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Should i Sell or Rent?

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martymar25
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Should i Sell or Rent?  Reply with quote  

Hi Guys I'm a newbie to the forums and I'm in need of some advice. I will try my best with all of the details. My wife and I made our first investment in real estate with a Multi Family Property. At that time business was great, the economy was great and we had no idea what we were getting ourselves into. We built a 3 unit townhouse complex 1 3bed 2 1/2bath which we intend to live in and 2 2bd 2 1/2bath we planned on renting. At this time we are just weeks from total completion but there was a time things got touch and we were almost in foreclosure.
We owe 490k with a 30y mortgage @ 7.5% interest mortgage (Yes our mortgage rates are very high here).We just got an appraisal done and the property is worth over 805k. Because of the economy the rental rates are down and we can make about 1900pm in rent per unit. But the total expenses after insurance and property tax is 4400 pm.
Should we sell both units now and payoff the mortgage and be content with being debt free?

Should we sell the end unit for more than half the mortgage to ensure that when we sell the middle unit the sales price is enough to pay off the mortgage or is this something I should not worry about?

Or should we rent them for a year while making property improvements then try to sell them for more a year from now?
Sorry guys I know this was a bit lengthy but I tried to included all of the details
Post Fri Apr 12, 2013 4:33 am
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oldguy
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From what you say, I think I would keep all 3 and rent the 2 smaller units. And don't be in a hurry to prepay the loan, keep it. (Some of my houses had 7.5% and 8.5% loans 30 years ago and I still made money on them.)You'll have $3800/m coming in and paying $4400/m so your cost is only $600/m, that is pretty inexpensive living. And eventually you will be able to raise the rent, maybe in 4 or 5 yrs the rent will be about $4400/m and your costs to live there will be al,ost zero. Plus your renters are paying the mortgage for you, you will ultimately own all 3 units.
Post Fri Apr 12, 2013 4:45 am
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littleroc02us
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I come with a different opinion. You speak of nearly foreclosing on the complex and since I don't know what your income is that worries me greatly. So you built this complex without any money down and have a huge mortgage, to me that is a big mistake, because where is your margin? I personally would rather have more paid off on the property thereby taking in more income with less payments. I'm just worried your going to lose your shirts if you don't have renters.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Fri Apr 12, 2013 1:33 pm
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martymar25
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That's is my fear. At this time I've been making 3600pm payments for the past 2 years and the complex will finally be completed and able to rent. Our business account for 90% of our income has really suffered not only because of the economy but also because of lack of reinvestment. In the past 2 months its shown signs of recovery but things are tight we are making a 5,200pm net profit.
Post Fri Apr 12, 2013 1:58 pm
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moneywiser
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Re: Should i Sell or Rent?  Reply with quote  

quote:
Originally posted by martymar25
Hi Guys I'm a newbie to the forums and I'm in need of some advice. I will try my best with all of the details. My wife and I made our first investment in real estate with a Multi Family Property. At that time business was great, the economy was great and we had no idea what we were getting ourselves into. We built a 3 unit townhouse complex 1 3bed 2 1/2bath which we intend to live in and 2 2bd 2 1/2bath we planned on renting. At this time we are just weeks from total completion but there was a time things got touch and we were almost in foreclosure.
We owe 490k with a 30y mortgage @ 7.5% interest mortgage (Yes our mortgage rates are very high here).We just got an appraisal done and the property is worth over 805k. Because of the economy the rental rates are down and we can make about 1900pm in rent per unit. But the total expenses after insurance and property tax is 4400 pm.
Should we sell both units now and payoff the mortgage and be content with being debt free?

Should we sell the end unit for more than half the mortgage to ensure that when we sell the middle unit the sales price is enough to pay off the mortgage or is this something I should not worry about?

Or should we rent them for a year while making property improvements then try to sell them for more a year from now?
Sorry guys I know this was a bit lengthy but I tried to included all of the details


Being debt free is great and not knowing what the future holds is an important part of any investment decision and understanding the psychology of investing with the forseen and unforseen risks that are associated with them that you are dealing with currently. If you cant stomach the losses and dont want to take a risk then sell out now and be debt free. You will sleep more sound at night.
Post Sat Apr 13, 2013 3:48 am
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oldguy
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quote:
If you cant stomach the losses and dont want to take a risk then sell out now and be debt free. You will sleep more sound at night.


Not necessarily - he lists entrepreneur in his profile. A debt-free entrepreneur doesn't sleep well, they have a strong desire to be invested and making money - and that involves leverage and risk.
(Disclosure: when I was young I worked hard to quickly pay-off our home and our rental houses - and after they were paid-for I realized that my Return On Equity had fallen. So I refinanced the houses, goet leveraged, got our ROE back up, started making lots of money - and slept way better.)
Post Sun Apr 14, 2013 1:28 am
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martymar25
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quote:
Originally posted by littleroc02us
I come with a different opinion. You speak of nearly foreclosing on the complex and since I don't know what your income is that worries me greatly. So you built this complex without any money down and have a huge mortgage, to me that is a big mistake, because where is your margin? I personally would rather have more paid off on the property thereby taking in more income with less payments. I'm just worried your going to lose your shirts if you don't have renters.


I did put money down actually, I took it to roof at that point it was appraised for 240k. I just an appraisal on it and its appraised @ 805k. My mortgage on it is 490k
Post Fri Apr 19, 2013 7:39 pm
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ZoeldaThames
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If you can cover the monthly mortgage amount by renting, then renting is fine. If not selling is the best option.
Post Mon Jul 01, 2013 11:15 am
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