Trying to decide if I should sell

Real Estate Deal Analysis & Advice
5yFollow

Trying to decide if I should sell

Jason Muenchow
Property Manager · Sarasota/Bradenton, FL · Member since 2018 · 10 posts · 3 votes

Hello all, 

Thank you in advanced for taking the time to read this post. I've got a triplex in clearwater FL which im trying to decide if I should keep or sell. The triplex consists of two 3/2.5 units and one 2/1.5 unit. Rents are 1350/1300/950. Rents could easily be increased to 1450/1450/1150, but the tenants I have in there are great paying longer term tenants. Two of the units have been renovated since ive owned it starting in 2016. The triplex is in fairly good condition. One of the nearby identical triplexes (in square footage and build) sold recently for 410k. My triplex is bringing in more rents and is overall better condition. I feel the triplex could sell for 450k-500k. I currently have a 245k mortgage on the property. PITI (including mortgage insurance (originally was a house hack)) is 1950. If I keep the property, I plan to refinance out of the mortgage insurance. Rate on the mortgage now is around 3.9 percent.

One of my issues is that I live roughly an hour and 30 minutes away from the property. I currently self manage.  I'm trying to determine if I should keep the property or sell and use that money to buy more properties. My overall goal is to gain more units. I think I might be emotionally attached to this unit because it was my first purchase. So my question is do you all think I should keep this unit or sell and attempt to turn that money into more cash flow. (prices are pretty high in my area) The Pinellas, Manatee, and Sarasota County areas in Florida. 

Again, thank you all in advanced for taking the time to read this post. 

0Reply
34 views

Most Popular Reply

Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
5y

@Jason Muenchow, That's not a bad performer really.  And Clearwater is hotter than a pistol right now with pressure from pinellas pushing up and Pasco Hernando, etc pushing down to Clearwater as the last best water access community moving north.  

But you gotta feel comfortable. And a job (self managing) you gotta worry about all the time isn't fun. I do agree that a refi and getting rid of PMI would help. It's possible that the refi rate and losing pmi let you almost pay for outside management along with a rent bump. Are your current numbers satisfactory? If so then try to do a revenue neutral move - bump rents, refi to a lower rate, and get rid of pmi. Then hire management.

The alternative to that would be to sell and 1031 into an area like Sarasota near you where growth is crazy and many good rental opportunities even east of 75 are filling up so quickly because of access to the water and places like Siesta Key.  Sarasotas been discovered and is growing younger all the time.

The 1031 Investor5137 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Kyle J. CooperPro Member
    Investor · Corpus Christi, TX · Member since 2019 · 71 posts · 43 votes
    5y

    @Jason Muenchow

    Congrats on the job well done! I love that you house hacked that property and now its a small multifamily that cash flows. My first thought is why make changes to a good thing? Sounds like you have good tenants and your property is cash-flowing nicely. Also, what would it take to house hack where you're at currently? If you're in a HCOL area I'd try to do that again with your current living situation. 

    This all comes down to your goals as well. If you sell for a huge gain you have capital gains tax to think about, not to mention the lost cashflow, and in my opinion I'd keep the cashflow and make it work if you're looking to buy the other property you mentioned. Do you have enough equity to get a HELOC then use that as a down payment on another small multi? Or utilizing other creative finance strategies? Hope this helps a bit. Cheers!

    0Reply
  • Jason Muenchow
    OP
    Property Manager · Sarasota/Bradenton, FL · Member since 2018 · 10 posts · 3 votes
    5y

    @Kyle J. Cooper Thank you for your thoughts and thank you. I only wish I could still house hack. Since I purchased this property I got married and had two kids. My wife isn't really a fan of house hacking anymore. I might be able to convince her if its a rental on a beach! I plan to refinance all the properties I own around March/April of this year. I thought about doing a HELOC or pulling money out of them. I currently have some capital to put to use to buy another duplex or two. I work a w-2 job as a social worker and haven't had much time to look for deals recently. To buy all the rentals I have currently I scoured the market for hours a day for months..and got lucky on top of all that. Thank you again for your thoughts and its much appreciated.

    0Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    5y

    It looks like you also own some other properties closer to you.  If that's an area that is performing for you and you think you can roll your profit into something locally that could make the same or better returns, you might think about selling.  I know the stress of having to take hours out of your day to handle something simple!  

    Now is a great time to sell.  Buyers are moving very fast and there is almost no inventory locally.  Prices are up-up.  I am seeing a lot of things selling at 6% cap rates, especially if, as you say, rents could move up with very little investment.  If you want, I can run you a quick estimate of what you could get on the open market, or if you have a Realtor, they can help with that.

    If you don't think you can buy closer, or don't have a plan for the profits, you might want to hold on to it until you do.  I don't see the market dropping anytime soon.  Talk to your CPA or finance person about a 1031 and the best way to go about it.

    0Reply
  • Cathy Svercl
    Rental Property Investor · Clearwater, FL · Member since 2013 · 124 posts · 55 votes
    5y

    i also have a triplex in Clearwater (and live nearby), although i only managed it for 2 years before using a property manager.  my goal when i bought the property was to update it and hold on to it.  have you run the numbers to compare what a property management company might cost you?  would you still make money, be able to re-finance your mortgage?  do you want to hold on to it or sell it?  maybe you prefer to have your next rentals closer to home?  good luck!

