All Forum Posts by: Jon O.

@Thomas S.

At the end of the day I put $140k down in late 2010, I would walk away with $380K + ~$36k rental income. Pretty good ROI at ~200%. Now I want to ensure I maximize this first very lucky / good investment. The next step is the most important step, which is why I came here looking for advise.

Thanks all for the continued guidance.  @Ryan Inman I do believe it is an attempted asset grab from my advisor. With that said I am willing to admit to this point when I calculated my investment return on my rental property I never factored in the significant equity that has built up in the property, so he did force me to start to think about it differently.  At this point at least I can see the value of putting that money I have tied up in the property back to work for me.  

I am very willing but unfortunately do not have much insight into where optimal opportunities exist. 

Thank you all for the quick responses and advice! I see the property as a great long term investment and looks like many others do too...

Simplifying my goals a little here but ideally I would like to grow my income (whether that be through RE Investment, Business or other investments), outside of my day-day job, to sustain 75% of my current spending/lifestyle. At that 'tipping' point I would at least have the option to continue working my day-day job, while having some great side income to support early retirement, or I could comfortable choose to work for myself.

I am very comfortable with RE being a significant portion of my assets if that supports the above goal.

I think the above quote hits the nail on the head with where my thought process is. I do have a lot of equity tied up doing nothing for me and that's why I raised this question. I think cash-out refinance is the best option to pursue and begin putting that money towards my goals.

Hello,

I would like your help in analyzing the long term investment potential of either A. Holding the rental unit or B. selling it and diversifying my assets.

Background:

3 Years ago I decided to hold onto a condo I owned, in Hoboken NJ, and turn it into a rental when I moved to a new primary residence.Although a stretch at the time it was the best financial decision I have made in my life.I see this as a great investment from a cash on cash investment standpoint, by holding the condo as a rental property the last 3 years I have had significant property value appreciation (~25%) along with great cash flow from the rental income.It's a great location, walkable neighborhood (1 square mile city), and I have found both tenants in <5days.

With that said my new financial advisor has raised some concerns with how I am analyzing my investment return on the rental property.In addition he has concerns with my assets being heavily tied to real estate (between this rental property and my primary residence I have ~70% of my assets in RE). He suggests I sell my rental property, locking in significant equity I have, and reinvest the money in the stock market.He suggested if I want I can take some of that equity and reinvest in a new rental property (only problem with that is in the area buying a new rental does not make sense, CAP are )% or even negative as property values have skyrocketed).He believes by selling rental property I would accomplish goal of diversify my assets appropriately and also give me better returns in longer run.

Below are some key numbers and I'd appreciate your thoughts on how to analyze long term investment potential of either A. Holding the property or B. selling and diversifying my assets.

Option A: Hold as Rental Property

Purchase Price (Dec. 2010): 375,000

Current Value:$615,000

Outstanding Loan: $208,000, (3.875% 30 Year Fixed – 50 of 360 payments made)

Monthly Mortgage/Tax/Insurance/Maintenance:$1,851(Occupancy has been 100% for past 32 months since I started renting).

Month Rental Income: $2,850

Monthly Cash Flow: ~$1,000(I have had no minor or major repairs.Building was newly constructed in 2008).

Expected Future Rent Increase: 3% Annually, Expected Future Property Appreciate: 3.5% (This is very much on the low end, property values in my area have been >10% annually for past 4-5 years, I just do not want to analyze based on a number I am not sure the market can maintain… then again it certainly may!)

Option B: Sell and Reinvest in Stock Market

Sell Price (615k) – Closing/Fees (~5%) – Outstanding Mortgage ($208k) = ~$376,250

Expected Market Return: 7% (could debate this all day long, but this is the number I want to use).

I'm having difficulty making this decision because I have seen holding the rental property as a great current and future investment. Maybe I am too tied emotionally to the rental property and not analyzing this properly. Can someone please help me understand what the future expected investment returns would be between the two options and which would be better returns?I am looking for a 5yr/10yr/25yr return estimate on both options.  Any help would be greatly appreciated.

Kind Regards,

Jon