Real Estate News & Commentary

Should You Pull Your Money Out of the Real Estate Market?

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Businessman forecasting a crystal ball

Today I’m talking about how to figure out when it’s a good time to pull your money out of the real estate market. 

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OK, guys, you heard it here first. On June 4, 2019, the Real Estate Dingo is telling you that you need to pull your money out. This is why.

Should You Pull Your Money Out of the Market?

If you look at the real estate markets across the country, they have surpassed the peaks of 2005 and 2006. If you look at the stock market and Dow Jones Industrial Average and a lot of other indexes across the world, they are all at all-time highs.

After being in real estate and an entrepreneur running various companies for the last 10 years, I haven’t really lived through a market cycle or recession. I was still pretty young and inexperienced in 2008 and 2009. But I am smart enough to have smarter people around me who are “old timers” when it comes to investing.

Related: Should Real Estate Investors Sleep Soundly Despite Stock Market Scaries?

A lot of these individuals have been telling me that every 10 years or so is when we have a dip or when a recession hits. Real estate prices tend to go down, the stock market also tends to go down, and everyone’s in fear and panic. Then the market plunges even further.

Look, we’ve really had a pretty good run. If you look at the last 10 years, a lot of investors who I talk to on a daily basis are telling me that they’ve made a lot of money in the stock market. A lot them are pulling money out of their home equity line of credit because they’ve made a large capital appreciation or equity gain in their personal residence or other investment properties.

So this has started to become a pretty common topic that I’m hearing. A lot of folks have done really well and made a lot of money.

In my opinion, what you should do when you’re on top of the hill is take some money off the table. Sell a few properties and sell out of your stocks.

I’m a big believer in cash. I love cash. Cash if king and cash flow is queen. In the current market conditions and circumstances, I don’t think there is anything wrong with liquidating your stock portfolio and liquidating out of investment properties in markets that have already appreciated.

red down arrow on black and white grid indicating stock loss

So pay your capital gains taxes, pay your taxes, and park your money in a very conservative money market account and just sit on it. You know why, guys? Because when the market takes a dump and you have the cash to jump in, you’re going to make so much more money.

There are going to be people who are fearful, who are desperate, and who want to sell out, making it easier for you to get better deals and negotiate harder. Just remember cash is king.

I think that taking that route is better than maybe waiting for another year or two to try to make more money. Even if the market keeps going up for another five years, if you are happy with where you are right now and how much you have profited or gained, take the money off the table and sit on cash. There’s always going to be a deal around the corner.

Here in the Midwest, we feel like kids in a candy store. I’m not the only one who’s going to tell you this. There is a lot of other operators like myself who will say they’re doing well in the Midwest because of the deals and opportunities. The cash flow makes sense and the profit margins are good. So keep that in mind. There are markets out there that still haven’t recovered, there’s still a lot of foreclosures, there’s still a lot of opportunities. And maybe consider using your capital to get in some of these markets here in the Midwest.

Once again, I don’t think you could go wrong selling out right now. I said it first: keep the cash and wait. Then go all in once you have seen the market has gone to hell.

So that’s it! Take it for what it is.

Do you believe we’re headed toward a recession? If so, what are you doing to prepare?

I’d love to hear from you in a comment below.

 

Engelo Rumora, a.k.a.”the Real Estate Dingo,” quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He runs runs Ohio Cashflow, a turnkey real estate investment company in the country (Inc 5000 2017 & 2018) and is currently in the process of launching a real estate brokerage called List’n Sell Realty. He is also known for giving houses away to people in need and his crazy videos on YouTube. His mission in life is to be remembered as someone that gave it his all and gave it all away.

