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Selling off or holding on?

ChrisKoller64

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Curious as to what others are doing in this current housing situation. I have a rental property that we primarily rent to friends for the weekends in summer time (don't do Airbnb) and a snow bird from Canada in the winter months. The mortgage is cheap and we bought it 4 years ago for under 185k...thinking we could get somewhere north of 325k now. I'm leaning towards cashing out but curious to hear view points of people who are more experienced with investment properties and the benefits/disadvantages of selling vs renting it out longer. Mortgage runs $860/month and we've had someone offer $1800/month to rent it.
 

sirbob

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I have one financial regret. Selling a bunch of houses that were producing positive income because I looked at the value one day and thought - OH WOW - they have gone up in value!

I'd be totally retired today and living larger than when I was working if I didn't sell them.
 
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RichL

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Without knowing all the parameters it's hard to say for sure but my initial thought is to hold it.

Just my $.02.
 

ChrisKoller64

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That's how my Dad sees it as well. I'm only 24 and he's 45, self employed, and looking to retire somewhat soon. Its something we went in together on and that's what sparked somewhat of dilemma between us. It would be nice to cash out while the market is like it is and hold onto the cash and reinvest IF the market levels off but it is positive right now. This is the sole rental property we have at the moment.
 
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lbhsbz

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Curious as to what others are doing in this current housing situation. I have a rental property that we primarily rent to friends for the weekends in summer time (don't do Airbnb) and a snow bird from Canada in the winter months. The mortgage is cheap and we bought it 4 years ago for under 185k...thinking we could get somewhere north of 325k now. I'm leaning towards cashing out but curious to hear view points of people who are more experienced with investment properties and the benefits/disadvantages of selling vs renting it out longer. Mortgage runs $860/month and we've had someone offer $1800/month to rent it.
I'd keep renting it....it doesn't cost you anything and makes you $1000/month.

I'm in the process of buying an income property should net me a bit more than $1000/month. The plan is to play the refi game, pull most of my cash out, then do it again 10 more times in the next few years.

I'm trying to turn my cash into something else as fast as possible because cash doesn't age well in the current financial climate. Selling the place will cost you a bunch in taxes and then what's left will get run over by inflation so fast that you won't be able to buy anything with it. I got lucky with my last rental as I'd only been out of the place and had it rented for less than 2 years before the tenants left so I was able to sell it without paying any cap gains.
 
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ChrisKoller64

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I have one financial regret. Selling a bunch of houses that were producing positive income be cause I looked the value one day and thought - OH WOW - they have gone up in value!

I'd be totally retired today and living larger than when I was working if I didn't sell them.

Did you have the majority of properties in one specific area? The Havasu market seems more volatile than most as it seems to be mostly secondary houses and there isn't much of a job market. I live in Mesa, AZ and would like to start acquiring more properties in the Phoenix area in a few years.
 

FlyByWire

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We are in the same situation trying to decide if we should sell (and rent a place) now while our new one is being built. The build will take a year and a lot can change in that time. [emoji30]
 

HB2Havasu

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Curious as to what others are doing in this current housing situation. I have a rental property that we primarily rent to friends for the weekends in summer time (don't do Airbnb) and a snow bird from Canada in the winter months. The mortgage is cheap and we bought it 4 years ago for under 185k...thinking we could get somewhere north of 325k now. I'm leaning towards cashing out but curious to hear view points of people who are more experienced with investment properties and the benefits/disadvantages of selling vs renting it out longer. Mortgage runs $860/month and we've had someone offer $1800/month to rent it.
Only $860 a month and your renting it out on the weekends your not there in the summer and to snowbirds in the winter? Sounds like you have an almost free house. I would only sell if I never planned on going back to Havasu. Most people would love to have your problem Sir, lol.
 

petie6464

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If you paid 185 and rent it for 1800 thats almost a 10% cap rate, I would be very happy with that thinking this is in LHC?

I've been in this thought process myself, lots to consider, mine was my age, (You can't take it with you.) So to sell one off and basically blow the money on having fun while I still can is what I'm doing.

If I where younger I would hold them all, you won't find a more secure income off that money, if you do lmk. I'd be interested!
 

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I think age would play a big factor in the decision then if the area the house is in, is landlord friendly. I don't see any point in selling unless you're retired or are going to reinvest the money into an asset with a solid return.
 

sirbob

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Did you have the majority of properties in one specific area? The Havasu market seems more volatile than most as it seems to be mostly secondary houses and there isn't much of a job market. I live in Mesa, AZ and would like to start acquiring more properties in the Phoenix area in a few years.


Mine were in Wash / Colo / Louisiana / TX and Northern CA.
 

hallett21

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Keep it and continuing renting it out.

Not sure what you guys put down.

But figure selling it is going to cost close to 20k in commissions, any minor touch ups etc.

Off of your payment I’m assuming you owe 150k +\-

So 325k becomes 155k in your pocket. Which is a great gain but can you put that 155k somewhere today and make $1,000 a month?

