Exit and reinvest or keep and rent

[Matthew Fermino]

I’m trying to decide what is the better move with my two family short term rental property? Should I continue to rent it or should I turn it into two condos and sell one of them?

I bought a two family duplex (2bed1bath each) on the beach in Wells, Maine for 750K. I was profiting after all expenses about $1000/month previously and I just tore it down and rebuilt the entire thing to double the occupancy so now 4 beds 2 baths in each unit. The new post renovation value is $2.5 million. I spent 700k on the renovation and currently owe $1.2M at a 7% 30 yr fixed.

I rent it out now and profit about $1,200/month. My question is if I turn it into two condos I think i can sell 1 unit for $1.2-1.4M, pay off the entire home and keep the other. Then I’d be profiting 5-6k/month. Or I can pay some of it off and get another investment property. This is currently my only investment property.

[Dan Weber]

@Matthew Fermino agreed with JD - look at your Return on Equity. If you sold one, your return on equity would jump. If the other one that was owned free and clear was worth $1.2mil and had a cash flow of $60k/year, your ROE there would be 5%. You could tap into the equity in that one for a downpayment to scale your portfolio from there. At least you'd have some options.