    Mike McKinzie Investor from Westminster, CO
    Replied about 1 month ago
    Pulling money out is easy, but being disciplined to NOT spend it is hard. While cash is nice, if I put a hundred dollar bill in a safe in the year 2000 and pulled it out today, I would only have $100! And it would be weaker! We are selling, one last year and three this year. But what we are doing is even more important.
    Rob Barry Rental Property Investor from Franklin Lakes, NJ
    Replied about 1 month ago
    I’m going to have to, respectfully, say that I totally disagree with advice that encourages anyone to try to time the market. This is essentially an attempt to call the top of a cycle and recommend liquidating assets. First off, timing markets rarely works – from the top down or the bottom up. When markets are juicy, they’re often too juicy for you to want to back off. When they’re bad, they can be so ugly you just want to look the other way. So great, sell it off and get into cash. The bargains are right around the corner, right? Maybe, maybe not. For one, the financial and physical real estate cycles are two separate cycles, and the latter tends to vary on the microeconomic front. 2008 was a freak incident where both cycles had an overlapping recession, driven by finance messing up the fundamentals in physical R.E. Conditions now are not like those that lead to this. Historically, macro physical R.E. has followed something like an 18-year cycle. So if averages hold true, we’d be looking more like 2026 for a major pullback there. Or maybe the whole thing tanks. How do you know when to get in? At least in equities markets, often the largest gains occur in the first week of recovery. Real Estate is slower to move, yes, but we’re assuming the next recession is a major crash and not just a modest, temporary pullback. Meanwhile, what are you living off? My real estate pays my bills. If I got all into cash, I’d have to start paying for things out of my principal. I’m sorry, but I do NOT hit my principal. Sorry for the diatribe here, but trying to time markets is usually something one does because they either have too much information (see Big Short) or too little information (see average market participants). The advice Ben Graham has for expensive markets, I think, is pretty good. When things are very overpriced, you risk-off with maybe up to half your portfolio, but stay invested so you’re participating no matter what happens. Over the long term, it all generally goes up anyway. It’s your psychology, not the market, that’s your biggest risk.
    Christopher Smith Investor from brentwood, california
    Replied about 1 month ago
    So what are you selling?
    Vince Ivanov from Issaquah, Washington
    Replied about 1 month ago
    You don’t have to put the cash in a safe. You can buy 60 or 90 day T bills and earn close to 2%. The rental yield on my house in Seattle was sub 3%. 6 months ago the yield on the 10 year government bond was 3.25%
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks Vince, I’m getting 2.26% with my MM. T bills are just a touch higher at 2.4% Much success
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks Mike and agreed. Inflation does “chew you out” so it’s good to keep your cash in a money market account that keeps up with inflation. I have always liked staying liquid and holding cash 🙂 When a good deals comes along, I snap it up hehe Much success
    Brendon Woirhaye Rental Property Investor from Whittier, CA
    Replied about 1 month ago
    Someone will call the top – maybe its you. Real estate isn’t for market timers, as it has low liquidity and the really big gains come from deferring taxes forever. Will something happen? Sure. Real estate growth could slow, real estate growth could rebound with falling interest rates, the stock market could crash.. or not. Paying taxes and putting everything into a money market may be the best call, but you have to get it right on too many assumptions – real estate will fall, stock market will fall, recession happens and vacancies increase and rents decrease, interest rates go up, and inflation stays low. If some of those don’t happen, you’ll be in a worse position.
    Vaughn K. from Seattle, WA
    Replied 29 days ago
    I think one of the things he was getting at is that SOME markets are obviously overheated. I’m sorry, but there is just NOWHERE for places like San Francisco, Seattle, NYC, etc to go from here. Seattle has already begun pulling back on pricing, whether or not it turns into a blood bath is anybodies guess, but it ain’t returning to 10%+ a year increases anytime soon. So selling out of overheated markets and investing in those that aren’t overheated is not a bad move.
    Christopher Smith Investor from brentwood, california
    Replied about 1 month ago
