Should I sell my rental townhouse and use the equity to invest in multiple townhouses?

Question

I have been the landlord of a townhome in North Carolina for over 4 years. It's equity has increased almost 40%. Would I be wise to research and buy multiple townhomes to rent out or should I keep the house I have and hope for more of an equity rise.

By the way, I have not been affected in any way by any recent real estate down turns, but you never know about the future. It seems to me like the time to buy, when others are scared and selling cheaply. But I'd like everyone else's advice. Thank you.

Answer 1

Do you have the cash-flow to pay the mortgages, taxes, utilities, insurance, repairs and maintenance on these other properties if:

1) you have no tenants (you can't find a renter)
2) you have tenants but they don't pay the rent (it can take months to evict them)
3) you have tenants that destroy the property and you have to spend thousands on repairs that may take months.

If you do not have enough financial reserves to handle these kinds of possibilities - don't do it. You could lose everything!

Answer 2

It depends on a lot of factors that you haven't given any of us to make an accurate estimate. What is your interest rate and terms on the loan for te townhouse? What is your cost in it and what is your projected profit? What other income do you have and how will tis sale affect your taxs? Are you thinking of do a 1031 exchange and have you reasearched those hoops and costs and procedures? How do you KNOW that you are the ONLY person in the entire USA that has not had thier property value affected by the recent downturn in the market? How do you KNOW what that townhome will sell for and how long it will take to sell and what those sales costs will be? Have you identified property that you can buy currently that will give you a better rate of return then you currently have? What is your current rate of return post-tax and how can you improve it? Do you have a team to the skills to manage multiple properties? Are you looking at property just in your area or are you tinking of investing in a different area? What are the population and job growt numbers of the areas you are thinking of investing in?
Starting to get the idea that this is more then a 30 second answer?
Taking "profit" from 1 property and leveraging it into more assets usually is a good idea but again it depends on a lot of factors and the cost/risks involved.

Answer 3

Yes, and no. The real estate loan crisis has just begun. Many loan payments will not reset until mid-2009. So I would wait. See what is happening over the summer to early fall of 2008 and then decide. In the meantime, watch the market like a hawk. Remember buy low, sell high. I would wait until the market drops more then buy. Right now know area is safe because it is somewhat unpredictable when the number of people in a given area will no longer be able to afford there current payments. Also, new home starts are lagging so builders are trying ever possible incentive to stay in business and make money. This too will effect the market. Most existing housing is still nearly the cost of new construction. Reality has not set in for most.

Answer 4

YES! Go into a rental, Wait and watch the real estate market unfold before your very eyes. Ca$h is king. You will find an investment or upgrade to better house that is than the one you are selling and with a better loan.

The market givith and taketh away. The longer you wait to sell your townhome, the more equity you will lose. Do something NOW or sit down for the next 3-4 years.

Answer 5

You could do a cash out on the property and use the funds to acquire others in order to take advantage of the soft market.