This might be dumb. I want to sell it.

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

Originally posted by @Michael Plante:

Originally posted by @Heather De La Cruz:

@Michael Plante

It's profiting 1k, not renting for 1k. The cost was only 139k.

But it does look like it would be better to sell.

How much does it rent for?

Why does that matter if the CF is stated?

0 Reply

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

5y

Originally posted by @Heather De La Cruz:

I think I have too much going on and I'm considering making a decision that's a little rash.

I have a duplex which is generating a little over $1025.00 after mortgage and escrow. It's an hour and a half away. I work full time at a desk and go to school.. I find it harder and harder managing tenants when they move out, dealing with repairs/ cleaning and traveling back and forth as my time is not that flexible.

Anyway, I bought the property for $139k it looks like i could possibly sell for close to $400k. (That was the recent sales price for identical properties next door.)

My issue is that's my only passive income. I feel dumb because it's $1000+/month for life or potentially over $200k one time with no similar prospects that are nearby.

Others have suggested to use a property manager but I honestly have not come across anyone or any company that I find trustworthy. I've seen countless times where tenants are treated poorly and maintenance is upcharged insane amounts.. I've also seen where companies do not respond to tenant requests creating lager problems due to lack of repairs.

Is it dumb to sell? Should I hold on to it and bite the bullet and find a reputable property management company? Should I sell and take advantage of the profits?

Anyone else find themselves feeling this way or in the same position?

I'm a little stressed and welcome any advice.

Selling a headache at a great price is never dumb.

Not planning what to do with the proceeds tax and return optimization-wise can be.

I've 1031 consolidated twice in the past 12 months, I've also sold outright 3 times without exchanging.

Meet with a tax pro prior to selling as has been mentioned. It's ok to want/pursue more passive investment opportunities. Properties far away can eat you alive.

5 Reply

Account Closed

Member since 2021 · 154 posts · 108 votes

5y

Originally posted by @Ron K.:

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

Right. I made roughly 26% profit this week alone on tsla stock. At 5% I wouldn't risk my cash...

0 Reply

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

Originally posted by @Ron K.:

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

Percentages like this are at best misleading. They are not accurate enough to make an informed decision. I prefer to work with dollars, and only dollars in my analysis. Percentages are just guesses at best. I've seen many deals I have done (and others) where if I, or they did rely on a percentage for analysis or projections, made a yes/no decision based on it, and either lost a great deal or walked into a terrible one.

Can't do that when you use dollars, when the dollars are based on actual numbers from the market the specific property is in.

2 Reply

Caleb Brown

Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes

5y

Sell. You seem very young too so you'll have a nice launching pad.

3 Reply

Kyle Wells

Realtor · Lake Stevens, WA · Member since 2018 · 122 posts · 91 votes

5y

I would sell and 1031 exchange into a larger turnkey property and have it professionally managed. You defer the taxes to the future and you lose the headache. You'll still have to manage the PM though so not 100% passive. Another option is to sell the property and pay taxes and invest in dividend stocks. It doesn't get any more passive than that.

1 Reply

Nate R.

Real Estate Investor · Austin, TX · Member since 2015 · 219 posts · 234 votes

5y

This is not financial advice, but...

You sound like you are stressed out and tired of the headaches of landlording.

You could look into rolling the money into a bigger deal using 1031 and hire a PM. But there is a conflict of interest between PM and owner, typically, as they have different incentives. Also, even with a PM it is not a completely passive option.

Another route is to go completely passive, into something like syndications as an LP, where you have no personal liability for the debt and can't be sued. In multifamily where there is bonus depreciation, you can get a big depreciation deduction in the first year, which offsets the capital gains you would have from a sale. There are also opportunity zone funds which offer deferral of capital gains, and this administration seems to favor this tax break. These completely passive options involve no time but you would lose control.

I would never let the taxes drive decision-making. Also, anytime you consider relative returns you have to look at the hassles and risks. Comparing returns if they're not apples-to-apples comparisons makes no sense.

0 Reply

Nate R.

Real Estate Investor · Austin, TX · Member since 2015 · 219 posts · 234 votes

5y

I don't know about you guys but the past year has taught me a lot of lessons.

I love liquidity. I hate dealing with tenants and contractors.

Taxes? Good problem to have.

1 Reply

Ron K.

Professional · Altoona, PA · Member since 2010 · 72 posts · 23 votes

5y

We never know the actual dollar return of any investment. The best we can do is projections based on past numbers. I'm sure many landlords with nice cash flows were feeling pretty good at the end of 2019. 3 months later many of their "actual numbers" weren't what they had expected. Thinking you can project the future is very dangerous. I love the old saying, "he who lives by the crystal ball eats a lot of shards of glass".

So why did i use 5%? I selected that rate because it was the rate of return she needed to get for an equivalent cash flow that she was receiving from the rental property. It was to show that she had other options other than keeping the property. I think we can all agree that a 5% long-term return is very conservative. Over the past 100 years the stock market returned 8.5% - 10% return. Is it guaranteed? Of course not. But neither is any projected return on real estate or any other investment.

This is a very simplified example of course and doesn't take into account other variables (inflation, loan rates etc), but it should illustrate that she doesn't have to feel locked to the rental property and can find other viable alternatives.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

Percentages like this are at best misleading. They are not accurate enough to make an informed decision. I prefer to work with dollars, and only dollars in my analysis. Percentages are just guesses at best. I've seen many deals I have done (and others) where if I, or they did rely on a percentage for analysis or projections, made a yes/no decision based on it, and either lost a great deal or walked into a terrible one.

