Ive heard on several podcasts and read several blogs/articles of people saying they sell their rental property after 5-7 years, while purchasing many more during that time.
Besides getting the equity paid out to you, what is the benefit or reason to selling a property if you continue to make money on it each month while you continue to invest? Is this simply to get a nice lump sum pay out from time to time?
Two reasons come to mind
1.) They bought in the dip and the property has appreciated significantly. Now they're reaching what could be the top of the market, so it's probably a good idea to sell while the selling is good, rather than watching your equity plummet with the next correction.
2.) They're selling out to 1031 exchange into a bigger building/community. I'm currently exploring this option as we speak. My goal is to own a 50+ unit self sustaining community. I'd be willing to sacrifice my smaller properties to get that.
1031 is good way to trade up and defer taxes.... 5-7 years could be helpful in reducing major costs before they come due (roof being one example).
That makes sense, thank you michael. That was sort of nagging at me because everytime i read or heard about it, they failed to elaborate on why they chose to sell.
If you replaced CapEx items when you bought your property then you may be close to peak value. Your CapEx items will start to become worn and need to be replaced. Some suggest getting out before the age/wear goes against the property. At 5-7 years everything should still look pretty good and have a couple good years left. Therefore, max value. Go much past that and you will have to start to replace items. I'm a newbie, but that is what I'm told.
That also makes a huge amount of sense, thank you matt and mathew. Simple things like that I havent considered yet as im a newb too