Author Topic: sell or hold seattle rental property?  (Read 1625 times)

kenmoremmm

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sell or hold seattle rental property?
« on: June 08, 2017, 11:14:23 PM »
i have a townhouse (only one half of the building) that i co-bought with a friend in 2006 near the peak of the housing bubble.

purchase price was $373k. refi'd a couple times through the years with the most recent one occurring in 2012. rate is currently 4.625% with $320k left. current monthly payment is $2250. house was new in 2006, so siding/roof/etc are still doing fine.

we've rented one room for as long as we owned it, generally for $700-900/mo. after we fully moved out in the end of 2014, we've had a single renter paying $2225, so not quite breakeven with monthly payments due to the bank. i expect that when it hits the market as a rental again, it will go for $2400-2500/mo, though taxes will probably go up to match. there is a brand new elementary school literally 3 minutes walking away. and, in 3 years, there will be a light rail station about 15 minutes walking away. seattle traffic is 100% terrible, so this could be a huge renting boon.

obviously, seattle real estate is booming like no other place in the country. conservative value of the house is now $550k. with bidding wars, i could see this going to $600k.

my wife and i have about $300k in cash and investments, a $300k condo paid in full that's rented for $1400/mo, and about $300k in equity in our primary residence. age 37.

so, sell and cash out on profits, or sit and hold?

obviously, the cash flow sucks relative to, well, just about anything. but, the appreciation has been nice of late. seattle seems to not want to slow down and most people seem to think this will last at least another year. i'm kind of bearish on the fragility of the economy, thinking that there's a lot of leveraged money out there and we're nearing the end of the current stock market cycle. i know investors have piled into real estate to eek out returns, so when ish hit's the fan, real estate could see a selloff just like stocks. with seattle building huge rental capacity in the downtown area, i don't want to be left with begging for renters at super low rates.

i don't really see an option to 1031 it (no value buys left near us and i'm hesitant about investing remotely), and we don't have the 2-in-5 option to shield taxes. if we sold, i'd probably dump half the profit on my primary residence mortgage (though it's at 3.325% for 30 years) and keep the other half for a rainy day.

thanks for any input.

ketchup

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Re: sell or hold seattle rental property?
« Reply #1 on: June 09, 2017, 09:27:29 AM »
I'd probably sell and throw what you walk away with into VTSAX.  I wouldn't pay off a 3.325% mortgage early.

Another Reader

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Re: sell or hold seattle rental property?
« Reply #2 on: June 09, 2017, 09:58:02 AM »
What does your partner in this unit want to do?

I would consider selling.  You may only net around $125k at $600k and have to pay some tax on capital gains and depreciation recapture, but I am convinced the market will drop at some point.  Markets are cyclical and Seattle is not an exception.  Being in a partnership in a down market would not be a situation I would like, although you did get through the last downturn.

kenmoremmm

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Re: sell or hold seattle rental property?
« Reply #3 on: June 11, 2017, 09:58:04 PM »
my partner is indifferent and has effectively deferred to me for all decisions. he has stable employment, but poor finances. if shit hits the fan, i'd be holding the bag, which is something i don't like the thought of.

one concern with selling and investing is knowing that we're at the top of a market cycle and we're due for a correction. how much, who knows. 40%? 10%. either way, it seems like the wrong time for that to me. if i did dump the proceeds into the mortgage, i would contact the bank for a loan reamortization which i think would save about $250/mo.

yes, we have a bad tax hit coming whenever we do sell. i don't have the option to move back in to get 2 in 5.

Dicey

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Re: sell or hold seattle rental property?
« Reply #4 on: June 11, 2017, 10:04:41 PM »
I wouldn't pay off a 3.325% mortgage early.
Ahem. ^^^This!!^^^

powskier

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Re: sell or hold seattle rental property?
« Reply #5 on: June 14, 2017, 12:34:39 AM »
Sell when the market is hot.
The market is hot.
Also, nobody knows the future.