I am thinking if we should (and want) to keep the appartment and rent it out, or sell it and put the over-value in our new house.

Numbers Appartment:

We bought the appartment for 144K 3 years ago, it's now worth 195K, which makes a 51K profit. If we sell the appartment now, we have the 51K guaranteed.

If we keep the appartment, we have an extra income cashflow and a extra retirement income source. But also some extra work/possible stress when there's a bad tenant for example.

The numbers:

Appartment bought for: 144K

Appartment now worth: 195K

Appartment potential rental income and expenses: (calculated  roughly since I rather keep extra space for unseen costs):

Income:

€1100,- monthly rent

Costs:

Mortgage €450

Power/water/gas/maintenaince: €200

Repairs/insurance/write offs: €200

Total costs: €850

Montly income: €250

Year income: €3.000

-10% management fee =

Total cash profit year 1: €2.700

Personal thoughts:

1. I feel like we are at a peak in the market, since this is a good time to sell. If we sell now we have the 51K guaranteed and can put it in our next house.

2. If we keep the appartment as a rental unit for the long run (20+ years), we have an extra income source, might come in handy when my wife wants to work less due to children. If the market drops we have extra cash flow income, but could lose the 51K profit. On the other hand, in 20 years the appartment can also be worth even more.

3. If we rent it out, and have a yearly rental income of €2.700, it should take almost 20 years to get to 51K cash profit. Ofcourse there's the extra mortgage pay off by the tenant, which is €450 per month x 12 months x 20 years = € 108.000, which is also income, but not cash in pocket.

4. We could sell the appartment now, take the 51K, and wait for a  for a market normalization/drop and buy an new appartment rental.

I would like to gather some opinions, what you guys would do in my situation and why.

Big thanks for reading and taking your time. Have a great day.

Gr, Wes

[Wes F.]

Originally posted by @AJ Leman:

Greetings Wes! 

Your situation sounds alot like mine.  I tried to sell my apartment back in 2011.  No one wanted it for the price I was asking, so I rented it out.  Fast forward to today - my wife and I and our partners now own 36 units.  I never planned on being a landlord (I'm a high school teacher) and most folks told me not to do it, but it turned out to be fun, challenging, and profitable!  Now I realize that it is going to be a big part of my life.

So here is one opinion:  If your finances allow, rent your current apartment out.  Let it cash flow for a while.  Who knows where it will take you? Perhaps you will find that you actually like being an investor/landlord! Maybe you will buy more units?  You could wait for the market to drop to buy a new rental, but timing a market is difficult and easy to lose sleep over.

The market will eventually dip, but if you are cash flowing, then as you say, you are still making money, so no big deal.  The market will eventually come back up.  Remember that you can also refinance and pull some equity out if needed, or perhaps finance another rental based on the equity in your current apartment.

These are just my thoughts.  Good luck writing your own story.  I don't think you can go wrong!

 Thanks Aj! For your story and your vision. What a great accomplishment you and your wife acchieved.