A client followed my advice 2 years ago and bought property (a duplex) in the Miami area. Her first investment property! She only had $40,000 to invest, so SoCal was out of the question. We focused on Miami because I have a team built up out there.
She bought a duplex for $130,000 with gross rents of $1850. Then one tenant moved out and she was able to bring the property to market rent at $2350. She had to put about $30,000 into rehabbing the property between the initial purchase and the newest 3 bedroom unit’s vacancy. While talking to the property manager we found out that the property is now worth $350,000.
So a light bulb went off that, “Hey, she could sell and make $171,000 profit. Why not sell and get an even bigger cashflow property? Or move the funds back to CA?” She is getting ready to retire and has been stressing out about long distance landlording. This may be the chance to cash in. The Capital Gains would not be that much since she is on a fixed income ($15,000 according to her CPA). Should she exchange and not pay taxes at all? So many choices!
What’s the ROI? $350,000 – selling costs = $439,000 – $165,000 invested (130+ 30k+ 5k cc) = $164,000 divided by amount invested $165,000 is a 99% return in 2 years or 45% ROI per year. Counting cap gains, probably a 90% ROI. WOWZA…
Should she keep or cash in?
I love when people become my real investment students, and follow my advice of buy low and sell high and improve their lives by a lot! Her retirement just changed dramatically!