Should I keep or sell my property?

Question

Hello,

I am still fairly new to the property investment business. I own two homes in Goldsboro NC. The house I am currently wondering about is one I bought about 5 yrs ago for its actual market value (which I know not to do now). One year ago I refinanced from a 30yr to a 15yr fixed 2.5%. It's worth about $145,000 and I owe $117,000. The property is in a great part of Goldsboro and I believe it will increase in value a bit due to a new highway being built nearby and the shopping area improving nearby as well (but that's a gamble). I have tenants in there now and I make maybe $100 dollars a month profit to my mortgage.

I am wondering what you think my best option would be? Should I keep the property long term and just continue renting it out or should I sell the property as soon as possible and use that money to find a foreclosure in the Goldsboro or Raleigh area? should I use what little money I gain from a sell to pay off the other property I have a bit faster which is also on a 15yr?

Shaun Carl · Answer

Dain,

Leveraging (to your comfort level) is a real estate investors best friend. Why use extra money to pay off a 2.5% loan when that money could be making you 10%+ depending on the property. Hey you should be able to make more than that in a low risk stock.

This means you are losing out on 7.5% or more.

I would always try to take the longest term with the lowest payment. This helps increase cash flow per month. You can always make big principle payments when you want too.

Try not to look at the overall you are paying for the property after the interest.

A very popular book on here and pretty much everywhere is called "Rich Dad, Poor Dad" I would suggest reading that if you haven't already and it will help you too understand much better.

Account Closed · Answer

What would you rather have?  $50,000 to invest TODAY or the guaranteed promise of 360 monthly payments of $238.71 at 4%?   You should probably get a 30 year loan on your current property while you can get favorable owner occupied rates.  Let you tenants pay the interest.

Dain Boelter · Answer

@Michael Jobe  Thank you for the input I will start looking into those areas.

Michael Jobe · Answer

@Dain Boelter

I'm still learning about Raleigh day by day but I am becoming more pro-Durham every time I hear about the multiple offers and bidding wars going on regularly for properties that truly aren't worth the prices they're commanding. I guess a property is worth what someone is willing to pay for it but to have a house selling for $10-15k over asking bc of a multiple offer scenario is insane to me from an investor standpoint.

If you're not in the anti-Durham crowd there are lots of options there. The downtown area where all of the revitalization and gentrification efforts are underway seems to be a winning situation. There are plenty of properties under $100K that will undoubtedly become prime real estate in the next few years once all of the low-income housing and its occupants are replaced with townhouses, condos, young professionals, and hipsters. If a chunk of change fell in my lap to invest that's where I'd be purchasing. And of course, you can't go wrong with any property near Duke as you'll have an endless pool of renters with the student populace.

Dain Boelter · Answer

@Michael Jobe  Thank you for telling me about highlighting the name. I have actually done some limited research in to the Raleigh Durham area and everything I have seen looks very promising. I would love to get into that market. I may actually be getting some funds to do so in the next 1-3 months any suggestions?

@Shaun Carl  Thank you for the book suggestion I just purchased it and have read half of it already and am looking at investing a bit differently already.

Everyone thank you for the advise, I think I will end up selling the property unless I can think of a way to make some good cash flow from it. It's just difficult to do because I have put so much time and money into it. I am admittedly a bit emotionally attached to it, but its all part of the learning process from what I suppose.

Jerry M. · Answer

@Dain Boelter

I would sell you are losing buddy. I am not far from you I am in Smithfield. Take Care

Joshua D. · Answer

Sell!

Sounds like a long term money loser.

Michael Jobe · Answer

Hey @Dain Boelter when you want to mention someone, make sure their name is highlighted in blue after you type the '@' symbol or they won't receive a notification.

As far as your original question, there's been some great advice given. I'll echo Andrew's sentiment that if you can increase the rent on the 2.5% property then hang on to it. Otherwise, I'd say sell it and try to acquire two properties with the proceeds. However, there are a lot of unknowns for us on the outside looking in to your situation. Have you done much research into the Raleigh market? What about Durham?

Andrew S. · Answer

@Dain Boelter

If I were you, I'd do very accurate assessment of the true cashflow for the rental.  Include ALL expenses.  You will find that you are running seriously negative, just based on what you have shared so far.  If so, I'd seriously consider selling it off now, unless you think there is upside to increase rent.

Dain Boelter · Answer

I already have a 30yr on my owner occupied property. I just started paying $200 (which pays it off 15yrs early) more a month to pay it off faster so I could profit the 34k+ in interest down the road. I do see your logic there by using the money for another property. What do you recommend I do with the tenant occupied property I owe 117k (worth 140-145) 15yr fixed 2.5% that I break even on without any additional monthly payments?

Should I keep or sell my property?

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