Why do people sell properties that are making profit?

9 Replies

I am a first time investor looking to invest in duplexes and triplexes. I found some properties listed which are already leased out and are generating positive cash flow to the current owner. In such a situation, why would the owner want to sell a property? Is it primarily because the owner might be in need of immediate cash? Is there anything I need to watch out for?

@Prachi Pant

I can tell you that some landlords get tired of owning rental properties, and the headaches that can come with it..  evn if they are profitable.  I sold a triplex building several years ago that was profitable.  We were about to have our 3rd child, and i didn't have time to manage/maintain the property.  Now looking back, i wish i never sold it.  Good Luck!

Adam

Good question. I’m actually looking for my first deal and that is the first question I ask when inquiring about the property. It gives me an idea of how much I should offer and if there is room for negotiation.

Its easier to sell something profitable , than one losing money .

Look to see what they paid for it, they prob want the appreciation instead of waiting monthly to accumulate the money. Some investors do a Value-Add strategy, get tenants and then sell the package to a buy-and-hold investor ...

Hi Guys,

It may have to do with the optimal year to sell the property. It has to do with the time value of money. A measure of this is the IRR of a property which can tell you the optimal year to sell the property.

I just called a guy today who had a sign in his yard. He lives far away and is tired of dealing with it. He encouraged me to look at public records which confirmed he is indeed selling at a loss. Everyone has their reasons.

Several reasons someone might sell .
They self manage properties and are burned out
Divorce
They want to sell and move their equity to a market with better cash flow .
Retiring and don't want to deal with rentals.
Etc

You can always ask, or have your agent ask, why they are selling. But as the other posters wrote...there can be a whole heap of reasons why someone might want to sell. Maybe they are over-leveraged so the property isn't actually profitable for them but would be for you. 

You can always ask, it certainly couldn't hurt, but more important that why the seller is selling is the property itself. Do your full due diligence on it and verify it for yourself, and go with that.

Why do people leave jobs where they are making a salary?

This is work.  Don't let anyone tell you it is not.  Anyone telling you that being a landlord is "passive income" is doing this at a large scale, or is lying to you to get you to buy something, or is over-paying for management and probably has never calculated their actual rate of return.

Buying a first-time investor with one property is WORK.

Sometimes, people decide that the money isn't worth the work, and sell.  Just like they sometimes leave a job when then decide that the money isn't worth the work.

Usually, someone else is willing to take that job, because the money is worth it to THEM.

So it is with rentals.

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