    Predicting overall market tops is always fraught with extreme peril and time has shown that no one can do it with any meaningful consistency. In fact the vast vast majority who end up trying it end up regretting it. Additionally paying tax early is always a massive killer to long term yields. However, on the other hand, certainly don’t want to be over paying for properties at this point, and accumulating cash will position you well for when the markets get irrational from fear and panic. Striking that right balance is always the challenge isn’t it, and despite what some hucksters might say, there is no magic formula, algorithm or scheme to get it right. It simply takes a lot of very hard earned judgement skills and emotional equanimity, and then perhaps a dash of good fortune.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks Chris and agreed. Much success
    Cindy Larsen Rental Property Investor from Lakewood, WA
    Replied about 1 month ago
    Sorry I don’t believe your crystal ball is any better than anybody else’s. The economy seems pretty good people of been talking about the stock market being at all time highs for at least 10 years. Yes someday it will crash which will not necessarily be bad for real estate. As long as interest rates stay low I see no reason to get out of real estate investments and into Cash. Cash that is not earning a return actually decreases in value with inflation. Yes you can get bank accounts money market etc. that will do better than inflation and your money will be completely liquid. But it won’t be earning as much as it would be invested in real estate. With low interest rates and an OK economy I don’t believe real estate prices are going to decrease much anytime soon. If they do property you already own is not really affected unless you’re trying to sell it. Buy and hold is a great strategy.
    Joshua Bush
    Replied about 1 month ago
    He who lives by the crystal ball will eat shattered glass. -Ray Dalio Read more at: https://www.brainyquote.com/quotes/ray_dalio_477435
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Unless you’re a witch and have a black cat as a friend lol
    Joshua Bush
    Replied about 1 month ago
    He who lives by the crystal ball will eat shattered glass. -Ray Dalio Read more at: https://www.brainyquote.com/quotes/ray_dalio_477435
    Mark Hentemann Rental Property Investor from Los Angeles, CA
    Replied about 1 month ago
    I agree that all investors, especially newbies, should be very aware that we are now seven years into a boom market that started in 2012. We’re in the late innings. A market downturn could happen in the next six months. It could also continue rising for another four years. I saw investors cash out after an extended run up in real estate prices in 2003, expecting a crash. But it didn’t come. Instead prices continued to climb at an unprecedented pace for the next 3 years (remember “irrational exuberance”?). Many of those sidelined investors were kicking themselves for missing out on huge appreciation, and ultimately jumped back in around 2006-07 — exactly the WRONG time. They got the worst of all worlds — missing the steepest rise, and jumping in just in time for the steepest decline. My advice is it’s VERY HARD to time the market. I suggest keep investing, but invest DEFENSIVELY. Don’t pay market prices. Buy undervalued, mismanaged, or distressed properties at a discount, and add value. Don’t buy A-class, but look for B- and C class — because renters flee A-class during a recession into B and C class (people still need a place to live). I was lucky to own a decent amount of this during the 2008 crash. It wasn’t fun and wasn’t pretty, but property values held and even grew, because I was forcing that appreciation.
    David Roberts from Brownstown, Michigan
    Replied about 1 month ago
    Very hard to sit and wait. I think a lot of the 10 year talking heads got lucky with timing. They happened to find real estate in 2009, maybe right age and time, maybe had cash, then worked hard. Agree that something is likely coming. Disagree that anybody could sit around and wait long enough for a bottom, and then somehow know to jump back in at the right time. It is hard to watch others continue to make money while you wait and make nothing. Agree with another comment, buy big value add deals. Also we like to refinance our purchase and rehab money back out of rentals and stay as liquid as possible at all times just in case. But even then, how will anybody really know if it is a slight dip, a big dip, a crash, and when to jump back in? It is very difficult. Sounds good in theory though.
    Paul Merriwether Investor from Oakland, California
    Replied about 1 month ago
