Author Topic: To Sell or Not to Sell... That is the Question  (Read 991 times)

valuenation

  • 5 O'Clock Shadow
  • *
  • Posts: 9
To Sell or Not to Sell... That is the Question
« on: March 03, 2017, 06:11:34 PM »
Hey friends.  I have a two property inventory for my RE portfolio.  Both were purchased as owner occ's then moved on to the next house and so on.  Purchased the first one at the height of the market or close to.  Tenants are great in both.  My property here in Utah is doing great and is positive cash flow.  My property in CA is a monthly loss due to higher taxes and insurance on that one.  Both are 50% ltv if that matters.  Neither are at risk for capital gains if I were to sell now.  I'm thinking of selling the CA house and using the proceeds to purchase 2 different homes closer to where I am.  I'm nervous to sell the weak asset because I'm about 200K from it being paid off. 

Has anyone gone through this issue? Did you pull the band aid and sell?  Did you index the proceeds or get other properties?  Full disclosure:  I am an appraiser and realtor.  So the world of real estate is not the concern.  It's the what to do with it to get me closer to FIRE that I have trouble with.  TIA

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 8010
  • Location: United States
Re: To Sell or Not to Sell... That is the Question
« Reply #1 on: March 03, 2017, 06:25:00 PM »
We had a property that had been owner occupied and was cash flow positive (by a small amount) until a flood.  We sold it with no regrets. Honestly more because maintenance was a pain in the ass, as it wouldn't have taken too long to recover from the extra flood repairs. The particular property was just too much stress.  We lost a bit in the sale (considering what we had paid in, not that we were underwater) as the market sucked, but a down market meant our next property cost less.

We invested proceeds in the market. Repairing a property was too much stress (clearly we aren't good at being slum lords) and we decided rentals weren't for us.

Maybe someday we will actually find a property we evaluate as a rental (instead of owner occupied) and if it makes financial sense use a manager...

okobrien

  • Stubble
  • **
  • Posts: 107
    • Up From Wage Slavery
Re: To Sell or Not to Sell... That is the Question
« Reply #2 on: March 03, 2017, 09:37:16 PM »
I am confused about a couple of points.
1. why are neither at risk for capital gains?
2. Why are you thinking about selling the Utah house?
3. Why are you nervous? I don't understand what you meant by that last statement.

Sent from my SM-G900V using Tapatalk


waltworks

  • Magnum Stache
  • ******
  • Posts: 3393
Re: To Sell or Not to Sell... That is the Question
« Reply #3 on: March 03, 2017, 10:32:01 PM »
What are their market values, and what are the monthly rents/costs?

It sounds like one is unbelievably horrible (cash flow negative=sell immediately, unless there is some really weird mitigating circumstance), and the other, hard to say since you didn't really provide any information about how much it cash flows or how much it's worth.

Agreed that you need to explain the capital gains comment, too. Do you mean that you will take a loss on them if you sell?

-W

valuenation

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: To Sell or Not to Sell... That is the Question
« Reply #4 on: March 04, 2017, 09:12:02 AM »
No capital gains on the negative cash house because my purchase price at the top of the market in 06' is higher than I can sell it for and what my current basis is on it.  The Utah house I am not selling.  It is worth $450K and I'm about 200K owed on both homes.  The reason I'm nervy to sell the property with the negative cash flow is that it will be paid off in 10 years when I plan to FIRE and will have a good rental income by then that will all go to my income rather than live off the index funds.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3393
Re: To Sell or Not to Sell... That is the Question
« Reply #5 on: March 04, 2017, 09:21:23 AM »
Ok, Captain No-Numbers. Best of luck.

My guess based on your apparent knowledge level is that both are terrible investments. But again, no way to actually offer advice here. If the UT house doesn't rent for, at a bare minimum, $4k a month, then you're not doing well at all.

-W