    0Reply
  • Jason Muenchow
    OP
    Property Manager · Sarasota/Bradenton, FL · Member since 2018 · 10 posts · 3 votes
    5y

    @Cathy Svercl and @Dan Maciejewski

    Thanks for the response! Yeah, the drive is a huge pain when dealing with small things. If I didn't have my w-2 it wouldn't that much of an issue! I've never really looked into or had much faith in property managers. They charge roughly 10 percent right? I'd miss that money for sure! I did have the thought of refinancing and pulling some money out of the property. The payment would roughly be the same if not a little bit higher, but I could pull out 50-65k (assuming the appraiser isnt a moron)

    0Reply
  • Dan Maciejewski
    Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
    5y
    Originally posted by @Jason Muenchow:

    @Cathy Svercl and @Dan Maciejewski

    Thanks for the response! Yeah, the drive is a huge pain when dealing with small things. If I didn't have my w-2 it wouldn't that much of an issue! I've never really looked into or had much faith in property managers. They charge roughly 10 percent right? I'd miss that money for sure! I did have the thought of refinancing and pulling some money out of the property. The payment would roughly be the same if not a little bit higher, but I could pull out 50-65k (assuming the appraiser isnt a moron)

     Yes, most PMs start at 9% and then go up as they charge for lease-up, repairs up-charges, etc.  They do have their place and I have a referral partner that gets great reviews.  I prefer to self-manage, as well, though.  That is a lot of money going out, especially when you feel you could do a better job and you still spend time managing the PM.

    And it's always a crap-shoot when assuming they aren't morons!  Especially when it comes to small multi-fams.  Some appraisers are amazing and can give you 3 kinds of income approach analyses, and some will ONLY run comps, no matter what the rents are.

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Jason Muenchow, That's not a bad performer really.  And Clearwater is hotter than a pistol right now with pressure from pinellas pushing up and Pasco Hernando, etc pushing down to Clearwater as the last best water access community moving north.  

    But you gotta feel comfortable. And a job (self managing) you gotta worry about all the time isn't fun. I do agree that a refi and getting rid of PMI would help. It's possible that the refi rate and losing pmi let you almost pay for outside management along with a rent bump. Are your current numbers satisfactory? If so then try to do a revenue neutral move - bump rents, refi to a lower rate, and get rid of pmi. Then hire management.

    The alternative to that would be to sell and 1031 into an area like Sarasota near you where growth is crazy and many good rental opportunities even east of 75 are filling up so quickly because of access to the water and places like Siesta Key.  Sarasotas been discovered and is growing younger all the time.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    1Reply
  • Jason Muenchow
    OP
    Property Manager · Sarasota/Bradenton, FL · Member since 2018 · 10 posts · 3 votes
    5y

    @Dave Foster thank you for your thoughts. I’m leaning towards the refinance. However having the properties near me in Sarasota/ manatee county Florida would be ideal. Finding the good deals to 1031 exchange into is also holding me up from selling. That being said prices in manatee and Sarasota are ridiculous as well. Makes me wonder sometimes who is buying this stuff !

    2Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Jason Muenchow, It's the 950 people per day moving to Florida - mostly from ...drum roll.. CA, NY Boston, and Chicago according to the NY times.  Somebody blabbed :)

    The 1031 Investor5137 Reviews
    WebsiteView Page
    1Reply
  • Jeff Young
    New to Real Estate · Sarasota, FL · Member since 2020 · 22 posts · 6 votes
    5y

    Good afternoon Jason. From the numbers you provided that's a solid rental property. Have you looked on Biggerpockets for property managers in that area and/or had anyone give recommendations for one? It's hard trusting others to manage something you've done yourself.

    Refinance rates are great now, and not paying PMI will help too. That would offset costs for a PM. Make sure if you look at PM to get all costs associated with managing. Some want first months rent for each new tenant, or some portion of it. Then there's % of service calls and repairs.

    If you decide to sell, be sure to line up a property you'd like to buy before you sell so you can 1031 it.

    Personally I would refinance to get rid of PMI and look to get a HELOC.

    0Reply
  • Jason Muenchow
    OP
    Property Manager · Sarasota/Bradenton, FL · Member since 2018 · 10 posts · 3 votes
    5y

    @Jeff Young Thank you for your comments. There are lots of options! Thats my problem. I'm leaning towards the refinancing for sure though. How are you finding Sarasota? Feel free to PM me! I love to hear how other investors are doing in my area.

    Jason

    0Reply
  • Dwayne Byrd
    Real Estate Broker · Palm Bay, FL · Member since 2017 · 175 posts · 89 votes
    5y

    Sounds like you have a pretty good performer. The thoughts I have are that in this situation, I would sit down and write it all down on paper. Create a roadmap or sorts, as to where I am trying to go, and then reverse engineer the path to get there. Based on the information, it seems that you have obtained a solid amount of appreciation (depending on your original downpayment - which is obviously less than the 20 percent as you have pmi. You have done well with this one. 

    I don't know that there is a wrong answer per-say, it's about what you feel comfortable with, and WHAT UPCOMING DEALS YOU CAN GET INTO. You can start looking around to get an idea of what specific options you have to invest in, run the numbers and let the numbers help you decide. Make sure the next move is advantageous, if so, put your focus on moving forward in that direction based on your numbers (refi, sell, ect.)

    One of my best pieces of advice that I live by, is that I will NEVER my personal attachment to a property decide whether or not to sell. I house hacked at 24 while getting my Masters Degree, had some options to sell at a great high point, didn't because of all of the memories that I had there for celebrations with my late mother, ect. and ended up having to hold onto the property for much longer during the downtimes ect. I try to treat everything as logical numbers. Heck, there's a certain number that I have in mind that when my primary residence reaches, I will likely sell it and build another home for my family and I as we have got into building (and we love our home for the most part).  

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free