    My experience as someone that purchase his first home in 1973 in the Bay Area for $32,500 VA at 10.5% interest. I sold 5 yr’s later for $65,000 and bought my present home around the corner for $64,500. Today’s value approaching $1 million!!! I’ve owned 5 homes over time, 3 were rentals. Cashflow never happened!!! However APPRECIATION IS THE GOLDEN GOOSE THAT CONTINUES TO GIVE!!! I’ve made my mistakes retiring far too early at the ripe age of 46. Not paying attention to my real estate holdings in the 90’s and trying to guess what would happen after the 2008 crash then going into 2012. NEVER SELL BAY AREA PROPERTY if you own some!!! A future calculator says that over time Bay Area property has appreciated approx 4 – 7% per yr depending on the area. So a $800,000 home today will be worth over $4.5 million in 30 yr’s at 6%. SUPPLY & DEMAND is the key. We virtually have no land in which to build new homes. Our freeways are currently jammed packed with cars. Imagine what it’ll be like in 5 or 10 yr’s. So how does this translate to other areas of the country. 1) What is the supply/demand ratio where you are investing? 2) Lots of vacant lots, open areas for new subdivisions??? 3) What are builders doing? They have far more $$$ at risk than you. 4) Are commutes getting worse … people complaining? 5) Use a future cal to determine what has been the history of your area over the last 70 yr’s etc. And could be in the next 20 or 20 yr’s. IGNORE the crash of 2008 – 2009 that was all about Wall street GREED on a global basis. I f you think I’m wrong think about this. I owned a rental in very bad area. I purchased in 1980 for $50,000 by taking over the loan from a Savings & Loan company (they’re all out of business now). In 2007 the value had grown to $400,000+. The crash came and foreclosures came along, property values dropped. I was CONVINCED that area as I called it the killing fields … would never come back. I owed approx $180,000. Had pulled out $165,000 over time so I let it go back to the bank I was tired of painting/fixing/land lording. It sold at auction for $90,000. Today’s value $450,000!!! I LEARNED my lesson NEVER SELL BAY AREA PROPERTY!!! People will always need a place to live!!! The ease in which one can get into a new home will determine what is happening in your area. This one real estate guru states … THERE IN NOTHING GREATER THAN THE 30 YR FIX RATE LOAN!!! Inflation will eat away at the dollar over time as homes appreciate. Yet that 30 yr FIXED rate loan will be constant!!! You’ll be paying it off with CHEAPER $$$ !!! As income rise … they’ll pay higher rents!!! Or pay more for homes. Your home should appreciate with the others. Invest in that home expanding & improving it. YOU cam increase the value of the property!!! You can’t do that with stocks. You aren’t in control!!! Real estate has ALWAYS been a very sound invest in terms of the SFR. A few ups and downs alone the way. Yet appreciation will eventually appear. What were the values in Harlem before Clinton left office??? What are they today, how about in DC??? Look for or crate APPRECIATION in your homes!!! Opportunities are always present. Make sure you keep a healthy reserve just in case!!!
    Mike McKinzie Investor from Westminster, CO
    Replied 29 days ago
    $400,000 in 2007 and $450,000 today! Why in the world would I hold that thing? Sell it in 2007 and start investing elsewhere and it’s over $1,000,000 today!
    Vaughn K. from Seattle, WA
    Replied 29 days ago
    Do you really think the average income in the bay area is going to be $500K a year or whatever, which is what it would take to support $4 million + pricing??? No. It’s already overheated and due for a pull back. The bay area will never be cheap, but as the saying goes “Anything that can’t go on forever will eventually stop.”
    Chester Lee from Richmond, California
    Replied about 1 month ago
    Hi Paul. you said: So a $800,000 home today will be worth over $4.5 million in 30 yr’s at 6%. SUPPLY & DEMAND is the key. We virtually have no land in which to build new homes. Our freeways are currently jammed packed with cars. Imagine what it’ll be like in 5 or 10 yr’s. I live in San Francisco and I assume that is the bay area you are referring to. Incomes are not rising as fast as your 6% compound rate for price appreciation. Only the 1% can afford a home over 2 million. A $2mm purchase price at 20% down is 1.6mm in loans. @ 4% for 30 years is $7,600 a month in mortgage payments. and about $40,000 a year in property taxes. Throw in insurance, utilities and the proud buyer is spending $100,000 a year. supply and demand is one thing, but affordability is something else.
    Paul Merriwether Investor from Oakland, California
    Replied about 1 month ago
