Advice on Selling vs Holding and Renting

[Seth Martin]

Hoping for some advice from those that have been there before. 

So I'm trying to weigh selling my rental vs keeping and renting out through a management company. 

I am an out of state investor. I bought a townhome in the Charlottesville, VA area in 2019 where I was going to school. Lived there and rented half out to a roommate until 2023. I then moved out of state, and I've been renting it to a friend for the past year. However, he's moving out in October of 2024.

I initially bought the property for around $215k, but it's now worth ~$350k with about $165k left on the 30-yr mortgage that is at 2.85%.. I could rent it out for around $2200/mo. Escrow payments are around $1100/mo and HOA is ~$200/mo. After crunching the numbers I'd be cash flowing around $600-700/month if I hire a full service manager (and this is without accounting for any repairs, which it does need). Orrr I could sell it and get about $150-160k in cash to invest in in stocks or in a larger property closer to my current residence. The traditional ROI S&P500 for that amount of money would be fairly similar after accounting for everything. Just not sure if the headache and stress of owning a property out of state is worth the potential upside.

Any advice on what someone would do or has done in a similar situation?

[Jacob St. Martin]

Hello Seth, 

It sounds like you are in a good position here. This is scenario that I think could go either way. From the way that you worded your post, it sounds like you are not looking to spend a lot of time on your real estate projects. If you are then I'd say definitely sell, otherwise the rest of this post is more applicable. 

I live and invest in Charlottesville and I can tell you that the market has basically ground to a halt. Prices aren't coming down, but there are also hardly any buyers, and inventory is very low. If you sold you may have to drop your price more than you might want to. However, getting returns that match the S&P in real estate is not exciting at all. Additionally, townhomes appreciate much slower than detached single family homes tend to.

My personal advice would be to sell this property and then 1031 either into a better property near you that is low maintenance, or (probably better for you) invest the capital into a syndication or partnering with an active investor where you should get returns better than the stock market. 

If you want to discuss that option more in depth feel free to reach out. I know some great syndicators and I personally partner with investors on deals and typically get them returns in the 15-25% range depending on the type of deal. 

[Alex Olson]

1031 exchanges are good for level up - income, age, location, appreciation. if you like what you have, keep them, if not sell them. I know that sounds simple but the question usually comes down to preference and NEED. Hope that helps. 

[Aaron Howell]

@Seth Martin there are deals to be had with the market slowing down a little in Charlottesville.  Waynesboro and Staunton are still hot as ever because of affordability and lack of rentals available. Sounds like you've got some thinking to do but you have options.