Hold or Sell high cash flow, high equity property?

[Kathi Spencer]

Hi!

   I live in the Denver area and have a property I cash flow $550 a month on and have a 3.65% interest rate on.  I also have $260k in equity and if I sell here soon will be within the threshold of avoiding capital gains, I'm coming up on having been able to say I've lived there for 2 of the past 5 years.  I have no other investment properties.   I think the market is getting close to being at the top, could be another year or two but the savings bypassing capital gains I believe will supersede the appreciation gain.   The other thing is the homes all around my property are getting bought and scraped and row homes are being built in their place and I think that will make my little old house less desirable when it is towered by these townhomes.  I don't have a lot of experience in investing so while I believe I may be able to better leverage that equity if is sold I'm a)not sure exactly how to put it to work for the better or b) if Im better off holding on to the property for the long haul.  I believe it will always rent do to its location and was also considering airbnb with it.  Seems unlogical to take a property that I paid for at the bottom of the market and then take the equity and buy at the top of the market, but if I can own multiple properties or do something else with it then maybe the higher debt amount doesn't matter?  What would you do?

Thanks so much!

KS

[Steve Vaughan]

For me it would depend on how much cap gain I have.  I see how much equity and what your interest rate is, but what did you pay for it vs what it will sell for?

I'll always take a tax-free gain when I can if substantial.  Keeping a rental is cute and all but your ROE is low ($500/mo on $260k).  I have a house with $90k equity and cf's $600/mo for example).  I'd probably sell, thank Uncle Sam for a nice tax-free chunk and re-deploy.

Welcome to BP!