Thoughts - when is it time to sell?

Question

So appreciation due to COVID has been a game changer. Equity in my properties that I've held for a while really got boosted this year. I'd like to hear thoughts on when its time to sell a property or just hold it. One in particular I could likely pocket around 150k (pretax) and right now cash flows around 500 / m plus around 400 to equity when I pay the mortgage with potential rent increases down the line. So if it nets around 10,800 it would take me about 10-15 years ( depending on rent increases ) to get that insta burst of cash now.

Pros of selling: Can tap equity without closing costs of a refi and reinvest at a higher return and scale

Cons of selling: It cash flows nicely and tenants are great, improvements done on the front end makes capex very manageable

What do you guys think is a good course of action? I'm at a point where I could go either way.

Steve Vaughan · Answer

Good problem to have.

I've been selling 1-2 headaches  a year since 2017.  These had pain points it doesn't sound like yours has.

Transaction costs and hassle, taxes, re-deployment of capital are all factors.

I sold mine solo to help reduce closing costs and give my  first time buyers some equity going in, but that was part of my why.

When you close your eyes and think of this property, what comes to mind?  Mine made me flinch so I sold.  Others don't so I kept them.

Theresa Harris · Answer

I'm like Daniel and plan to hold what I have for retirement and then sell them off one at a time.

Ask yourself what your plans are.  If you sold them, could you reinvest that money and get a higher rate of return?

Daniel Ziner · Answer

@Dan M. First of all I wanted to congratulate you because it seems like you are in a good place! It is all about what your goals are. Personally my goal is to retire early, and hold onto anything I ever buy. I want to have a large real estate business that I can get my children involved and be able to pass it along to them eventually. Your decision is also dependent on how liquid you want to be right now. I believe there is going to be a lot of opportunities coming up due to COVID and it may be nice to have cash at the ready to be able to jump on good deals that become available. Whatever you decide I am sure it will be best for you.

Dan M. · Answer

Appreciate the input guys. All my properties are buy and hold the longer I have it the more principal gets paid down and rents increase. @Daniel Ziner I can get a HELOC but the bank I spoke to only does 1-3 year terms and if the covid crisis does allow for opportunities one would assume market prices would go down compared to like they are now and having the cash like you mention would be nice to have.

Downside I see to selling as well is now I have 2+ closings to get through which would eat into that capital a little.

I guess my biggest thing with this is I've never sold anything I've owned and now might be a good opportunity to do so.

Brian G. · Answer

@Dan M. depends how much you like that property, the longterm rent/price appreciation potential and if you want ti own that property in 10-15 years. Also, what works best for your goals, investing strategy, etc. Selling, Cash out refi and a Heloc are all options. Choose what helps you most to accomplish your goals.

Thoughts - when is it time to sell?

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