Rent or sell?

[Austin Glidewell]

Just curious on what some investors process is when deciding on selling a property vs continuing to rent. Do some investors look at cap rates and decide if the property falls below a specific cape rate number then they sell? Do some wait until a property has a certain amount of equity? Does anyone project out cash flow and run IRR calculations? Trying to get a good idea of what common practice is?

I have some rentals that obtain decent cap rates but not sure at what point I should sell. 

Thanks everyone,

[Michael Lam]

Hi @Austin Glidewell

The point when to sell is relative on your opportunity at hand.  Each time I've sold its for something different in some ways but at the end it was to free capital and pursue other opportunities.

1.  I would dump a home if its not cash flow but equity has risen and home is not in a desirable location.  (there is a grey line for no-cash flow but in desirable location and equity is rising)

2.  I would sell a home, if the market was favorable to me transferring that capital to another property (1031 exchange)

3.  I would sell if the home is in a market that is at its highest in several years and home is not in a desirable location.

My theme is, I'll hold on to my good cash-flow rentals in area that are desirable to sell.  I will be more inclined to dump homes in not so desirable location (even if they are cash flow).  I'll take money off the table if its reaching a peak.  For example, Sacramento, CA is reaching this peak in my opinion.  I have a few rentals there that I'm considering to dump.