Should I keep or should I sell?

[Mary Jay]

Hi guys,

I have a house in Florida. Bought it in 2019 for 180K, now its worth 350k (My realtor says 400K but I am trying to be conservative).

It rents for 1.4K...Way under value. 

I have 2 options:

Option 1: increase the rent to the fair market value (probably 2K). The issue is, there is always something breaking, do I want to keep an assett where always something breaking? (May be its just the tenant, not sure. Changed the stove, plumbing issues few times a year. The roof leaked, fixed, but still leaking, so dont think it really got fixed. Struggling to find the roofer who will actually do a good job, the fence fell from the hurricaine, leak in the stucco, etc.)

Option 2: sell. 

The problem is what can I buy with 200K in profit? Not much.... In the Midwest only.. Plus, probably will have to do a 1031 exchange so will have to buy 2 properties in the Midwest. If I buy 2 properties, I will be able to get 3K for both  (1.5+1.5K for each ) in rent... 

3 k (option2)  is better than 2K (option 1)

What would you do?

[Will Fraser]

Good points with Theresa above.

I'll contend that the better thing overall IF you can scrape that kind of equity right now would be to take as much leverage as you can take (while numbers still make sense) on a replacement property.

If you scraped $200k in equity from this sale and could use 75% leverage, then you'd replace with around an $800k home.

Assuming your numbers work out to a breakeven, this should put you doubling your asset value (assuming the midwest) getting a newer construction home.

I'd do that deal all day BUT check your assumptions and make sure that in today's market you can still actually scrape that much equity.