Timing of property sale: how soon if at all?

2 Replies

Hi everyone, I have 4 BRRRR houses and am thinking of selling two of them (hot market) to pay off the other two and maybe start a new project (new build or another BRRRR). I read the article on inflation here yesterday and I gotta say it kind of freaked me out. One property in particular is not a super cash-flowing house (it is rented right now under market which I did to get tenants to sign a two year lease and live in it while I did a major major reno job on it). I broke the rule of no rental houses with pools and it has a pool. Plus it’s in a very hot area so I could easily sell it. My question is two-fold: 1) I have in my mind that I need to wait two years from purchase to sell but I don’t know why I think that. Is that a tax thing? If so can someone elaborate? 2) are any of you thinking of cashing out in the hot market before things slow down and reconfiguring your portfolio? I don’t want to be rash but I also don’t want to be stressed out later of appreciation stops and interest rates are up. I’m having a tough time balancing the pros of “hang on to your assets and let the market do its thing” vs “respond to market conditions and make sure you are not over exposed/leveraged.” I have a lot of equity in all of my houses (well over 50% for all of them but one) so I’m not leveraged to the hilt or anything. But still. That article kind of freaked me out. I also am aware that some neighbourhoods are kind of insulated from market dynamics and I feel like mine could be one of them. But I lost my crystal ball. Thoughts?

@Heidi Wilson - I think there is a lot of personal preference here, so you could get vastly different opinions.

1) If you hold a property more than a year you only have to pay capital gains on the growth, versus less than a year could be regular income. I will add one caveat, I haven't looked at how this might change for 2018 and the new tax laws, so hopefully an accountant will chime in.

2)  If you haven't read it yet, check out this article @Jeff Brown wrote: https://www.biggerpockets.com/renewsblog/investing-more-than-ever/ - I agree with a lot of what he says and I still plan to buy more property. But at the same time I have spent the past year cutting my "losers" so to speak. Basically getting rid of more challenging properties, ones that don't make a high enough return, or ones where there has been insane appreciation. I am also trying to deleverage a bit. Here are two examples: At the end of 2016 I sold off a larger low income portfolio - I had good returns, but its a more challenging tenant base, so I sold to capture profits and free up time. Another example is I have one blanket loan on three properties next to a university. It is all college rentals. The properties have really gone up in value in a short time. I am selling two, and will have enough growth in equity to pay my cap gains, and pay off the blanket loan. This will leave me with that third property free and clear. This will help me lower the overall LTV in my portfolio. 

@Heidi Wilson - I've always felt that it's best to hold on to properties and build wealth thru letting tenants build equity in those properties. I guess my questions is why the fear? Regardless of the type of tenants you have currently in your homes, are those homes rent-able during a market down turn? Even in a market downturn people are always going to need a place to live. If you're asking me, I wouldn't sell. Hold on to them and cash out a refi. 

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