Author Topic: Sell 4-plex in oil field country?  (Read 1457 times)

booyah

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Sell 4-plex in oil field country?
« on: February 20, 2014, 09:40:00 AM »
We bought a four-plex in North Dakota in 2003 for $85,000. We've put serious money into it over the years, including a new roof ($14,000), new windows ($15,000), new garage doors, carpet, appliances, coin operated washing machines, etc. (probably $15,000?). In return it does well, especially the last few years since the oil boom hit. This last year it brought in $39,000 with expenses of $21,000 (that is everything from insurance, taxes, management fees, utilities, etc.)  Our real estate manager, also a real estate agent, says we can sell it for $325,000.  We don't owe a mortgage. Should we take the money and run? I'm from ND, and I'm a little nervous that this oil boom will crash in about 8-10 years. Even prior to that, more and more housing is being built every day and rent is sure to go down somewhat.
Sell? Keep? We would invest the money in another multi-unit in a different part of the country if we did sell.

jbmatth

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Re: Sell 4-plex in oil field country?
« Reply #1 on: February 20, 2014, 09:48:49 AM »
Right now you are getting a 13.95% return on cash each year. 18,000 profit/129,000 cash invested.  This is a good return, but if you sold for 325,000 you would have a much greater return.  With a profit of 196,000 from selling compared to how much you have in the house I don't think you will come across this again anytime soon.  I would personally sell it, but I don't know if I would sell it now, or wait a couple more years or more to sell it.  With all of the building it may drop in value enough to offset the amount of rent you could collect in the mean time.  This is a tough call, but a bird in the hand is worth two in the bush.  Make the money now and don't gamble on the future, that is just my opinion though so take it with a grain of salt. 

booyah

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Re: Sell 4-plex in oil field country?
« Reply #2 on: February 20, 2014, 10:40:45 AM »
I appreciate the input. My head tells me to sell. I think my main hesitation stems from the fact it was my first purchase. I was a single female right out of law school and borrowed $15,000 from my grandma to buy it. I lived in one unit and really worked to pay it off.  But emotions aside, I think the market there might be too unknown to me now that oil has moved in. I haven't lived there since 2009.

KingCoin

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Re: Sell 4-plex in oil field country?
« Reply #3 on: February 20, 2014, 10:41:29 AM »
Netting $18k on a $325k property isn't horrible, but it's not great either, especially if the market feels bubbly. I don't know much about ND real estate, but if I saw a lot of other properties being built, I might be inclined to sell before more supply comes online.

If you're going to redeploy the money into other real estate opportunities, it would make sense to see what kind of returns you can get elsewhere. If you're no longer in ND, it might make sense to buy a few single family homes in multiple locations to diversify a bit.