Should I sell one of my rentals? A risk/reward quandary...

[Ryan Thomas]

So, here are the specifics...the neighborhood in which I bought my first house has blown up for some reason. Our area in general is probably up 30% from last year, and this neighborhood is probably up closer to 50-60%.

Purchase price was 53k, and I've been offered 90k cash, out the door. After taxes and everything, that gives me 36,500 to do something with after I pay off the remaining mortgage (47k).

I've calculated that that's about 10 years worth of net profit on the rent. So here's the gamble: I hold onto the $$ until this bubble pops and buy back in at the bottom (in my area, 36500 would be two down payments on two solid rental properties in a "normal" market). Or, the "bubble" isn't actually a bubble (historical evidence strongly contra-indicates this) and prices never come back down, so I'm left with one less rental and a pile of cash that's being devalued by inflation.

What say you? Take advantage of this historic market and try my hand at timing it, or just keep going slow and steady? I'd have 2 other solid cashflow rentals if I sold this one, but again, I'd plan on reinvesting those profits in more rentals when/if the market returned to sanity.

[Joe Splitrock]

Based on your gross cash flow number, it would take you almost 8 years to get $36,500 in cash flow from this property. That assumes no major repairs or CAPEX over that time. Of course in 8 years you would still own the asset and have more equity. My personal opinion, that is low rent which means more problems. I would exit that property and exchange into a better property using 1031 to avoid taxes.