Sell a rental for liquidity/future rental opportunities, or no?

[Ryan Thomas]

Ok, so here's the situation: I've got 3 rentals, and I have an offer for a house I paid 79k for for 125k. I owe 72k, so that gives me 53k to play with. Taxes will be ~$6500, so that leaves me with 46.5k in pocket, free and clear.

I cash flow--after taxes, mortgage, maintenance, everything--about 380/month with the property, so it'd take me 10.2 years to make 46.5k in profit assuming (assuming rent doesn't increase or costs go up--big assumption, I know, but I can only work with the data I have now). 

I plan on buying land so I can build, and then turning my current house into a rental, which would probably cash flow ALOT; I bought bottom of the market and have a 2.99% rate on the mortgage, and it will probably cash flow about 800/month after taxes, mortgage, insurance, and maintenance. That aside, my thought is that liquidity right now is probably a good thing to have at the moment, as there will likely be some good buying opportunities in the near future, no?

It seems like a no-brainer to me...only way I get screwed is if costs to build go up SIGNIFICANTLY in the next year. Am I missing anything? I'll note that in my area, 46.5k can actually buy a nice piece of land and is a decent amount of $$. It's a cheap(er) area.

[Patricia Steiner]

Timing is everything...a great time to sell a performing asset is when you have an identified opportunity to redeploy the equity/sales proceeds.  Interest rates are going up, building costs are at an all-time high, and the Fed is planning on continuing the rate increases until we get to a recession.  It is believed that we will come out of the recession after a year - but remain through the end of 2023.  

To buy land, get plans drawn up, a builder hired, a budget/draw schedule in place, financing and more - that won't happen in short order.  I like your plan but I'm not sure your timing is right.  Before you let go of a performing asset and have cash that will be providing little to no return (and the buying power of it diminished by the current economic cycle), don't just get your ducks in a row.  Get those ducks moving in the same direction.

Just my two cents...(congrats on getting yourself to this position and having options!).