Sell or hold condo in Atlanta

[Matthew L.]

This was my first and only REI deal back in 2013. It's a condo in Cabbagetown that I purchased to use as a rental. At the time I thought the numbers were good but I clearly didn't have a clue :D On top of not knowing to set aside a % towards vacancy and capex, the property taxes also jumped from around $1k to $3k because I didn't know that landlords paid different rates than occupants.

It still worked out in my favor due to a combination of great tenants, low capex, low vacancy, rising market rents and appreciation but my money isn't working as hard as it could and I think it's time to get a few better cash flow SFH. Just wanted to get some opinions.

Purchase price: $165,000

Cash outlay: $37,725

Current rent: $1,650

Gross income (5% vacancy): $18,810

NOI: $11,124

Cash flow after debt service: $2,006

Cash ROI: 5.32% :(

This looks even worse because I self manage so it would be pretty much break even if I ever needed to outsource management.

Recent comps are around $240,000. 45% appreciation in 3.5 years thank you very much Beltline development! After fees and closing costs I should pull out about $96k in cash if the market holds. The plan is to use that to do 2 BRRRRs in 2017. Am I missing anything or is it pretty clear that I should sell?

[Nick Fitzpatrick]

@Matthew L.

Congrats on a solid potential return! That's impressive, especially from afar. 

I think there are a couple things for you to consider that aren't mentioned above. The first is what type of appreciation can you expect over the next year or two if you sign a new tenant. Cabbagetown is HOT (and it's an awesome neighborhood, I hope you've had a chance to visit it!). Let's say it appreciates as expected (~5%/yr) with the rest of the Atlanta market and is worth $260k in 2018. Can you take your profit and make more than that over the next two years using whichever strategy you decide on?

You didn't mention capital gains taxes on the property. Since you didn't occupy the property for two of the last five years, the government will request a portion of your profits. 

Based on your numbers, your PITI is about $970/month. How much is the HOA if you've had minimal capex and only cash flow $2,006/yr?

I'd sell. For one, I don't think condos make good investments given you don't have total control over the property and costs such as a special assessment. Mostly, I think you can take the nice profit and earmark it to other properties that give you a better return.