All Forum Posts by: Yun Han

@Yun Han you havn't supplied enough information for anyone to give an intelligent answer, only knee-jerk feeling based opinions. 

For example, what is the interest rate your locked in at? Is your current cost of $ sub 6%? Your not going to get that going forward. 

Are you using depreciation? How much is it? 

Have you looked at Cost Segregation and accelerated depreciation? What kind of $ impact does the use of depreciation have on your taxes? 

Yeah, you could sell, 1031 into some other "cash-flowing" properties, clear as much as a few hundred per month, but depending on your situation and use or non-use of depreciation, that more cash-flow could COST you thousands per year. Yeah, sometimes -$200mnth results in highest ROI after depreciation.

And what is the area like? Is it flat, ascending, descending? Is there room for growth or is it capped out? 

Your taking 1 item, 1 alone, putting on blinders of the 40+ other factors. Decisions made with such tunnel-vision are all but certain to end regrettably. 

Spending $40,000+ in selling costs to save $200/mo in negative cashflow (obviously still producing income and tax savings) doesn’t seem like a great first move. 

Unless you’re in such desperate financial straights you can’t afford the $200 why sell unless you think it’s going to start going down in value? Would it change your world if you raised rent $300 and became cashflow positive? I doubt it.

If you don’t think you’ll ever move back you can certainly sell just because it’s not an ideal rental or you have other uses for the money. But a built in $40-$50k selling costs alone with another $30-$40k in taxes if you sell without doing a 1031 seems to make selling a bad idea. If you found a great deal closer to your new home you could do the 1031, but remember California will still want their 10+ % in the future. 

Cash flow should be calculated after estimated vacancy, repairs, and capex reserves. If you are already negative, you are actually probably doing worse than your estimates. If you got rid of PMI, I'm guessing you got an appraisal or refinanced? Did you roll those costs into the loan? Is this your only property? Can you manage yourself and remove the PMC fees? Have you searched for a cheaper insurance carrier? There are lots of ways to cut costs, but being that far in the negative is going to be difficult to make sense, in my opinion. It may also be difficult to sell in the current market. Do you have the current comps? Is the area known to appreciate?

What is the current market rent?  If you are well below market, you may need to increase more than 4% (check state laws).  Numbers don't lie, and if the numbers don't work, then it's not worth holding, in my opinion.  If you can't get at least back to even with accurate and conservative estimates, I would consider going a different route.  Cash flow is king, appreciation is a bonus.  Just remember, rates are not your friend right now, so if you're looking for a killer deal, you'll have to put in some work and be very creative.

Just noticed you said you can't manage yourself, being remote.  If you have a great rate, it's in a great area, and you can get close to breaking even, it may be worth it to hold.  Other than that, 1031 into another property may be more ideal, imo.

If you did put lot of work like you are saying, did that increase the of the house significantly? 

If yes, why not sell, 1031 exchange to save tax in gains, and then buy cash flowy turnkeys or airbnbs in Florida!! 

That's what I do.