Seeking Cash out advice!

[Brent Benoit]

So a friend of mine who is much further ahead in the investing game than I put the idea in my head to cash out of the first rental I bought in April and take that money, put it into other SFHs like HUD and make more on my investment dollar.

So the details: 

Id be selling a 4 bedroom 2 bath 2 stall detached garage. Currently rented at $1,535/mo. I owe $80,000 on the mortgage. Without an appraisal yet, we think it’s be worth $200,000. So with realtors fees and taxes I figure I’d walk away with $100,000.

What would you all recommend?

What would be a wise investment for that $100,000?

Should I just stay where I’m at?

Should I buy, outright, 2 other units, in a C class neighborhood, HUD, and get $1,000/mo from them?

Thank you all for any thoughts and insight!

[Joe Splitrock]

If you decide to sell, my advice is hold the property for over year to avoid short term capital gains taxes. Alternately, you could hold it for 2 years to do a like kind exchange (1031) into the other properties, which defers taxes. 

Personally, I would hold the property for cash flow. Assuming the neighborhood will hold value over time, you can still profit when you sell in the future. 

If you want to access the equity, then just do a cash out refinance. Assuming it appraises for $200,000, you should be able to refinance for $150,000 (25% equity left in). Pay off your loan and use the cash proceeds to invest. This way you keep property A and buy properties B and C.

The best way to get rich in real estate is never sell, keep buying. Of course there are situations where selling makes sense, but the point is build a portfolio and let the power of time work its magic.