To sell or not to sell...

[Chad Duncan]

I have an investment property in Oregon and am pondering selling the place, but am unsure of what would give me the largest return. Some of the facts about the property;

- It's worth roughly $400k, but I think I could sell it for $390k.

- I bought it for around $265k in 2016

- I owe roughly $250k

Essentially, after taxes, real estate fees, etc. I will net roughly $95,000. I put around $25k into renovations, and when I lived in or "house-hacked" the duplex, I gained that $25k back plus some by saving rent I would have otherwise paid elsewhere. The duplex itself has much-needed repairs that are coming due, mostly cosmetic, but still roughly $23k to get the property perfect. I currently net roughly $250 a month after mortgage, management, expenses, maintenance, cap ex, etc. However, after October, when the new tenants come in I should net roughly $450 a month.

I will be the only other duplex in the city I invested in and the market I am in has very little multifamily available and plenty of buyers left. For those who are analytically inclined, I concluded that the after-tax NPV for 30 years is roughly $130k using a 7% rate. That's only for the net cash flows of the rental income, so its more than what I will have in hand after selling ($95k)

What would you all recommend if you were in my situation? As well, I would either reinvest the $95k into some land to build a small home (roughly 6% fixed return) on it to become close to rent free again or dump it into the stock market as I am an investment advisor anyways and know it well (roughly 7%, inflation adj). 

[Bob B.]

@Chad Duncan whereabouts in the city is your property?

If it’s in an A+ , super high demand location and it cash flows... keep it unless something better comes around and your only option is to sell this to buy that.

I’m guessing Your future value number likely does not include the appreciation that will happen over 10+ years. We have a long way to go, maybe not short term, but on a long term outlook.

On the flip side if the location isn’t A+ then consider selling... especially if you can get the gains tax free for having lived in it for 2 of the last 5 years (check with your accountant, I certainly am not giving tax advice )

If you keep it. You can also consider leveraging whatever equity you have in it via a 2nd pos loan or a heloc while money is so cheap. Just don’t violate cashflow rules with reasonably conservative rents.