All Forum Posts by: Arpit Patel

Would be a challenge to find tenants with 3500 for rent

You might end up with a roommate nightmare youre better off selling.

@Arpit Patel

You have a challenge as your property is probably a Class A property. These tend to hold their value the best in downturns and appreciate the most in rising markets. They just don't cashflow well!

Why? Because if you were to graph rents versus property values in any market, you would see that rents don't increase in step with property values.

A Class B property will usually cashflow more than a Class A, but not as much as a Class C.

So, you have to decide if you want to accept lower cashflow with your Class A property and bank on making most of your money via appreciation - or- liquidate and use the money to buy Class B or Class C properties with more cashflow, but usually less appreciation.

You should also be aware that tenant issues increase as you go lower in demographics A => B => C.

@Arpit Patel

If you have refinanced when the the interest rates hit rock bottom it probably doesn’t make sense to sell as it increases cash flow, just another aspect to ponder over.

I'll toss out some thoughts on self management from afar. My experience self managing two homes (CA and CO) from afar for 15+ years has been overall successful. I have a solid list of repair people and am proactive about regularly checking in with tenants about things that need fixing. I've developed the repair person list by asking for references from people who have done quality work. For example, the people who did my flooring have referred painters and they in turn have referred HVAC companies, handymen, etc. Also, like you, both rentals were originally my homes, which means there are family/ friends in the area that occasionally drive by and let me know how things look from the outside. If there is anything that gives you special concern, just make sure the tenant is aware of it and that either they, or a hired person is keeping an eye on it. 

Your monthly payment on a 800k loan is going to be a lot more than 3500$ a month. I’m advocating for keeping this property, maybe you can Airbnb it to cover the new mortgage 

I think the most important question is what you would do with the roughly $250k you would net. If you sell soon you avoid cap gains.  Typically higher end rentals like that don’t cash flow well. I don’t foresee the older parts of Folsom appreciating as quickly as they have with all of the new construction taking place south of Hwy 50.