Sell my property and make 70k or rent and make 700 a month

Buying & Selling Real Estate
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Sell my property and make 70k or rent and make 700 a month

Mike Kedziora
Member since 2021 · 4 posts · 6 votes

been on before asking this but my profit from my house has gone way up. My property can make me around 70k profit right now if I sell but also can make me about 700 a month from renting. I have a place to go live with my buddy for 300 dollars a month rent. What you guys/girls do if you were me. I wanted to take my profits and possibly buy one or two rentals 

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John Hamilton
Investor · Colorado Springs, CO · Member since 2019 · 9 posts · 20 votes
5y

I take the approach of long term holdings. Wealth tends to favor the patient. Especially with it cash flowing $700/month while your tenants continue to pay down your mortgage. Also, I don't know your particular market but rents tend to increase over time, potentially increasing the amount of cashflow. If you do come across an investment opportunity you could even cash out re-finance and have access to some of the equity in your home (granted that would raise your current monthly payment). Obviously take everything you read on public forums with a grain of salt and make the best decision for you, but this is what I would do.

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  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    5y
    Originally posted by @Mike Kedziora:

    been on before asking this but my profit from my house has gone way up. My property can make me around 70k profit right now if I sell but also can make me about 700 a month from renting. I have a place to go live with my buddy for 300 dollars a month rent. What you guys/girls do if you were me. I wanted to take my profits and possibly buy one or two rentals 

    You have to figure out cost of sale. If you pay an agent to sell your place that's 5% - 6% of the total sales amount, then you  have capital gains if any. You don't state which market you are in, but I would pay the $595 to have a service list the property, sell the property and take the money IF you have lived in the property 2 of the last 5 years. Then rent from your buddy for a year and invest in properties. That is only half of the equation but you have left out a lot of details so that''s the best that can be explained for now.

    6Reply
  • Mike Kedziora
    OP
    Member since 2021 · 4 posts · 6 votes
    5y

    Live in New Jersey where I believe they take 3% and I lived in it over two years 

    Thank you for your input 

    0Reply
  • Josh Ashford
    Insurance Agent · Highland Village, TX · Member since 2019 · 6 posts · 7 votes
    5y

    Depends. Personally, I would stay because I'm married with two kids and love my location. 

    If you bought it to eventually profit, might be time to take that profit. 

    2Reply
  • John Hamilton
    Investor · Colorado Springs, CO · Member since 2019 · 9 posts · 20 votes
    5y

    I take the approach of long term holdings. Wealth tends to favor the patient. Especially with it cash flowing $700/month while your tenants continue to pay down your mortgage. Also, I don't know your particular market but rents tend to increase over time, potentially increasing the amount of cashflow. If you do come across an investment opportunity you could even cash out re-finance and have access to some of the equity in your home (granted that would raise your current monthly payment). Obviously take everything you read on public forums with a grain of salt and make the best decision for you, but this is what I would do.

    13Reply
  • Michael King
    Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
    5y

    Theoretically speaking, and loosely at that, $700 equates to $8400 per year. $70K profit, if you get to keep all of it hello IRS, is the equivalent to a little over 8 years of renting it out. 8 years you have the $70K, and you still have the cash flowing property. And as mentioned above, maybe more rent and maybe more appreciation and equity. And now a possible cash out refi. It would be very tempting to take the cash and spend it all on shiny new stuff.

    6Reply
  • Matt Damon
    Rental Property Investor · Boston, MA · Member since 2019 · 17 posts · 13 votes
    5y

    @Mike Kedziora I guess it depends on a lot of factors. 

    1) Would you be putting the $70K to work? Buying stocks, income property, etc.

    2) If you held as a rental for 5 years, you would inquire taxes when you sell it. Good news, is that if you have lived in a house as your primary residence for two of the past five years, no capital gains taxes on gains over $250k if your single or $500k if your married

    3) Much (perhaps all) of the cash flow would be exempt from taxes if you depreciate the property.

    My thoughts, sell it before interest rates go up. Take the money and buy a 3-4 unit building to lock in a low interest 30 year mortgage. This investment would probably increase your monthly cash flow substantially. 

    3Reply
  • Jeff He
    Investor · Member since 2019 · 145 posts · 131 votes
    5y

    @Mike Kedziora

    If it cash flows well, keep it. You could refinance the property to pull out most of the $70k and use it to buy another rental.

    7Reply
  • Ryan Simpson
    Rental Property Investor · Melbourne, FL · Member since 2020 · 5 posts · 1 vote
    5y

    I’m in the same boat. Due to taxes and fees. I decided to hold and rent out. 

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    5y

    @Michael King don’t forget the pay down as part of the return, so it’s likely more a 5-6 year hold.

    Of course this assumes that the 700 is honest cash flow AFTER accounting for necessary capex and maintenance.

    Where is the building in its lifecycle? Are expensive fixes around the corner? That might influence my decision.

    Gut feeling is keep it on low fixed debt unless you have a great property lined up. YMMV

    2Reply
  • Jason Mileshko
    United States · Member since 2021 · 151 posts · 49 votes
    5y
    Originally posted by @Mike Kedziora:

    been on before asking this but my profit from my house has gone way up. My property can make me around 70k profit right now if I sell but also can make me about 700 a month from renting. I have a place to go live with my buddy for 300 dollars a month rent. What you guys/girls do if you were me. I wanted to take my profits and possibly buy one or two rentals 

     Right now, in this market, I would sell it. 

