Sarasota FL: Buy/Hold or Sell

[William C.]

Long-time follower of the forum (and Podcast listener). First time poster on here. I would like to present my personal situation and get some opinions on how people would proceed (also why). See below and thank you in advance.

Current Holding: Single-family home in Sarasota, Florida that was purchased brand new in 2017. It has rented out successfully with good tenants for the past 3 years. It is managed by a property management company, as I am located a few time zones away. The home was purchased for $315k. 20% down. Interest rate of 4.125%. Altogether mortgage is around $1600. The current tenants pay $2150 for rent. The margins are narrow, but generally the property cash-flows positively (a major repair would obviously change this fact).

Some Scenarios I've Considered (I know I'm missing plenty):

Keep the current tenants. Renew for another year. Continue being a landlord (via the prop. mgmt company). Play the risk game of a major repair (newer house). Continue gaining equity in the home (we all hope). Possibly refinance to get the mortgage amount reduced (not sure how much better our rate would get from 4.125% being that it is an investment property).

Sell. Ballpark sales would be in the $360k range. Net would be around $70k. We could 1031 into a different property that is closer to home. One we could manage ourselves. But we happen to live in a market where cash-flowing properties are few (Oregon).

Very interested to hear what people have to say and to learn! Once again, here to answer any additional questions. Thank you!

[Jed Haslam-Walker]

Hi Nathaniel,

I'm a Realtor who works with investors in the Sarasota market.

What you do will depend on your investment goals - I would suggest you think about those first and foremost. If, right now your primary concern is cashflow you will choose one path - if it is to grow your portfolio you would choose another etc. The goals you have influence your decisions and they determine, largely the metrics you choose to use to guide your decisions.

Briefly - it's a seller's market here right now - virtually every SFH I've either sold or bought has been a multiple offer situation in the past 10 weeks - inventory is historically low and rates are low and prices are projected to continue to rise over the next year at least in the SFH sector so selling right now - all things being equal would be relatively easy which could stabilise a 1031 situation - however if you plan to buy in a tight market ( Oregon) that would compromise the original impetus to increase cash-flow.

It is entirely possible to manage a small remote rental yourself if you have support locally and want to maximise cash-flow - 10% of $2150 = $215 + $120-170 extra from refinancing if you do not extract any equity = $335 - $385 extra revenue per month if you harness the PM fee and the reduced mortgage payment.

If your objective is to grow your portfolio then you might want to leverage the hot SFH market here and sell - maximise your selling price ( good Realtor and good target market asset positioning) and invest in a below market Triplex that you can force appreciate and set yourself up to pull the equity in a refinance event later down the line, collect good cash throw off and leverage the asset to speed up your portfolio growth...plus owning a MF builds your lender credentials more than a SFH if you want to scale up in the future.

I always have my clients clarify what their primary goals are with their investment portfolio - it matters and it really helps you to get clear so you can recognise what a good opportunity is for you. Without clarity you can't strike forward confidently and when you can't do that you can end up grinding your gears and not enjoying the process. 

Hope that helps a little..