Should we sell or hold?

Question

Hello everyone. We are in the Northern Virginia area and are really interested in opinions on whether to sell a condo we currently own (paid for) since the market is high or hold and continue to collect rental income.  The current comps for selling this 2 bed, 2 bath unit put it at around 210,000.  The rent is 1545/mo = 18,540/yr.  Yearly expenses are:

Condo fees = 337/mo = 4044/yr

Insurance = 34/mo = 409/yr

Taxes  = 208/mo = 2500/yr

The question is whether to hold or sell at the high point of the market and take that money to use to buy multiple, which would then mean mortgages on all, etc; however, more rental income versus the one property we currently own.

Or , the other idea we are contemplating is holding this and keep the rental income and take out a refi on the condo with a low percentage (3.1%) and use that money to purchase additional rental properties?

Any advice would be greatly appreciated.

Brian G. · Answer

@Phil Cecere I don’t like selling assets until/unless I have a better opportunity to redeploy the capital. Some use a metric like 10 years of cash flow, ie if they can capture the equivalent of 10 years of cash flow they sell, etc. Really depends on your goals. It’s expensive to sell so keep that in mind. Good luck on your decision!

Ika Sargeant · Answer

@Phil Cecere If your question is purely a real estate question; is the right time to sell? absolutely. But I suspect your real question is; you have 210K equity returning 11.5K annually. Where can you find better returns? Always a more complicated question. Are you going to buy another home? Consider selling costs and buying costs, taxes you have to pay. And if after answering all the questions you have another investment that can return something higher than what you are getting, then by all means go for it. Or perhaps you are tired of been a landlord or may be you think the future condo costs are going to rise faster and eat into your return. Another way to say this is to say; I have no idea if you should sell but if you do, you will catch one of the best real estate market.

Aj Parikh · Answer

@Phil Cecere I also own a condo in Northern Virginia all paid up and the rents are similar as well. I would cash out refinance at that rate and buy another property.

Northern Virginia market is appreciating like no other so I would hold. Good luck and keep us posted on what you decide.

Ben Riechmann · Answer

If you are going to sell, this is one of the hottest times to sell all over that we have seen in a long time.  It is also hard to determine how long such a market can last.  Part of what is driving it is the low interest rates that have begun to rise again, but are still very low.  As well as people wanting something solid in terms of investment like a place to live.  But like toilet paper, they got a little nutty about it.  I have family and friends all over the country, and people are buying above what people are asking.  In areas that often don't see this happen!  So selling now to put money aside for a better investment with more rental income really may not be a bad idea.

Things to consider when doing this.  Timing when going back in, but while your money is out, keep looking for a great deal.  The other thing to consider is that if your next venture you buy needs rehab work that building costs have really gone up.  So you will want to factor in building costs costing more than any previous work you have done.

I am considering selling propeties I was not considering selling for a while in Ohio due to this market.   This may not happen again for a while!

Theresa Harris · Answer

I agree with what others posted.  You are making $11.5K on $200K investment.  Could you do better if you used that money to buy another place like a duplex or single family home?  Your property taxes would go up a big, but you'd remove the condo fees.  I don't believe in pulling all your money out, but having a mortgage that your tenants are paying for you, isn't a bad thing.

Phil Cecere · Answer

Thanks to all who have replied.  Really appreciate the feedback and insight!

Ryan Mainwaring · Answer

I second @Aj Parikh to do a cash out refi as long as you still cashflow with mortgage.  Then buy more properties to increase your cashflow

Phil Cecere · Answer

Thanks Ben - appreciate the insight!

Should we sell or hold?

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