WWMMD?

[meltoine]

H and I bought an investment property right before we got married. the property has since appreciated by a lot. It's worth almost triple what we bought it for. We are considering selling. Considerations:

-We have no trouble renting it. It's in a VHCOL area near a major university and turns over every August. 

-We have no immediate need of the money. 

I don't think it will lose value in the near future. I assume it will continue to appreciate, at a slower rate. 

Should we sell now in case the value goes down? If so, what would you do with the money? Buy another property? Invest somewhere else?

[konapoppy]

Nice! Do you expect the value to go down? Sounds like it is in a great spot to retain value.

I think if you don't mind having assets tied up in real estate (not sure what your portfolio looks like) and aren't having trouble with renting, I would recommend just keeping it. There are going to be significant costs to selling and re-buying. Plus, you will have all new issues pop up, and perhaps not be as desirable to tenants.

[noodleoo]

Is the income covering the mortgage? If so, I'd probably just hold onto it and continue to pay down the mortgage. Is managing it getting to be too much of a pain or something? If it is an easy source of income I'd just keep raking in the dough!!

[crashgizmo]

Some questions:

Do you make money off renting it out?
What are your long term plans for the house? i.e. would you every live there or is it just rental?

I'm inclined to say keep it, but triple the price you paid sounds good too.

[delawarejen]

I'm in favor of asking the question backwards, because it tends to highlight different aspects of the decision-making process. Is this a property you would be looking to buy now if you didn't already own it? Would you be looking to buy at all? Is this the kind of property you'd buy?

It sounds like it's been a great investment for you all so far. Keeping it may make sense, and selling it may make sense. A lot of times it just comes down to what you want to do.

[cheezer]

I would not buy another property.  There's a lot of fees involved in buying and selling and you already have a good property.  If you have a larger portfolio I like real estate as it can provide some diversity.  If your portfolio is on the smaller side I would like my money somewhat more liquid and in the stock market.  Do you like being landlords?  

[meltoine]

The rent covers the expenses and upkeep, but it doesn't add to our monthly cash flow. We have a property manager who handles everything. We do next to nothing as LLs. H's parents own several investment properties and they suggested this to us and have advised us throughout the process.

We will never live there. It's 2 bedrooms in a neighborhood neither one of us is interested in. The original idea was to keep it until DS2 is ready for college and use it to pay his tuition. (DS1 will use H's GI Bill) We didn't expect it to appreciate this fast. The cash we'd clear from selling would more than fund DS2's and DS3's undergrad, which obviously are still a long, long way off.

I don't really see a reason to sell it as it's fairly self-sustaining. But H is all "But think of what we could do with all the cash!" But then neither of us can actually come up with a good answer for that.

[meltoine]

The rest of our portfolio is modest - liquid efund, mutual funds, TSP, and my Roth.

Our cash flow is not such that we can grow a huge more liquid portfolio now. It's dumb luck that this investment worked out so well.

We also own our primary residence, which we will likely rent out when we move in 6mos-1yr, but it's in a radically different geographic location and will appreciate more normally.

[oswin]

Ok, so if the rent covers expenses and upkeep, presumably including the mortgage, then the amount of money it is making you every month is whatever portion of the mortgage payment is principal. Is that amount of money more or less than what you would get with a (on average) 7% return if you sold and invested the money in a total stock market index fund? If you could get a better return by selling and dumping it in the market, do that. If the property happens to be in the Bay Area, I would also lean towards selling in the next couple of years, since I don't think the ridiculous property values there are going to be sustainable and at some point will drop significantly. Just my personal opinion.

[meltoine]

May 6, 2015 15:42:02 GMT -5 oswin said:

Ok, so if the rent covers expenses and upkeep, presumably including the mortgage, then the amount of money it is making you every month is whatever portion of the mortgage payment is principal. Is that amount of money more or less than what you would get with a (on average) 7% return if you sold and invested the money in a total stock market index fund? If you could get a better return by selling and dumping it in the market, do that. If the property happens to be in the Bay Area, I would also lean towards selling in the next couple of years, since I don't think the ridiculous property values there are going to be sustainable and at some point will drop significantly. Just my personal opinion.

I'll have to look carefully at the numbers tonight and do the math. Thanks for breaking it out.

It's in NYC.

[konapoppy]

If rent is just covering costs each month, I would look at selling. I would talk to your H's parents about implications in terms of taxes, etc.

I hope oswin is right about bay area housing market at least stalling out for a bit. But not my home losing value, of course  ETA: just saw it is NYC. 

[delawarejen]

I know nothing about NYC real estate, but with soon-to-be-3 kids under 5 you're very wise to be thinking about their college expenses.

How many more years do you have on the mortgage?

[meltoine]

May 6, 2015 19:41:18 GMT -5 delawarejen said:

I know nothing about NYC real estate, but with soon-to-be-3 kids under 5 you're very wise to be thinking about their college expenses.

How many more years do you have on the mortgage?

25.