Time to sell at top of the market

8 Replies

I have been convinced for about a year that we're nearing the top of the market, and I've thought about selling some of my properties. On Saturday my manager told me that one of my tenants is leaving, and it is my least favorite property in a neighborhood I wouldn't buy now, so I told him to list it.

Once I got over the psychological barrier of selling a house, I'm wishing I could sell two others, but we just got tenants in those two in August and early September. The two of them cash flow about $600/month combined and I probably have less than $30k into both of them. However, I bought them at the bottom of the market in 2010-2011 and probably have close to $100k in equity I could take out.

I guess now that they're rented I have to wait a year to list them? What are the other options? So far, I've thought of:

Offering them money to leave? I don't like this because it doesn't seem professional.

Offering to sell to the tenants on a lease option? Highly unlikely they'd be interested now that they're already moved in.

3. sell to other investors with the tenants in them.

but the investors will want a deal (dont we all), so you can not get top dollars.

btw, what will u do with the money? buy something else or get out of the business all together?

I'll buy up in time to do a 1031 exchange. Where I live now the prices are higher. I might also stay in Tucson and get a multifamily deal.

You can cash out refi them and then use that cash to buy up.

I have seven mortgages, so at most they'll only cash out 75%. I might get $45k out of the one with more equity, I'll start calling a few banks.

If you do a cash-out refi make sure to understand the fees and points you are being charged. May not be worth the refi if they wrap up $3,000 in fees to process the loan. 

Do you know your current cap rate pre-mortgage? Quick calculation to calculate your cap rate is:((Yearly rental income) X .65 (this is your expense multiple))/(What you would like to sell the property for)

For Example: if you rent the two units for $1,000 a month total. $12,000 per year X .65 = $7,800 and you want to sell the property for $100,000 then it would be $7,800/$100,000 leaving you with a rough cap rate of 7.8%

There is no reason you cannot sell a rental property with tenants in place. Actually, the investment market in Tucson is the strongest I have seen. I would with a number of buyers who only consider purchasing properties that have tenants in place. 

Hope this helps!

Hello, thank you. By your calculation and what I hope it's worth the cap rate is about 5.4%, not very exciting to most investors. There is a comp with the exact floorplan that sold for $142k in September though. It rents for $975/month and is never vacant long.

Does anyone know a bank that would lend 75% or 80% LTV on an investment property in Tucson when I've got 7 mortgages? My current rate is 5.75%, so it still may be worth the refi even with the closing fees.

if you had 6 mortgages then the whole world of lending opens up.  I wasn't able to do a cash out refi with more than 6 from a traditional source.  there are portfolio lenders out there that would do it but some only do it based on purchase price and not appraised price.  There are lenders out there that would do it but the rate is likely higher than your current rate.  If you find one that will do it let me know.

I'm selling one of my properties right now and then I'm told I can do a Freddie loan once I'm down to six properties.

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