The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Fenfen on April 04, 2014, 07:29:42 PM
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Okay, the subject line is a bit of a joke, knowing the market does crazy things, but here is the deal:
I bought a short sale in 2009 with a friend and fixed it up with a 203k loan. We couldnt have timed the market better. We bought in DC for 295, put about 100k into the property and had instant equity. My co-owner is a real estate agent and believes we could easily list at 725 today.
Now, we are considering whether we want to sell the house now, or wait it out for a few more years. I have since moved on to buy another property with my wife where we live currently. My friend still lives in the unit and we split the costs/profits equally. We rent out to a friend, and we also each pitch in some money, but it basically runs on auto pilot.
The question we are looking at is whether to sell in the next few months to unwind our investment and go our separate ways (or maybe on to a new project), or hang on for a few more years. If we sold now, we estimate we each would pocket about 150k.
The property is in a hot neighborhood in an extremely hot market. Inventory is extremely tight and properties are not on the market for long; the majority of houses are going very close to list price. Although no one can predict the future, there is a good chance we will continue to see appreciation for the next few years. We are at about a 78% appreciation currently.
However, holding the property would require additional capital in, and if we do realize further appreciation, we may also be limiting our market because we will be entering a price point where there are significantly fewer buyers (conservatively say 800k). Interest rates will also play into the size of our market.
I am torn between realizing a terrific profit now, or holding and seeing where the market goes. I want to be neither the person who regrets selling too early nor the person who held on too long.
Trying to find what my gut says, BUY or SELL? I thought I would subject myself to the forum, for the first time no less!
Thanks.
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If it were me, I would want to sell. It is hard to imagine that you could get a better return by holding onto it.
However, the question is what is your other investment opportunity? Do you have other investments to put the money into? What do you think you will make with the money gained and reinvested?
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If it were me, I would want to sell. It is hard to imagine that you could get a better return by holding onto it.
However, the question is what is your other investment opportunity? Do you have other investments to put the money into? What do you think you will make with the money gained and reinvested?
Milspecstache,
Good question, and thanks for the feedback. I am looking at two main options for investing the capital gains. I finally opened a Vanguard earlier this year, and have about 40k invested. I could make a serious stride in increasing my dividends if I dumped it all into the account.
The other thing I am considering is using it to pay down my current mortgage. My wife is also likely selling her condo within two years, and between the two of those sales, we could potentially pay off our entire mortgage on the house we own together and live in.
I have also considered an investment property that is focused on generating cash flow, but I think the first two options are more appealing to me.
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There is a saying in Wall Street, "bulls make money, bears make money, pigs get slaughtered."
I think you already listed some cons for waiting for greater appreciation, smaller market for higher price, risk of interest rates rising, ect.
If you really think the the housing market is still hot, then why don't you sell and get another property to fix up with more leverage. If you have any doubts about doing that then you should have doubts about the strength of this housing market.
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Thanks for the thoughts.
We decided to move forward with selling the property. Getting it prepped to sell. Now I am looking at whether to pay down my mortgage on my existing house or investing into my vanguard funds. I have read about this on the site, and see merits to both.
Anyway, this is not to start an off thread topic, but to close the loop on the original question!