Not to mention your current property tax costs or any taxes from selling.


Sent from my iPhone using Tapatalk
 

ChrisKoller64

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How would the net sales proceeds be utilized?

Ideally they would stay liquid until the market levels off and then reinvest into more rental properties but I also don't want to bear the tax ramifications.
 

ChrisKoller64

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We are in the same situation trying to decide if we should sell (and rent a place) now while our new one is being built. The build will take a year and a lot can change in that time. [emoji30]

I've heard builders out here in Phoenix are doing full refunds on deposits for new builds as they are saying they don't have the materials to complete the houses. Could be a strategy to resell the houses as I'm sure they've went up considerably since the initial build contract was signed.
 

EmpirE231

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you gotta consider capital gains / tax situation?

also... do you stay at the house during your personal trips to the lake? gotta factor that in as well
 

ChrisKoller64

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you gotta consider capital gains / tax situation?

also... do you stay at the house during your personal trips to the lake? gotta factor that in as well

Only time I will stay there is if its not rented and I bring friends. My parents have their primary 4 doors down.
 

ChrisKoller64

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you might die before that happens.

It's always intrigues me to hear the differing opinions on the market situation. Everyone here in Phoenix complains about the home prices and how they're getting out of control yet every house we tried to purchase had multiple cash offers usually 10-15% over asking. It was cheaper for us to buy a bigger house with a pool than continue renting in Gilbert. But I know every market is different.
 

Nanu/Nanu

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Get it paid for take equity and buy another have 2 pay for 1.

My FIL has done this he's on 5 or 6 now. Size is 1600-2200 sq. Ft. And tiny lots and he's pulling over 1500 a month off each one. Doing pretty good
 

samsah33

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Ideally they would stay liquid until the market levels off and then reinvest into more rental properties but I also don't want to bear the tax ramifications.
You don't want to hold too much cash, inflation is coming and will erode your purchasing power. You have a mortgage, which is cheap money and it is not subject to inflation (assuming you have a fixed rate) and does not get revalued like an asset. Asset values other than cash typically increase during inflation while liabilities remain at historical values... Your cash will not appreciate.
 

lbhsbz

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It's always intrigues me to hear the differing opinions on the market situation. Everyone here in Phoenix complains about the home prices and how they're getting out of control yet every house we tried to purchase had multiple cash offers usually 10-15% over asking. It was cheaper for us to buy a bigger house with a pool than continue renting in Gilbert. But I know every market is different.

I've been waiting for prices to "level off" for 15 years....hasn't happened. One can continue to wait and keep missing the boat, or buy now while it's still cheaper than it will be tomorrow.

....or, everything may crash and you can buy cheap....or maybe not.

One thing is for certain. Rent prices have never gone down.
 

ChrisKoller64

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Get it paid for take equity and buy another have 2 pay for 1.

My FIL has done this he's on 5 or 6 now. Size is 1600-2200 sq. Ft. And tiny lots and he's pulling over 1500 a month off each one. Doing pretty good

That's my long term financial plan but the thought of making 100k+ off one RE transaction in just 4 years had me very enticed.
 

EmpirE231

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I've been waiting for prices to "level off" for 15 years....hasn't happened. One can continue to wait and keep missing the boat, or buy now while it's still cheaper than it will be tomorrow.

....or, everything may crash and you can buy cheap....or maybe not.

One thing is for certain. Rent prices have never gone down.

C'mon man! 2010-2011 was pretty much the bottom of the market last time around... that was 11-10 years ago.

also during that time... rents did go down / became a lot more competitive (not as much as home values)
 

EmpirE231

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That's my long term financial plan but the thought of making 100k+ off one RE transaction in just 4 years had me very enticed.

unless that house needs a major rehab / major work needed... I would personally hang on to it. Sounds like a cash cow.

taking the cash now sounds nice.... but cash isn't going too far these days, and holding on to it for 1-2 years could be risky w/ inflation. At the rate things are going, a garden shed will be 100k in a few months.
 

NicPaus

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That's my long term financial plan but the thought of making 100k+ off one RE transaction in just 4 years had me very enticed.
I made that mistake on my first house. Bought it for 165k. Put 60k into it and sold for 380k. It's worth 720-740 now. Should of never sold it. But the money seemed to good to pass up.
 

lbhsbz

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unless that house needs a major rehab / major work needed... I would personally hang on to it. Sounds like a cash cow.

taking the cash now sounds nice.... but cash isn't going too far these days, and holding on to it for 1-2 years could be risky w/ inflation. At the rate things are going, a garden shed will be 100k in a few months.

I was just quoted $9500 to pour a 800sq ft slab to build a garden shed on who's lumber cost is close to $4000. You're not too far off I don't think.
 

Mike K

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I’m in a similar situation ... but ... don’t forget the “ Hey you can’t kick me out for not paying my rent” moratorium.
 

c_land

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I'll be the devil's advocate, I'm going to be selling my rental to pay off my primary residence in the next year. Granted the rental is in CA, so the rules make being a landlord a lot less attractive.

