Real Estate Investing Basics

Here’s Why I’ll Never Sell My Multifamily Investment Properties

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I never plan to sell a single multifamily property, and here’s why:

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I’m Going Long

I’m in it for the long haul. I’m not just thinking about how to make money next month, hit a goal this year, or get rich in five. My eye is on the long game. I’m looking 10, 20, 50 years down the line and beyond.

It’s a Lot of Work

Sourcing, screening, negotiating, and closing on multifamily apartment buildings takes a lot of work and time. Often, that is just the beginning. Once purchased, you must deal with tenants. You’ll have to market the units, and you’ll probably have to renovate and improve the property at some point. Compared to the long-term rewards, to me, it doesn’t make much sense to sell after putting in all of that work. I want the best returns on my time and money. I want to know that I am really doing something worthwhile — something that will last. 

Related: Attention Multifamily Investors: Are You STILL Paying Taxes?

Taxes

The quick cash and returns some people rave about from flipping and wholesaling houses can sound really attractive. Until you do the real math and pay your tax bill. They never talk about taxes on reality TV. They talk about gross profit, which is in a completely different ballpark from net profit. You pay a lot less in taxes on long-term gains and passive income dividends than on active income or short-term windfalls. I’m not trying to give up a large fraction of the gains I work so hard to earn in real estate investing. That’s just not my model.

Speculation

I believe it is just too much of a gamble to buy a property in the hopes of selling it. Especially after putting countless hours, energy, and precious capital into renovations and improvements. Some people say that you make your money when you buy, but really, you make your money when the property puts money in your pocket. I know I can do that with cash flow from tenants right away. There is never a guarantee that you can flip for a certain figure (or even sell at all). I see many investors setting themselves up for difficulties right now, overpaying for properties with hopes of flipping. None of the thousands of investors who got caught in the last crash expected they would get stuck with those properties, but they did. I buy for cash flow.

Related: Why the Wealthy Put Their Money Into Multifamily & Commercial Real Estate

Net Worth

Even the best properties may fluctuate in value at different times. Yet, in the long run, these assets keep going up in value. After all, what are you going to do with fast money anyway? Stick it in the bank at negative interest rates? Or stuff it in your mattress to devalue? I’m looking at long-term wealth building, which will in turn increase my real net worth. By holding multifamily properties long term, extra losses on transaction fees, taxes, commissions, can be avoided.

Summary

I’m not selling anytime soon. I’m going long, and never plan to sell my multifamily property investments. That may not be for everyone, but before you are quick to judge, do the math on the above factors and give it some thought.

We’re republishing this article to help out our newer readers.

What about you? Have you sold and regretted it?

Or am I missing something about flipping that you think I should know?

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Costin I. Rental Property Investor from Round Rock, TX
    Replied about 2 years ago
    “Fearful when others are greedy and greedy when others are fearful” – Warren Buffet “The Best time to buy real estate is NOW.. The Best Time to sell real estate is NEVER.” “Never ever sell real estate. Ever. [but never say never, so…] Unless it’s to buy better real estate”
    Greg Carroll from Central MD
    Replied almost 2 years ago
    As someone brand new to REI, I want to take advantage of several income streams. Buying and holding is a great long-term wealth (and retirement) building strategy, but flipping and wholesaling can take care of some of the immediate needs (becoming debt free quicker) and reinvesting. As compared to the banks and the mattress, with ready cash on hand you can become the lender to other REIs helping them while getting a good return on your dollar. And as great as REI can be for those willing to work at it, a wise investor diversifies, so when I’m able, there will be stock, bonds, precious metals, and maybe that odd Van Gogh.
    Karl B. Rental Property Investor from Columbia, MO
    Replied almost 2 years ago
    I’ll sell, but only to level up using a 1031. To sell without a 1031… not my style. 🙂
    Jared Stasch
    Replied over 1 year ago
    How can anyone say what is going to happen two years down the road much less 50 years? What about the job market and economy? What if they overbuild in your area and you have a huge vacancy factor? What about all that cash flow you took in and then had to spend 5 years later on a new roof, or paint job, etc.? What about when the rents stop going up and you can’t raise them anymore? How does that affect your return on investment? Always best to look at your Annual Rate of Return and see what you come up with. I met a guy who would never sell. Owned the property for 14 years. I showed him what he could sell the property at today and it was a million dollar “profit” from what he paid originally. However, once we sat down and calculated the annual rate of return he was only at 7% a year and it gets worse every year he held the property. Cash flow doesn’t stay in the bank account. It goes back into the property especially the longer you hold them.
    Roderick Mills Jr. from Cincinnati, OH
    Replied over 1 year ago
    Loved this article and it is the strategy I am going for as well. I think it will also be good to buy and hold to pass on to children and start building generational wealth!
    Doug Keach Rental Property Investor from Boston, MA
    Replied over 1 year ago
    I know operating expenses can vary from one property to another, but what do you typically see for your operating expenses in C-class multifamily properties as a percentage of gross rents (not including P&I in those operating expenses)? 45%, 50% or even 55%?