Posted by Craig (IL) on July 04, 2005 at 14:26:38:
Selling. If you’re nervous and expect to make a huge profit. Go ahead and take profit providing (1) you have the tax thing worked out, and (2) you have good use for you money, like investing in more real estate. If you invest VIA an exchange, that works the tax thing out depending on depreciation recapture. Investing in other areas has problems. Do you know that area? Can you manage any rental long distance, or how are you going to handle this?
Holding. If you decide not to sell, there’s the management thing. Your post doesn’t say if you have rental management experience, willing to deal with tenants, etc. If a bubble bursts, it doesn’t matter to you as long as you can continue renting through a slow period and not sell until prices recover. Another issue, of course is whether or not cash flow is positive. You say it is. Positive cash flow means income tax. Negative cash flow, say, if renting goes bad, can you handle the costs is the issue.
As far as lease optioning, it depends on who you option to. A good optionee is going to take care of the property and pick up the option. You get a sale an at-or-above market sale, probably with no realtor costs. If the optionee doesn’t make it, though, you may be dealing with an angry tenant who will trash your property, and you make no sale. Ther’s alowasy potential legal problems with lease options.