    Chester Lee, you are so correct, affordability is an issue!!! That doesn’t change the fact it will happen. It’s not how many can afford homes … it’s about WHO can afford them in the Bay Area. Currently in San Francisco, if you search Zillow for homes that sold above $5,000,000 you’ll see the big picture. View, 1045 Church St San Francisco, CA 94114 on Zillow. Listed for sale in Feb 2016 for $1,799,000. It sold in March 2016 for $2,225,000. On April 26, 2019 it was listed for $5,275,000. It sold on May 10, 2019, 15 days later for $5,395,000!!! I’m thinking that was a CASH DEAL!!! That’s not even appreciation … that just DESIRE for a particular area!!! Is that usual … NO!!!! Bay Area, I was actually speaking about homes in Oakland where I live. Yet I knew it applies to all areas of the Bay Area, I sure hope you are a home owner. If not look to Oakland!!!
    Paul Merriwether Investor from Oakland, California
    Replied about 1 month ago
    Chester, NO DOC loans are still available. Two tech workers earning $100k/yr each would be $16,666/mth. 20% dwn could come from parents. And that is at today’s earnings. 30 yr’s from now a worker earning $70,000/yr today at 2% increase/yr they’ll be earning approx $126,000/yr. As a couple would be earning $252,000/yr or 21,000/mth!!! Average BART Salary >> Bay Area Rapid Transit Salaries in the United States. … The average Bay Area Rapid Transit salary ranges from approximately $69,626 per year for Electronics Technician to $164,603 per year for Group Manager. <<
    John Cummins
    Replied about 1 month ago
    You are absolutely right, you haven’t lived through crash cycles. Agreed market timing is for losers that get lucky so it is best to not get greedy and take your profits. However this line of thinking is not suitable for landlords living off cash flow. Many many real estate investors are so wrapped up in 1031 exchanges and horrendous tax gains that selling out will wash out their income. Case in point, a thirty year real estate investor will likely have several exchanges and several paid off properties and all will be fully depreciated. By the time they pay all the tax bills and realty commissions, a three million dollar portfolio will be reduced by 30 to 50% That huge hit comes the day they sell out, then when they jump back in several years later with only 50 to 70% of what they had…. well anyone should see the result. Jumping off real estate right now is a good idea for speculators, the ride up is most certainly about over but for a longtime landlord making a living off rents, perhaps keeping rents current is the best advice. I know some will bristle when I say there is a major difference between a speculator and an investor and is comparable to one who buys lottery tickets claiming they don’t gamble.
    Vince Ivanov from Issaquah, Washington
    Replied about 1 month ago
    I agree with the author but my problem with this article is that it just says to sell your assets but doesn’t present any sound arguments or reasoning. I actually believe that the time to sell was Q1 of last year. Many markets are down about 6-7% since then. i live in Seattle and i can see that even people with good salaries can’t afford to buy in some of the good neighborhoods. The monthly payment on an average house in my neighborhood is about 5K and that’s with 20% down. How many people have 200K to put as a down payment? How many people can pay 5K and take care of a family especially if one of the parents doesn’t work? My personal rule of thumb is that i wouldn’t want to hold a house if my rental yield is lower than the 10 year government bonds which happened last year in Seattle.
    Louise Fuller
    Replied about 1 month ago
    Yikes. So basically you are saying to try and time the market, not once (getting out) but twice (getting back in). I wish you luck with thi strategy, you will need it.
    Trung Nguyen from Aurora, CO
    Replied about 1 month ago
    Hey, a broken watch is right twice a day.
    Steve Ryan from Hazleton, PA
    Replied about 1 month ago
    I was waiting for a “gotcha” punchline the whole time. Engelo, I love reading your posts, but this article is advocating the worst kind of speculation. In the stock market, “market timing” done right is virtually indistinguishable from what might be called aggressive dollar-cost-averaging. Market’s down, buy more; market’s up, buy less. This can best be done with a mix of stocks and bonds, which (I realized embarrassingly recently) is not to keep part of your money “safe,” but to keep it in reserve for buying opportunities. The real estate equivalent would be to sell a part of your portfolio in a hot market to free up cash for a better deal later. The key word being “part.” However, market timing usually refers to the fool’s errand of “calling the top [or bottom].” It can’t be done. If you’re confident the market (stock or real estate) will go up in the long run (i.e., before you retire), feel free to buy low. It might go down more, but it will definitely end up higher eventually. And at least you’re buying cheaper than you could have a month or a year ago. But you’ll never call the top. It’s worth repeating in all caps: YOU’LL NEVER CALL THE TOP. It could go up another 15% before a 10% correction, and remember, you won’t know when it’s done correcting. Is it a dead cat bounce, or is it resuming its inevitable climb? If you wait to buy cheaper than you sold, you might sit out forever. And keep in mind, all of this is assuming we’re buying and selling real estate like stocks. REITs are fine, but I get the impression that’s not what brings people to BP. Who cares about property value if it’s flowing cash? And more philosophically, are you “investing” (adding value, growing, contributing) or just “trading”?
