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Updated over 5 years ago on . Most recent reply

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Joe Caiola
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When does it make sense to sell a rental property?

Joe Caiola
Posted

The home has appreciated from $315K in 2016 to ~$450K in 2019, and my rent is cash-flowing positively. The area has exploded with development and growth, but as more and more new properties flood the market, I'm not sure if the growth will continue at this rate. One positive clearly is that that my equity has increased a lot. That said, when analyzing the total value of my equity compared to when I purchased it, the ROI actually decreased due to the amount of capital tied up in the investment.

I lived in this home for 3 years prior to just renting at the beginning of this year, and it's also in an "opportunity zone". So if I wait until 10-years of ownership, I can sell tax free (I believe). If I sold now, I still think I can claim primary residence though and avoid tax up to $500k.

Curious what some folks think makes the most sense. Take chips off the table and reinvest, refinance to pull equity out, or keep payment low (without refinancing) and just ride it out for years to come.

Appreciate any insight,

Joe

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Greg Dickerson#2 Land & New Construction Contributor
  • Developer
  • Charlottesville, VA
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Greg Dickerson#2 Land & New Construction Contributor
  • Developer
  • Charlottesville, VA
Replied

I say sell and put the cash to work. You will not see much more upside and will likely see a downturn soon as we are definitely at a peak in the matket. 

Interest rates are the only reason values are where they are right now both in all asset classes. Rates really can't get much lower and if they do it will be due to a slow down and clearly indicate serious issues in the global economy.

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