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Updated over 12 years ago,
Duplex - is it better not to sell?
Hi, we own a duplex in Sacramento for 10 years. Currently it is worth about 330K. I can net about 150K if I sell today, after paying realtor and cap gain and whatnot.
For two years I was dead set on selling it this spring and moved back to get the cap gain exclusion on one side of the duplex. But lately we are thinking it may be better to hang on to this duplex as an investment. What do you guys/gals think?
Selling price: 330k
Net after RE/capgain tax: 150k
Current mortgage: 1120/m
Prin: 350
Int: <770>
Rent, 1250/ side: 2500/m
Esmt vacancy: <125>/m
Prop Tax: <260>/m
Insur: <60>/m
Maint/repair: <170>/m
Utility: <195>/m
Based on these figures from AARP cap rate calculator:
( I used $150000 as my property cost. This is where I am unsure, since I am already the owner with equity. My rationale - since I purchased this property at a much lower price, the real cost to me equals to what I can extract out of it by selling.)
Is this correct?
Cap Rate = > 11%
I did also a cash ROI analysis on my own and came up with,
ROI/yr = 7.4%
After tax cash flow = +1620/yr
If I put in expected appreciation I get the following. My city, Sacramento, in central CA is starting to wake up in RE in my observations. I think 3 – 5% a year increase is not unreasonable.
ROI with 3% apprec = 8%
ROI with 5% apprec = 18%
We think we should hang on to this duplex, rent out both sides since this kind of return is better than anything else that we can expect with rather low risk.
What is your take?
Kenny