When to sell

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When to sell

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Rick, I am going to start and end my two bits with "no one can tell the future." Here's my thoughts. The government has been telling the public that the interest will go up for over a year now. But they didn't raise. If that happens, the buying power of the buyers will go down and eventually the rate of the house price increase will slow down. In other words, $/SF may at its peak right now. Therefore, if you want to sell, you might consider selling before the government announces the interest rate hike. I think the government said they will announce something next month or January. But like I said, they haven't done so for a long time.Another thought is that I am a buy and hold investor. I get $550 cash flow in some of my rentals but some are $200 or so. You have a nice rental as far as math is concerned. I don't know what your investment strategy is but that house sounds like it's a really good buy and hold property. Some of the investors I have known in the past sold properties because they got a really good price for them but they didn't turn around with the sales proceeds and convert to a better investment. And so, they got a big profit when selling but wasted the profit by going into something that was worse than the first deal.No one can tell the future.

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I would hold it unless you find another property you want. Then 1031. A wise man once told me it is really hard to find a good property and really easy to sell. So why sell? The answer is you found a better property. 550 cash flow is really good. Your next property must beat that or an equity hold opportunity. Best of luck

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Hi Brent, Well said. You should only do a 1031 Exchange - if an only if - it puts you in a better position. If you find a replacement property that puts you in a better position - and you have to define what that means to you - then sell and 1031 Exchange into the new property. If not, then I live by the old adage "if it ain't broke, don't fix it!"

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@Rick Birkey Good advice all ways out there. It all depends on you doesn't it? I'd be looking at that equity as the opportunity cost and factor from there. BTW - it's not 50K because you'll have realtors costs, closing costs, costs for the next loan, discount on sale costs, etc not to mention time and the very real possibility of lost net income (550/mo) for a period of months while you shop for, buy, and rent your next property. It's very conceivable that your actual equity gain after netting out all the hidden factors is may $20K. If so you're looking at trading $550/mo for the opportunity to free up $20K of cash. And that's only if you do a 1031. If you don't then you'll have another 15-25% chunk out for taxes and then there's the recapture of depreciation as well.So do a quirky exercise and compare three scenarios.1. Do nothing and look at net income for a year (550/mo plus tax benefits)2. Liquidating with realistic costs and taking the equity and original downpayment and investing somewhere else or paying off high interest debt. What is that net benefit after a year.3. 1031 into something available in the market now.Compare out a year and see how that shapes your thinking.

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I agree with you @Rick Birkey on the Dallas market being hot. With all of my rentals I hold on for the long haul unless someone is paying a premium for the asset. It comes down to what your goals are really.If you do decide to sell hope you have a property lined up in that hot market for a 1031

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@Rick Birkey I would only sell if you are a distress landlord or you think future tenants perspective is negative (unable to sustain your profit). If you are an OK landlord and have everything under control with long term good rental market, I would hold forever and pass it down. If you need to buy more property, then work with your lenders to pull out equity and leverage away. This is assuming you have good credit and can leverage. If you reached the number of building limitation already (up to 4 under personal purchase), seek portfolio/commercial lending.

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Thanks to everyone for your thoughts! You've confirmed what I knew, but didn't want to admit--that I was starry-eyed thinking of having that $30k (or whatever) check in my hand. I would have reinvested, but after realtor fees and capital gains taxes I wouldn't have profited much. You know what they say -- a "property" in the hand is worth two in the bush!

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You have renters. You don't really need the equity just yet. I say hold it a bit longer.

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I would sell only if you have trouble finding a tenant.

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i agree with @Gary Wong