I am selling my properties. Am i crazy?

[Alexandre Marques dos Santos]

I have a total of 8 SFH fully paid that were the source of my retirement.

Every year i had to fill a dispute to tax appraisal as they always put the price of my property very high, in order to collect more taxes.

That started to bother me as my expense becomes higher than usual. Instead of paying a % of the right value of the property in taxes, i usually paid more. That is because i had to pay the attorney fees.

I also noticed the rental price dropped as massive inventory was added to to the city i have my properties. When i strt buying those, i was having around 5-5,25% return. Since then rental prices dropped 5-10%.

All together, plus the fact i started to foresee an increase in capex ( properties are now 7 years old), dropped drastically my expected COC return.

So i was hoping i for an opportunity to change the allocation on some of my investments.

With this market, i saw prices increasing by as much as 10%. Rentals are flat. So i decided to sell some of my properties. I already sold 3 and i am negotiating the 4 th one. I expect market to cool down a bit, and a possible increase in foreclosures. If that happens, i will be in a great position to acquire distressed properties. Am i crazy?

[Joe Villeneuve]

First, you shouldn't be using percentages to compare anything in REI...especially to the stock market. They are in no way similar investments. When you do, you lose out big time in your REI. You are seeing an example of it right now...and probably don't realize it...yet.

You said you have all your properties paid off (I'm in pain right now). That means you are losing money every day on your REI. Equity is cash that is "dead". It has little or no "real" value in dormant state of equity. It has a "face" value that is equal to the property value though...which means your "real" value is running at about 20% of what it should be.

If you sold all of your properties, and used that cash as DP's on replacement (and added)  properties, your equity wouldn't change...it would just be spread over 5 times as many properties as you have now.  The CF would go down for each property (at worst 50%), but if you had 5 times as many properties your total CF should actually increase to 2.5 times what you have now.  Not only that, but your total property values would increase 5 times...which means your appreciation also increases 5 times.  Keep in mind that increase in property value is also an increase in your equity (thank you economy and your tenants))...for free.   So when you retire, that equity you wanted to retire off of, also increases.  

All of this happens when you simply transfer the "cash" in your equity from a "dead" state to a "living" state.