    Tom Phelan Real Estate Investor from Miami, Florida
    Replied about 1 month ago
    My favorite Wall Street ploy when the financial market tanks and your projected retirement income is short, is your Financial Advisor suggests you take a Reverse Mortgage to supplement your Wall Street income.
    Paul Doherty Rental Property Investor from Mc Kinney, TX
    Replied about 1 month ago
    “If you look at the real estate markets across the country, they have surpassed the peaks of 2005 and 2006.” Why is us surpassing values attained 13 years ago a problem? Shouldn’t we be well above that more than a decade later?
    Vaughn K. from Seattle, WA
    Replied 29 days ago
    Not according to math… Depending on the market, things are as out of whack with the fundamentals as they have ever been. Other places are fine. There are several metrics to look at that can be considered “fundamentals” for RE. Cap rates are one. I personally like the magic ratio of average income to average sales price. Long term sustainable is somehow always 5-6x average income equals average sales price. It is overheated when above this, and then corrects back down into this range or lower every time. Even cities like NYC and SF hit this range during corrections. By any fundamentals one wants to choose though, most of the biggest cities in the USA are overpriced… But there are tons of boring big cities, and ever more midsized cities that ARE NOT. Bottom line is income hasn’t gone up enough to warrant the pricing in hot cities even after 13 years, but in other places everything is on solid ground.
    Kevin Cedeno from Huntsville, AL
    Replied about 1 month ago
    “My favorite time frame is forever.” “The only value of [stock] forecasters is to make fortune-tellers look good.” Warren Buffett “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” Peter Lynch “Only liars manage to always be out during bad times and in during good times.” Bernard Baruch “I don’t believe all this nonsense about market timing. Just buy good value and when the market is ready that value will be recognized. ” Henry Earl Singleton “The average investor’s return is significantly lower than market indices due primarily to market timing. ” Daniel Kahneman And of course my good old man, John C. Bogle: “The idea that a bell rings to signal when investors should get into or out of the [stock] market is simply not credible. After nearly fifty years in this business, I do not know of anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has done it successfully and consistently…”
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks Kevin, funny thing is that all of those folks you mention have regularly sold out of their positions many times over. Why do you think that is?
    Robert Pemp
    Replied about 1 month ago
    I concur. Prices where I am have gone well beyond what most local money can afford and it’s not sustainable. My house went up 15k the last 30 days (Zillow) and I certainly wouldn’t pay what they say it’s worth. I am opening a sizable HELOC right now. I see the same implosion coming and want quick cash when the moment comes, be it 6 months or 3 years..it’s coming.
    Robert Pemp
    Replied about 1 month ago
    I concur. Prices where I am have gone well beyond what most local money can afford and it’s not sustainable. My house went up 15k the last 30 days (Zillow) and I certainly wouldn’t pay what they say it’s worth. I am opening a sizable HELOC right now. I see the same implosion coming and want quick cash when the moment comes, be it 6 months or 3 years..it’s coming. Reply Report comment
    Gregory N. Investor from Vista, California
    Replied about 1 month ago
    Completely agree with Kevin and Steve. With all due respect to the author, this is dangerously bad advice. This is the kind of content that you’d expect to find on junk websites like Yahoo News.
    Mike McKinzie Investor from Westminster, CO
    Replied about 1 month ago
