New to Real Estate · San Antonio, TX · Member since 2021 · 11 posts · 16 votes
I purchased my first "investment" SFH a little over a year ago for $435k in a A-list neighborhood in Central Texas. Due to property taxes, insurance, etc my mortgage is $4,200/month. However, according to my comps houses in the area are renting for just about $3,000/month. I'm wondering if I should sell now (It's worth about $100k more than when I purchased it due to inflation and about $80k of renovations) or if I should rent it out for the $3k/month and let it keep appreciating until I'm able to refinance a few years from now.
Real Estate Agent · Schertz, TX · Member since 2017 · 42 posts · 15 votes
3y
The short-term rental market is getting tougher in San Antonio as they restrict new permits for non-owner-occupied short-term rentals. Midterm furnished rentals are a money maker if you can keep it occupied and i believe it would not require a permit. San Antonio Airbnb / Short Term Rental Regulations - BuildYourBnb
Have you considered moving into it? Refinance it as a primary home for yourself and make your current home a rental. Ride the wave of appreciation while living in the beautiful home you just created. My wife and I have had to do this in order to keep a home but definitely don't regret it. You may be able to pull some equity out when you refinance and go buy another cash flowing asset or project.
I purchased my first "investment" SFH a little over a year ago for $435k in a A-list neighborhood in Central Texas. Due to property taxes, insurance, etc my mortgage is $4,200/month. However, according to my comps houses in the area are renting for just about $3,000/month. I'm wondering if I should sell now (It's worth about $100k more than when I purchased it due to inflation and about $80k of renovations) or if I should rent it out for the $3k/month and let it keep appreciating until I'm able to refinance a few years from now.
Texas Taxes only go up. A few years from now you are down $35,000 in rents at $1,000 loss a month, (if you have no vacancies) and have other repairs and lots of other costs like opportunity costs.
Tell what year rents will equal your expenses and I can give you a definite answer. Meanwhile, sell if you can and reinvest in a cashflowing property.
Use a $300 listing fee service, give any buying agent 2.5% and see what happens.
Lender · Member since 2022 · 1k+ posts · 505 votes
3y
Is there a short term rental market where the property is located/is it allowed? I've seen investors often do better in the short term rental market depending on the area.
Investor · Fort Lauderdale, FL · Member since 2020 · 1k+ posts · 755 votes
3y
With a gap of $1200 between the mortgage and rental rate, I think it is an easy sell unless it is in an area with high STR/MTR rental demand. If you can walk with about $100k in profit (or maybe a little less due to transaction costs), you can roll it into another property that will cashflow better.
Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
3y
Even if it is a gap of -$100 I think it would be best to sell, holding properties that have negative cash flow is too much risk and appreciation is never guaranteed.
Real Estate Agent · Schertz, TX · Member since 2017 · 42 posts · 15 votes
3y
The short-term rental market is getting tougher in San Antonio as they restrict new permits for non-owner-occupied short-term rentals. Midterm furnished rentals are a money maker if you can keep it occupied and i believe it would not require a permit. San Antonio Airbnb / Short Term Rental Regulations - BuildYourBnb
Have you considered moving into it? Refinance it as a primary home for yourself and make your current home a rental. Ride the wave of appreciation while living in the beautiful home you just created. My wife and I have had to do this in order to keep a home but definitely don't regret it. You may be able to pull some equity out when you refinance and go buy another cash flowing asset or project.
I purchased my first "investment" SFH a little over a year ago for $435k in a A-list neighborhood in Central Texas. Due to property taxes, insurance, etc my mortgage is $4,200/month. However, according to my comps houses in the area are renting for just about $3,000/month. I'm wondering if I should sell now (It's worth about $100k more than when I purchased it due to inflation and about $80k of renovations) or if I should rent it out for the $3k/month and let it keep appreciating until I'm able to refinance a few years from now.
Hi Kayde,
I believe you should consider a reverse mortgage and a HELOC. My intention is not to advertise, but I genuinely think we can assist you in your situation. Our company offers $1,000 per month for your future home equity. If your home equity increases, it's a win-win situation where you retain the majority of your home equity and share some of the gains. Conversely, if it decreases, you would share the loss with us.
Avoiding putting out an ads, if it's interesting, please PM me.
Losing $1,200 per month doesn't seem feasible. Therefore, I believe your best option could be a 1031 exchange.
There may be a few challenges in your situation.
Can you sell the property with a tenant in place paying only $3,000/Mo?
Can you get the tenant out and then sell the property to a home buyer?
Assuming you sell the property, where should you invest? It depends on your goal. If your goal is financial freedom, then you need to invest in a location where:
Rents outpace inflation
You will not outlive the income.
When Rents Outpace Inflation
Real estate prices depend on the balance between the number of buyers and sellers. If there are more buyers, prices go up. If there are more sellers, prices go down.
Rents follow the same pattern. High house prices mean fewer people can buy, so they rent instead. This makes rents go up. When house prices are low, more people can buy, so fewer people rent. This makes rents go down.
What causes the balance to shift? It's all about population. If more people are moving into an area, prices and rents go up. If lots of people are moving to a place and staying there, rents can even go up faster than general prices. So, here's our first criteria for choosing a location:
Significant and sustained population growth, Wikipedia
You Will Not Outlive the Income
You'll only keep getting the income if your tenants keep their jobs. But most non-government jobs don't last forever. On average, companies only last for ten years. Large companies in the S&P 500 only last about 18 years on average.
So, your future income depends on businesses starting new operations in the city and creating new jobs. What factors make a city attractive to businesses?
Economic stability. This requires a metro population of >1M. Smaller cities tend to be dependent on a single company or market sector. Wikipedia
Low risk of a natural disaster: Natural disasters can wipe out jobs, homes, and businesses, forcing people to relocate. This means that even if your property is restored, there may be no tenants. You'd still need to cover mortgage, tax, insurance, and upkeep expenses. To prevent this, pick a city with low homeowners insurance. Homeowner insurance rates are based on the probability of a major disaster. Insurance - ValuePenguin
Pro-business environment: Google search
No rent control of any kind. Rent control is a sign of an intrusive government that limits the ability of companies to compete with others in more business-friendly environments. Google search
Selecting a City for Financial Freedom
The process is straightforward. Start with any of the criteria, then apply all additional criteria, eliminating any that fail any criteria. A good place to start is cities with a population >1M. Wikipedia
Once you eliminate cities that fail any of the criteria, only a few will remain. The next criterion is an experienced investment team.
Experienced Investment Team
Why is it essential to work with a local investment team? Podcasts, books, seminars, and websites only provide general information. You will purchase a specific property in a specific city with specific local conditions and regulations. Only an experienced local investment team has the local knowledge, processes, resources, and skills you need to be successful. I wouldn't consider a city without an existing investment team.
Also, working with an investment team usually does not cost more. For instance, we have delivered over 490 investment properties and charged our clients a fee on only four or five, which were exceptional circumstances. In all other cases, our fees were paid by the seller's listing agent, not by our client. Thus, there's no reason not to work with an experienced investment team.
I used to owned a rental in Texas for 5 years but eventually got out because the numbers did make sense for my situation. The property taxes were too high and eroded the net return substantially.
For a while I was "Holding and Hoping"that the situation would improve, but the appreciation and rental income just inched up.
Looking back, I wish that I had sold sooner and taken the profits for investing in a different area.
