SELL villa for a multifamily OR HOLD for more cash flow?

Question

Hey!! I currently own a cute villa 2/2 in West Palm Beach Florida,  in a 55 and over community.

PROS of this villa: Great tenant, villa has appreciated 100k in 5 years, low HOA fees, locked in a Low interest rate.

CONS: 55 and over community, tenant paying below market rent, the community board is untrustworthy and are accusing us of not paying HOA dues for 2 years, but that's a whole other issue I need a lawyer for. Concerned about the current state of Florida market.

So here is the situation that I need advice on. What's the wisest decision to make on this at this point?

1. Do I raise the rent and make $600 a month on passive income, keep the property and chance this home not appreciating much more bc of what's currently happening in Florida with excess amount of inventory sitting there?

OR....

2. SELL it , keep the 90k profit and re-invest it to buy a multi family property in a different state? What are your thoughts???

PLEASE ADVISE!!

Appreciate any help.

Gladys Cepeda · Answer

Hey Ray, I so appreciate the input here. It's just helpful to get other perspectives.  So we decided to renew the tenants lease she was relieved to stay, so much so that she was willing to pay market rent. So it was a win win for both of us. So glad I sought advice n sat on it for a few more days. So glad I didn't lose her bc honestly she has been a great tenant for past 3 years. She is even willing to purchase in a year If we are interested in selling. So we will see. So relieved. Thank you once again!!

Ray Hage · Answer

Congrats on the increased cashflow and great that you basically have a buyer lined up whenever you are ready to sell!

Gladys Cepeda · Answer

Hey Dan, just thought I'd thank u again for your input, we decided to renew her lease n she was very happy to stay n pay market rent. We are delighted to keep her!!! We will stay put n revisit thos again next year!!! Thx so much for the advice!!!

Ray Hage · Answer

@Gladys Cepeda It is always a tough situation dealing with an unprofessional HOA board. I am both an investor and realtor.... I would generally lean towards selling it and cashing out to reinvest in a better property. There is an excess of inventory right now and I think it will get significantly worse. Another concern is if the tenant moves out, do you think it will be relatively easy to get another tenant? You have to worry about the HOA board controlling this timeline as well.

I am not trying to scare you into selling by the way. If you can keep the current tenant and raise the rent to market level, I think that's not a bad idea either. As you said, you're ok with it not appreciating much more so if the cashflow and tenant are good enough for you, then it why not.

Gladys Cepeda · Answer

Thank you so much for this advice. You made some important observations that I should definitely consider. Sincerely appreciate your input.

Kyle Camerlinck · Answer

I agree with Gladys! It’s really all up to you and what works best for your current situation. It would be worth  asking the current tenant if they would be interested in staying even with a higher rent. If the tenant will stay and the headaches from the HOA are not too much then I would keep it. If the HOA is causing that much of a headache then I would not let that ruin your experience in real estate investing. Make it a process you enjoy and try to keep it fun! As far as the market, I would not make your decision on timing the market. Try to focus on the time, and effort portion of the decision. I am a local real estate agent in Palm Beach if you would like to discuss further. I’d also be able to give you a valuation on your property if you want to crunch some numbers to helP make your decision. My cell is (561) 371-5143

Dan M. · Answer

This is a question only you can answer, look inside for the answer. I'm being serious this isn't some campy quote. At the end of the day your looking for the answer that you already decided on you just need validation. Sometimes the emotional peace is worth more than the money. My thoughts from the little I know about the raw numbers however:

1) You have no reason to not raise the rent at least a small amount to compensate for the extra cost of ownership the past few years. If that's 25 dollars or 300 that's entirely up to you provided you comply with the law.

2) You could pull the equity out in a cash out refinance, and use the proceeds to purchase another property and keep both. Run the numbers and make sure the extra work would be worth the money. ( Now you have 2 or 3 tenants instead of one)

3) Remember to add a risk premium to your new venture, whatever it is or how that looks like. You could get a non paying tenant or a bad well. The grass is not always necessarily greener, though it may appear to be on the surface.

SELL villa for a multifamily OR HOLD for more cash flow?

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