    Calling advice ‘bad’ because you disagree with it is poor taste. The advice may be “wrong” or it may be “right” but more than likely, it will be “right” for some investors and “wrong” for other investors. I am liquidating some property this year and getting into Multi Family Syndication, NEW homes in an up and coming market and upgrading my personal residence. Another investor may do something else, sell SFR’s and get into Storage Facilities, or sell Commercial and get into Mobile Home parks. To each their own and may their guesses be correct. Just look at 2008 and see how the “whistle blowers” were told, “…that is dangerously bad advice…” when it wasn’t.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks for the support Mike
    Louise Fuller
    Replied about 1 month ago
    Thank you – quite dangerous advice.
    Gregory N. Investor from Vista, California
    Replied about 1 month ago
    Completely agree with Kevin and Steve. With all due respect to the author, this is dangerously bad advice. This is the kind of content that you’d expect to find on junk websites like Yahoo News.
    John W. Rental Property Investor from Buffalo, NY
    Replied about 1 month ago
    Agreed!
    Darryl S. from Small Town, Tennessee
    Replied about 1 month ago
    Great Article. My thinking aligns exactly with the author. i bought everything that I had cash to purchase in 2010 thru 2012 at bargain basement prices i am currently prepping all to sell this year. When you have paid for rentals that have tripled in value in less than 10 years you get the heck out of that chit. From here forward the odds of further appreciation are much lower. All you greedy dreamers stick with it, I am out, and when the market settles and the “gloom and doom” phase is in full bloom I will buy your property at pennies on the dollar with my stashed dollars and you will thank me for pulling your butt out of a hole LOL.
    Engelo Rumora Specialist from Toledo, OH
    Replied about 1 month ago
    Thanks Darryl, Similar to my strategy. I’m happy to sit and wait this time. I have lost many times due to greed and impatience. I’ve had a great run over the last 5 years and have unofficially retired at the ripe age of 29 lol Hard part was getting to the first $100,000. Once you accumulate a large chunk of change you can take smaller risks and make larger gains. Each to their own tho and everyone’s circumstances are different 🙂 Thanks again
    Colin March Rental Property Investor from Portland, ME
    Replied about 1 month ago
    So all real estate everywhere will crash? Single family, multi-family, commercial, industrial? Every state? Even if interest rates keep falling? No caveats to this bold prediction? No math to back it up? Just gloss over the effect of paying taxes on gains and depreciation? Maybe using cash flow to purchase more in a down turn is smarter than trying to time the market twice.
    Tom Phelan Real Estate Investor from Miami, Florida
    Replied about 1 month ago
    The Rich and I mean the very Rich know that “Tax Free” and “Risk Free” income is King and they use LIRP as a compliment to their real estate portfolios. I’d bet most real estate investors don’t have a clude what LIRP us and how to use it. If you have multiple rental properties with mortgages it would seem a prudent move might be to liquidate the weaker properties and use the equity to pay off the better properties. It is so much easier to ride out both the Wall Street and real estate markets if your properties are debt free. If rents were to fall a, yes it is possible, a debt free rental can adjust, a highly leveraged rental cannot. Nor can a monster HELOC if rents won’t support thre payments.
    Tom Phelan Real Estate Investor from Miami, Florida
    Replied about 1 month ago
    Colin doubts thge wisdom of “… paying taxes on gains and depreciation? ” I agree. Why not consolidate the multiple SFHs and 1031 Exchange into one choice commercial property like a small medical building with high quality tenants.
    Darryl S. from Small Town, Tennessee
    Replied about 1 month ago
    The norm seems to be that people will twist/contort and bend in all kinds of crazy directions to try to avoid paying capital gains taxes. A majority of people pay weekly payroll taxes that are totally outrageous and never let out a peep. It is all in the perspective and of course as mentioned earlier all about the details of your particular situation. I know that this is old fashioned and not “hip or trendy” but I am a firm believer in the KISS method. You can shear a sheep every year but you can only skin a sheep once. You have to decide if you are shearing or skinning Hahahaha
    Mike McKinzie Investor from Westminster, CO
    Replied about 1 month ago
