Should I sell or should I hold?

Question

Hey everyone, I had a question about when / is there a good time to cash out on a rental property to then leverage that into a better situation or multiple new builds.

I purchased and lived in my first duplex about 5 years ago. I paid $166,000 for it and collected rent while I lived for in the other side. The market is hot right now (North East FL, just north of Daytona Beach) and me and my family just build a new home. I'm confident I could get $350,000 (for the sake of discussion lets roll with that). The units are in great shape, newer AC units (3 and 4 yrs old) and a new roof (1 year old) built in 2004.

The house is now paid off and renting for $1,400 (each side) which is great. Lots of people are moving into this area and there is a new house being built on every street, new apartments and many old folks homes.

My question is, wouldn't it make sense to sell now, make $184,000 profit free from capital gains and reinvest in something bigger? I would be able to build 2 new duplexes with that $184,000 in this area plus have my initial $166,000.

Any thoughts would be appreciated! I'm 27 and enjoy real-estate so I'm looking for ways to move up and leverage my equity to acquire another multifamily. I own a duplex zoned lot as well so the new build would be ready to go (275K for a 3/2 duplex in this area) + land.

Or would a HELOC make more sense to fund a new build?

I appreciate your thoughts in advance!

Nat C. · Answer

I will give you some advice which I wish someone had drilled into me years ago. NEVER SELL. Well, only sell if the asset is creating problems that you can't resolve. Otherwise your goal should be to hold as much RE as possible and keep buying.

So indeed, a HELOC is the way to go. Just keep buying, renovating and refinancing, as per the BRRRR model. By the time you are 40, you would have amassed great wealth.

By the way, which area North of Daytona are you referring to? Ormond Beach?

Paul Ricci Jr · Answer

I appreciate that! I am not in a position where I need the cash or anything like that, seems I need to get a bit more educated on HELOC's and go from there.

I am in Palm Coast but actively look in surrounding areas, including Ormond !

Jason Scavilla · Answer

@Paul Ricci Jr I’m an agent and investor in Ormond, I would HOLD AND NEVER SELL. Take out the HELOC. If you do need help/advice/anything then let me know. I have 5 properties, 1 of them my primary, so 4 rentals. All single family and when I have the capital will be looking at a duplex.

Basit Siddiqi · Answer

@Paul Ricci JrYou won't be able to exclude the full amount of gain since it was a duplex and you lived in 1/2. You would be able to exclude 1/2 the gain. You can still defer the other half of gain via 1031 exchange.

Karen Salem · Answer

@Karen Salem I meant to say lots of old dated homes here

Karen Salem · Answer

@Paul Ricci Jr I’m in Palm coast too. Had a Florida license for 12 years. Getting it back in January. I’m looking for a flip. Lots of old dates homes here. They look nice in the outside but inside they are very 80’s let’s connect!

Paul Ricci Jr · Answer

Hey Gary, I appreciate your perspective and thank you for taking the time to respond. I live in Palm Coast and am always checking the surrounding areas for deals. Iv'e had a great experience with my duplex and definitely like the idea of acquiring another multi of some sort.

I have never heard of a cash out refi so I will need to look into that, sounds intriguing! I own the duplex outright so If I were to purchase another property would you suggest that I pull money from the duplex + add some more funds to pay off this future investment (assuming I have enough when I find that property) or should I put down a downpayment on this future investment then just get a mortgage and leave the duplex debt free?

I understand interest rates are low rn, so I would want to make an educated decision and figure out the best option

Lee Judd · Answer

@Paul Ricci Jr yes but if you capture the appreciation tax free it makes sense to me to take advantage of it and expand into multiple properties.

Paul Ricci Jr · Answer

Very true, It would be nice to take advantage of the tax free capital however it seems like holding makes the most sense from a long term perspective

Should I sell or should I hold?

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