    1Reply
  • Dillon Cook
    Realtor · Greater Tampa Bay · Member since 2014 · 219 posts · 130 votes
    5y

    @Mike Kedziora

    I would hold on to it for another decade, at least, if you're getting that much cash flow.

    2Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5y

    Refi and capture the equity. Rent the property out. Then find another one

    3Reply
  • Sylvia B.
    Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
    5y

    Are we talking $70k profit on a sale of $150k or $750k? It makes a difference!

    3Reply
  • Zambricki Li
    Real Estate Agent · Los Angeles CA + Lake Tahoe, NV and CA · Member since 2021 · 180 posts · 158 votes
    5y

    Keep it and refi for your next move. Get a very accurate net sheet to decide if you are leaning the other way. Don't sprinkle magic dust on your numbers. If your current place can have a second unit added(garage adu?). I would do that first.

    1Reply
  • Gary Pilkington
    Rental Property Investor · Orangevale, CA · Member since 2015 · 36 posts · 19 votes
    5y

    @Mike Kedziora depends how long you have been there.

    If it has been your primary residence for two of the last 5 years, you can probably avoid capital gains on that 70k. If you rent it out, depending on how long you do that, you will have to pay capital gains on that 70k (and any other appreciation going forward) when you sell.

    And yes, there is also a 1031 exchange later on but you will eventually have to pay capital gains (in less you can avoid it now and then put the capital to work on another property.

    0Reply
  • Ulric Donawa
    Lender · MD · Member since 2016 · 31 posts · 15 votes
    5y

    Of course it depends on a lot of information not included in your post.  However, the profit now is not necessarily the profit in 2 or 5 or 10 years from now.  Selling in a hot sellers market is an opportunity that comes along periodically.  If you are able to reinvest most of the profit after marketing and closing costs you should have that rental income anyway and then appreciation and the tax benefits of the rental property.  If you don't have a plan or any intentions to reinvest the money better to collect the rent and the tax benefits of owning rental property.

    1Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    5y

    With looming inflation, there's no better place to have your money than in real estate in my opinion.

    2Reply
  • Adam Widder
    Real Estate Agent · Minneapolis, MN · Member since 2017 · 138 posts · 87 votes
    5y

    What's your return on equity if you rent it? What ever that number is, does it make you excited? Whatever your COC/ROI goals are, that equity ROI should meet those. If it doesn't, 1031 to something else, if you've lived there the last couple years, just sell and take the tax free $$$!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y

    Yeah, who knows.  Does $70k mean it doubled in value and you feel its peaked?  

    Does $70k represent 10% of value and, doh, sales expenses will be $50k?  

    If everyone sold every house every time they would gross a profit of $70k.... 

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Mike Kedziora, Have you lived in it for two out of the last 5 years?  If so then the $70K would be tax free.  That's a powerful incentive.  So compare the rent from this if you kept it versus the rents you could get from a tax free sale and purchase of two smaller properties.  Living with a friend could be an awesome experience.  And it's certainly cheap enough.

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    1Reply
  • Prithvi Sri
    Member since 2018 · 71 posts · 50 votes
    5y

    @John Hamilton,

    I agree with your long term perspective. I was lucky to have sold several homes just before the 2008 downturn but even the ones I didn’t sell and held onto, continue to make me money at a much higher rate and nowadays without any mortgage. Unless I have constraints of property management, I would focus on acquiring assets and sell only to finance new purchases. Selling a home to book a profit doesn’t sound appetizing to me, and based on my own experience, it doesn’t pay well either.

    2Reply
  • Tim Stuart
    Real Estate Agent · Member since 2019 · 60 posts · 37 votes
    5y

    Mike,

    Lots of great advice in this post so far. I would echo a lot of investors that are taking advantage of historically low refinance rates and pull as much cash out as possible while maintaining it as a rental. Keep in mind you can get a better rate if you refinance as your primary residence and I work with a lender that will extend the LTV up to 90% for a HELOC second mortgage. Looking at the macroeconomic picture, we are setting up for a mid term inflationary run which includes property values AND rents (and taxes).You are going to benefit more over the long term as an asset holder, short term as an asset seller.

    Hope this helps,

    Tim

    1Reply
  • Steve Miklashevskiy
    Real Estate Agent · Hillsdale, NJ · Member since 2020 · 87 posts · 39 votes
    5y

    @Mike Kedziora if you know where you’re going to invest your profits (next rental), why not sell and reinvest? Is the next rental going to be flowing cash, better than $700 you currently have?

    1Reply
  • Tavis Moore
    New to Real Estate · Flowood MS · Member since 2021 · 25 posts · 20 votes
    5y

    @Mike Kedziora find a great property, apartment complex, or something big that can give you SERIOUS cashflow.

    THEN 1031 THAT SUCKER!!

    0Reply
  • Yenika M.
    Wholesaler · Philadelphia, PA · Member since 2016 · 37 posts · 4 votes
    5y

    @Dave Foster how can my gain be tax free If I wholesaled a home I lived in for more than five years?. Do you know of any tax professionals?

    1Reply
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