I purchased a duplex last summer at a sheriff's sale for 68K. I put another 60k into it and can sell it for about 220K. I set this place up for rental and have separated all utilities. It has central air and is a very nice place.

If I keep it, I'd net about 16,000k annually of cash flow after expenses (including reserves) and debt service. The market for both rentals and real estate sales is hot with an influx of new people coming into the area. My mind changes daily whether I should sell or keep. I think the economic situation is going to get worst overall and sometimes i think having more liquid cash around wouldn't be a bad idea. On the other hand, I got this place on the cheap and have set it up to rent and it will cash flow well perpetually. What would you advise?

I think it depends on your long term goals and out look on the future. If you believe that RE will decline within the next 3 years then sell and redeploy the funds then. Do you need the 16K income? What properties do you like? SFH or duplexes?

I think I would have a hard time letting it go if I fixed it up but then I am a buy and hold kind of guy and not a flipper.

You have three choices:

1) Keep and rent out, making over 9% on your money.

2) Sell it and pay taxes, making around $50,000 in net profit.

3) Sell it doing a 1031 exchange and buy another winner property.

Since you are making a good return on your money with rents, even if the market would drop in price, your set!

The only reason to sell is if you are Real Estate Rich and Cash Poor! Do a quick calculation on you Total Net Worth vs how much of that is in Property. When I went over 80% in real estate, I had to cut back and reevaluate my holdings...

I'm a buy-and-hold kind of person as well. Things are tough for a lot of people, but there's no lack of money or competition-- people who are doing well are doing very well, and are looking for places to put their money for good returns. Even in my rural little area, we're seeing investors from DFW and Houston trying to buy houses on the cheap and then flip them, because the competition is so vigorous in their areas--- so they have to look into a market that's 100, 200, 400 miles away (that they know nothing about).

If I had a place that cost me $68k, and I put $60k into it, I'm all-in for $128k. If I sold it for $220, that leaves $100k. The government takes their chunk of it... and what do I do with the rest? Compete with everyone else who's also looking for a place to stash their money?

But if I've already got a place to stash my money, then I enjoy the $16k this year, and the $16k next year, and so on, until I was tired of making $16k/year and have a better opportunity where I can make $30k/year, or $60k/year on my $128k that's locked up in the form of a duplex.

But until I have those actual opportunities knocking on my door-- I'll leave it alone.

I have a similar situation on a SFH I picked up for on the cheap. Market is hot, inventory is very low, and prices are up. In my conservative market, real estate has never had the 20-40% swings like other areas. Prices are up about 12-15 percent over last year which is a huge swing for us. I'm betting there will be a downturn in the next year or two that will give me some more cheap properties and I want to have the cash to jump in with both feet.

When I hear Duplex - along with location the two things that jump out at me our utility billing and layout.

Given those numbers, I'd keep it...assuming all your numbers are correct. You basically have a choice of taking the $220k and investing it elsewhere, or $16k/year. That infers a 7.3% return even without considering appreciation of the property. I think the "risk adjusted" return of the stock market is not that high....stocks are quite risky.

One thing I'd be really sure of though is whether the $16k is accurate...have you considered the time you spend managing the place as well as all other costs?

G,

Remember that $16,000 will leave you $9600 after taxes.

9600 / 128000 = 7% ROI

I'd hold it for a year from purchase then sell. With all the NY exodus it might go up in value.