    I have really enjoyed reading everyone’s input. And other than the extremely critical responses, everyone is right. NO ONE CAN TIME THE MARKET! And I do not think that Engelo is saying that. What I hear him saying is that if you have had a tremendous appreciation over the past 10 years, you MIGHT want to consider getting MORE cash to take advantage of an upcoming future opportunity. Let me give an example. I bought a house for $130,000, in 2002. In 2004, I sold it for $200,000. In 2012, that same house sold for $160,000. It did not reach $200,000 in value again until 2014. $200,000 in 2004 is worth a heck of a lot more than $200,000 in 2014!! What did I do with my profit? I built myself a Custom Home 2 blocks away! I think that we can all agree, that overall, today’s Cap Rates are lower than they were 5 years ago. It is getting more difficult to find a good FLIP opportunity. It is getting harder to find an 8-10% Cap Rate Rental. It is getting harder to find any wholesale deal that isn’t being marketed at RETAIL prices. I tried to chase down 3 different rentals in Colorado Springs, offering ALL CASH, and OVER asking price, and lost all three! My CAP RATE would have been in the 4-5% range. And these were OLD houses. I would rather have a 4-5% Cap on NEWER homes so there would be less maintenance and repairs. So I went elsewhere. Engelo is not telling everyone to liquidate everything, he is saying to look at your portfolio and see if there are some properties that might be time to sell for a myriad of reasons such as they are in a declining area or their return on equity is diminishing or the deferred maintenance is not worth the investment, and so on!!! Someone said “never sell a property in the Bay Area.” Let me ask, if you have $5,000,000 in cash, would you BUY a rental in the Bay Area? Some of you might, but my guess is that there are BETTER Rental Returns elsewhere for $5,000,000. Many REIT’s, Syndications and paper will pay better than a Bay Area Rental, and there would be NO LANDLORD HEADACHES. And while Appreciation creates wealth, Cash Flow buys the groceries! Good investors need BOTH!
    Juan Nieto Rental Property Investor from Bradenton/Sarasota
    Replied about 1 month ago
    I don’t necessarily disagree, but it depends on what your portfolio looks like. I do tend to agree we are nearing or hitting a peak. I personally sold a property that I hated. High maintenance, terrible tenants and has appreciated nicely. I traded for another property and some cash. Cash is parked in an ultra short term bond fund. Yield is just over 3%. Cash I generate from my other properties are going there too. If I see an opportunity I will buy, but for now and am watching the market and waiting. My properties that are generating cash and give me no headaches, I am happily holding. If they are giving me a nice cashflow, I am not concerned if they increase or decrease in value. They are doing the job they were purchased to do, generate cash. Would I buy for appreciation now or a flip, probably no, unless I got a really really deep discount.
    Vaughn K. from Seattle, WA
    Replied 29 days ago
    Fundamentals are king. Math rules all markets at the end of the day. Emotion doesn’t come into it, because eventually it will wear out, and the math will call the shots. Right now MATH says that all the trendy cities are overpriced by a good margin over what is long term sustainable. PERIOD. Will they go up for another year or 2? Some might. Seattle has already been pulling back for over a year, and may continue to drop, maybe even sharply. The thing is there is just no LARGE upside left in any hot markets. NONE. But there is a lot of downside according to the math. Fortunately there are tons of areas that are NOT overpriced according to the math. They are in line with normal fundamentals for cap rates, price to income ratios, and other numbers. So if you own in an area that math says has massive potential downside… Would it not be prudent to at least invest in an area that’s got no massive downside pending? That provides strong cash flow? And maybe even has upside? The top 10-20 markets are becoming unlivable messes for people. 6 figure salary earners can’t buy starter houses. This stuff cannot last. If recent history shows us anything, it is that once certain markets get too crazy, the money flows to the “next” place. Places like Seattle/Denver/Austin went from zero to hero in the last round of this stuff. There are others doing the same now like Boise, Nashville, etc. I don’t know what the math says for all of the places that are coming up, but I’d bet they’re not too far off in some of them. But they have long term potential on their hands. It’s not that I can predict an exact top, it’s just knowing that if there is any upside it will only be for another year or two, and probably not large… But there is a lot of downside. It’s not hard to realize that is not the greatest position to be in. If you don’t want to invest in markets other than where you live, maybe it makes sense to just hold them… But do be aware that math says there is no large amounts of upside left in most trendy markets.