Collecting interest is cool, paying it is gay. I'll be happy to dump both the mortgages/tenants and stack cash pretty quickly thereafter.
 

Mike K

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Little more to the story ... I passed on a 49 day rental & on my Park City AiRB&B cuz ... according to what I have learned ... any stay over 27 days is considered a long term tenant and then it’s get complicated if they don’t leave. I know rules are different from state to state ... just saying ...
 

monkeyswrench

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That's my long term financial plan but the thought of making 100k+ off one RE transaction in just 4 years had me very enticed.
Though the money looks good, take into account taxes, what you will do with the gains, and when you will be able to do so. A lot can happen causing you to not get the full value, or needing to spend some or all beforehand.

When I was your age, I sold my first house, and cleared just shy of 100k. Sweat equity on a 96k purchase. Those gains went directly to the next home...where the timing was right to do the same once more. My last house in Cali I was able to clear enough to pay for my current property. Not much by todays standards, but the house sold for a little over 700k.
If I would have held on to that home, it sold 3 years later for 1.1
1 in the hand, 2 in the bush kind of deal.

If your end game is buying more properties, hang on to the one you have. Possibly buy your father out of his half, as he is possibly setting different plans based on retirement. There are lots of variables. You know your family dynamic and your own finances best.


As a full disclaimer, I am just an idiot that plays with cars. I have been real lucky with timing, and have no financial or realestate knowledge!
 

ChrisKoller64

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Though the money looks good, take into account taxes, what you will do with the gains, and when you will be able to do so. A lot can happen causing you to not get the full value, or needing to spend some or all beforehand.

When I was your age, I sold my first house, and cleared just shy of 100k. Sweat equity on a 96k purchase. Those gains went directly to the next home...where the timing was right to do the same once more. My last house in Cali I was able to clear enough to pay for my current property. Not much by todays standards, but the house sold for a little over 700k.
If I would have held on to that home, it sold 3 years later for 1.1
1 in the hand, 2 in the bush kind of deal.

If your end game is buying more properties, hang on to the one you have. Possibly buy your father out of his half, as he is possibly setting different plans based on retirement. There are lots of variables. You know your family dynamic and your own finances best.


As a full disclaimer, I am just an idiot that plays with cars. I have been real lucky with timing, and have no financial or realestate knowledge!

Definitely appreciate the input! The only thing that scares me about the Havasu market is the volatility compared to a market like Phoenix where the job market is booming and people are coming in droves. It blew my mind that someone would pay over 300k for an older home under 1200 square feet. The thought of ongoing maintenance and managing the property also worries me a little as we'd most likely do it all ourselves and aren't very familiar. Property management might not be a bad idea depending on the percentage they take.
 

ChrisKoller64

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I made that mistake on my first house. Bought it for 165k. Put 60k into it and sold for 380k. It's worth 720-740 now. Should of never sold it. But the money seemed to good to pass up.

Where was the home at? Maybe I'm being short sighted, but I just cant imagine the value going up much more than it has. I'm sure you probably had a similar voice in your head when you sold though.
 

badgas

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Keep it and get more serious about renting it as a business. Even turning it over to a turnkey manager as a vacation rental will net you more than you are getting now.
 

FlyByWire

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I've heard builders out here in Phoenix are doing full refunds on deposits for new builds as they are saying they don't have the materials to complete the houses. Could be a strategy to resell the houses as I'm sure they've went up considerably since the initial build contract was signed.

Fkn hope not. Reputable builder, and we are fully closed and funded. The price did go up 100k for the same build vs a year ago when we were looking back then.
 

OC Mike

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make sure you understand the tax implications from offloading a rental property w/o having a shelter
Keep it. Unless you can do a 1031 for a property that you can get higher rent from.


Pay close attention to the above quotes.
You will be shocked at what your net proceeds will be after Seller's Fees and income tax.
 

Ultra912

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I paid 199k for home in Havasu when the market crashed in 09. Seller paid 340k on 04. Comping right now at 475k. Same Snowbird for 4 years from Nov to end of April. We're hanging on to retire there and sell our Cali home we own outright. Eliminates CG taxes
 

ChrisKoller64

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I paid 199k for home in Havasu when the market crashed in 09. Seller paid 340k on 04. Comping right now at 475k. Same Snowbird for 4 years from Nov to end of April. We're hanging on to retire there and sell our Cali home we own outright. Eliminates CG taxes

So when I initially purchased the home, it was a primary residence and for the most part has been all the way up to 2 months ago when my wife and I purchased a home in Mesa. I refi-ed that one at the same time we were closing on the new one and it was classified as a secondary home. We haven't had the property classified as a rental ever since purchase as we rarely rented it and I never claimed any expenses/income on my taxes. I'm not familiar with tax codes or anything relatively similar but I was under the impression after owning a primary residence for 2 years capital gains no longer applied.
 
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