Hold or Sell Situation

[Derek Hanners]

Hi Everyone, 

I've had a long distance property that I've been renting out for about 6 years now (Seattle area).

I'm wanting to ramp up my Real Estate investing with something more close to my current location (Ohio area).

My problem is that the property's numbers seem almost too good to be true and I think I'm missing something? See if someone can help me make sense of this.

My 3 options are:

1) To keep the long distance property, which is RARELY vacant and brings in about $150/month over the cost of the mortgage and property management. It's also a newer house (Built in 2007? I think?), so maintenance costs aren't too bad.

2) Sell it and use the proceeds to put down payments on a property(ies) closer to where I currently live.

3) Keep the long distance property and leverage it's equity (HELOC probably) to fund the down payments on the properties I want here locally.

For the last month or two my only path was to sell the remote one and use the money to buy local properties. But after some consideration I feel like I might be "shooting myself in the foot" by selling a house that has payments going to more principle than interest? To be clear, I am worried about selling a property that gains more and more equity momentum than it had in the past. Is this even a valid consideration?

So my questions are:

1) Is where you are in the loan repayment a consideration? Now that my tenants are paying more principle than interest would it be disadvantageous to sell?

and 2) Which of the 3 options (or any other) would you consider if in my shoes?

Thanks for your time!

I hope the wall of text wasn't too big of a deterrent for most.

Derek

[Seth Ferguson]

Hi @Derek Hanners,

My personal opinion is that you never want to pay off the mortgage. I interviewed Chris Gray about this a few weeks ago. I also don't like selling properties...I would rather refi and keep them.

Doing a refi is your best bet. If it takes you into a negative gear with your original property, the positive cash flow of your new purchases in a "friendlier cash-flow market" will offset the loss. The biggest upside is that you will own more property, paid for by the first property.

Don't worry about loan repayment...that's peanuts compared to the appreciation over a long-term hold.