Author Topic: Sell or Hold Investment? I have cold feet  (Read 1772 times)

YBFree

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Sell or Hold Investment? I have cold feet
« on: February 26, 2016, 06:07:43 PM »
Hey everyone,

This is my first post, though I've been reading this blog and Afford Anything for many months.  I'm 35 and I've been FI for 9 months, passive income from rental properties and savings/investments were my path to freedom.

Here's the situation: I purchased a lovely property in south Harlem when I was 24, lived there a couple of years, moved away for grad school and have been renting out ever since. I make a profit of $900/mos after expenses on this unit and expect to make $1000/mos starting in Aug.  The market is good right now and a broker who lives in my building has been after me to sell.  He knows someone who wants my unit.  If I sell now, I'd make a profit of ~$240k after expenses.  This is tempting as I really want to buy another investment property or two and need additional capital to do so.  The $100k investment I'm eyeing would yield about $3k/mos in rental income after taxes.  I'd put the remaining $140k into index funds and other investments.

I'm very tempted to sell/cash out now to pursue these other investments, BUT the area in Harlem where the rental in question is located is still vastly under-valued relative to the rest of Manhattan.  There is a possibility that if I hold onto the place for another 5-10 years that I could make $400-800k in profit...sounds crazy but totally realistic if uptown values ever get closer to downtown ones.  It's a really amazing location that is just starting to perk up.  But, the unit has several appliances on it's last leg, HOA/maintenance could go up significantly, and/or the area could stagnate or decline if there is another big market crash.  I'm also technically renting against building rules, so there is always a risk that they will force me to stop renting my unit (unlikely after 9 years of renting, but a possibility)

My question: Do I sell now (tho still well below market value for Manhattan), take my $240,000 profit and secure the other properties that I know will be solid cash cows OR hold onto this investment property until Harlem catches up to the rest of the market - which could be another 10 years but $400+ in profit?

Would greatly appreciate any input/wisdom!

Another Reader

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Re: Sell or Hold Investment? I have cold feet
« Reply #1 on: February 26, 2016, 07:11:46 PM »
The landlords/investors on this forum will need ALL the income, expense, mortgage and value numbers to express any opinions on what they would do in your shoes.

I have never met a broker that didn't have a buyer for whatever property s/he wants you to list.  That's a ploy to get you to list the property.  If you are at all interested in selling, tell this and any other broker you would consider using to produce a market analysis with comparable sales and current listings so you can determine the fair market value of your property.

Future appreciation is not certain.  Harlem is certainly better than it was in the 1970's, but predicting future value includes factors that are unknowable today.

GrowingTheGreen

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Re: Sell or Hold Investment? I have cold feet
« Reply #2 on: February 27, 2016, 07:41:28 AM »
Future appreciation is not certain.  Harlem is certainly better than it was in the 1970's, but predicting future value includes factors that are unknowable today.

This.  Be careful of speculating.

lhamo

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Re: Sell or Hold Investment? I have cold feet
« Reply #3 on: February 27, 2016, 02:13:40 PM »
I'm also technically renting against building rules, so there is always a risk that they will force me to stop renting my unit (unlikely after 9 years of renting, but a possibility)

This is a huge risk.  Especially considering someone in the building is already encouraging you to sell.  I would not be surprised if they bring your illegal rental to the attention of the HOA.  And there goes your income stream.

I would get a competitive market analysis from another realtor, and consider selling depending on what you find.  Just wouldn't trust the offer the one in the building is bringing to the table to be competitive.  The NYT real estate website also has pretty good tools for searching recent sales data. 

FWIW, we sold our Queens coop for $260k in early 2003 after buying it for $120k in mid 2000.  I thought we did pretty well until our downstairs neighbor sold their unit for $560k in 2006.  But we couldn't rent ours out, and having it sit vacant had other kinds of risks, so I still think we did the right thing by selling when we did.  But i do understand the desire to get as much out of the appreciating market as possible.   

mountainstache7

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Re: Sell or Hold Investment? I have cold feet
« Reply #4 on: February 28, 2016, 03:08:26 PM »
Here's the situation: I purchased a lovely property in south Harlem when I was 24, lived there a couple of years, moved away for grad school and have been renting out ever since. I make a profit of $900/mos after expenses on this unit and expect to make $1000/mos starting in Aug.  The market is good right now and a broker who lives in my building has been after me to sell.  He knows someone who wants my unit.  If I sell now, I'd make a profit of ~$240k after expenses.  This is tempting as I really want to buy another investment property or two and need additional capital to do so.  The $100k investment I'm eyeing would yield about $3k/mos in rental income after taxes.  I'd put the remaining $140k into index funds and other investments.

Based on the above statements, if you can triple cash flow that would seem like the way to go all the same. You also mentioned you're not supposed to be renting per HOA, seems like another good reason to get out and move on. Your hand may be forced anyway.