Your Advice Needed: Sell and '1031' Cash Out Refi or Keep Renting

[Daniel Rozen]

Dear BP members,

In these tough economic times I would like to get your opinions. What would you do? Here is my situation:

Last year I purchased a new construction SFR in Sarasota FL which appreciated nicely in the past year. Second year leasing with no issues. Few months ago I was forced to pay off my mortgage with the lender using my primary home HELOC (currently fluctuating apr at 5%). Here are some rough stats:

Home values and if SOLD today

Current Home Value       $680,000

Purchased Value             $(480,000)

RE Commissions (5%)    $(34,000)

FL Doc Stamps                $(4,760)

Rough Profit                  $161,240

Yearly P&L

Rent          $43,800

Mtge         $(24,000)

HOA $(1,224)

Taxes       $(7,000)

Ins            $(900)

Maint       $(500)

Total Net Profit $10,176

My question to you:

1. Should I continue renting which will be getting more expensive as my HELOC apr is bound to go up this year as per the FED directive.

     Con: reduced Cash Flows.

Con: used up HELOC which could have been used for other investments.

2. Should I cash out refinance at say 80% home value ($540K), pay off my HELOC ($380K), and be left with $160K available to invest elsewhere in real estate markets.

     Con: drastically reduced Cash Flows on rental since bigger mortgage balance.

     Con: New underwiring process and closing fees.

     Pro: Fixed mortgage vs fluctuating

    Pro: no 1031 exchange issues to deal with and no tax ramification

3. Should I sell while the market is still good in Sarasota and yield myself a nice profit which I can 1031 exchange (buy low, sell high – finally 😊)

   Con: Dealing with 1031 exchange and rushing into identifying new investments within 45 days

   Pro: It would take me 16 years to break even on profit from sale vs renting cash flows.

as always, appreciate the BP forum and all of your input.

Regards,

Daniel