Can't do that when you use dollars, when the dollars are based on actual numbers from the market the specific property is in.

0 Reply

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

Originally posted by @Ron K.:

We never know the actual dollar return of any investment. The best we can do is projections based on past numbers. I'm sure many landlords with nice cash flows were feeling pretty good at the end of 2019. 3 months later many of their "actual numbers" weren't what they had expected. Thinking you can project the future is very dangerous. I love the old saying, "he who lives by the crystal ball eats a lot of shards of glass".

So why did i use 5%? I selected that rate because it was the rate of return she needed to get for an equivalent cash flow that she was receiving from the rental property. It was to show that she had other options other than keeping the property. I think we can all agree that a 5% long-term return is very conservative. Over the past 100 years the stock market returned 8.5% - 10% return. Is it guaranteed? Of course not. But neither is any projected return on real estate or any other investment.

This is a very simplified example of course and doesn't take into account other variables (inflation, loan rates etc), but it should illustrate that she doesn't have to feel locked to the rental property and can find other viable alternatives.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

5% (.05) = conservative return she could expect long-term in other investment classes.

Originally posted by @Joe Villeneuve:

Originally posted by @Ron K.:

You could sell it and take the $250,000 and generate a return of $12000/year in a more passive investment vehicle and not have to expend as much life energy. $250,000 x .05 = $12,500/per year.

You have multiple option.

Where did the ".05" in your formula come from?

Percentages like this are at best misleading. They are not accurate enough to make an informed decision. I prefer to work with dollars, and only dollars in my analysis. Percentages are just guesses at best. I've seen many deals I have done (and others) where if I, or they did rely on a percentage for analysis or projections, made a yes/no decision based on it, and either lost a great deal or walked into a terrible one.

Can't do that when you use dollars, when the dollars are based on actual numbers from the market the specific property is in.

I disagree.

1 Reply

Paul MoorePro Member

Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes

5y

@Heather De La Cruz I agree that a 1031 exchange is a great plan. But you're still in Managment Mode if you buy another property. Or you can do a 1031 exchange into a DST. But the returns are often lame and they often cash out early.

I would recommend you read @Brian Burke’s great book The Hands Off Investor. This will teach you how to invest in passive syndications Then choose a syndicator or a fund and invest there. I’d recommend splitting the $250k or so among a few syndications with a few operators. Good luck!

Podcast Guest on Show #533

2 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

5y

OMG it's so simple. Sell.
Your passive income only attainable if the price appreciation is slow. With skyrocket value like now you can cash out.

1 Reply

Joe S.Pro Member

Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes

5y

What would you do with the money if you sold? If you’re like lotta people it can slip through your fingers and then you will not have the cash flow or the appreciating asset.

1 Reply

Joe VilleneuvePro Member

Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes

5y

Originally posted by @Joe S.:

What would you do with the money if you sold? If you’re like lotta people it can slip through your fingers and then you will not have the cash flow or the appreciating asset.

This is where the importance of a REI plan comes in.

2 Reply

Tyler Williams

Dentist · Taylorsville, UT · Member since 2013 · 102 posts · 68 votes

5y

@Heather De La Cruz

Property managers make your life easier, get better tenants and increase your rent.

Just like anything there are good and bad ones out there, but you have to try if you see which are best for you.

Can you cash out refi and use the money to buy another?

2 is better than 1, and 3 is way better!

1 Reply

Jeff T.

Rental Property Investor · Culver City, CA · Member since 2014 · 222 posts · 79 votes

5y

@Heather De La Cruz

Please consider a property manager.

That will take the hassle out of it and you get to keep most of the cash flow.

It would be hard to replicate that purchase now and you won’t be able to do it 5x like that guy said.

All County Polk property management is solid, if they service that area.

Florida prices will continue to grow or be stable with the influx of new residents.

1 Reply

Guy Schroen

Rental Property Investor · Pinehurst, NC · Member since 2020 · 3 posts · 1 vote

5y

@Heather De La Cruz

I like Joe’s way of netting out options but don’t forget realtor fees (6% if you use one) and capital gains tax (if applicable). A friend uses and recommends Evolve for his short term property rental.

1 Reply

Dennis Yosco

Rental Property Investor · Bloomfield, NJ · Member since 2020 · 138 posts · 128 votes

5y

@Heather De La Cruz

Sell and redeploy elsewhere. Either 1031x or pay your capital gains and wait for a downturn in the market depending on your area.

Congrats! You did it.

0 Reply

Heather De La Cruz

OP

Rental Property Investor · Lakeland, FL · Member since 2016 · 15 posts · 22 votes

5y

@Jeff T.

I don't trust All County Polk. I left a review on them over a year ago on their Google page. That's not the only property management company that I've ran into that behaves that way.

0 Reply

Deanna O.

Rental Property Investor · San Diego, CA · Member since 2010 · 377 posts · 314 votes

5y

Just read "All Polk County" reviews -- Yowza! For what it's worth, while some mgmt companies that act like that, most don't, and some are quite good. I'm in CA (so not much use for you), but have been renting from the same mgmt co for over 20 years. They've definitely learned stuff over that time frame, so maybe look for one that's been around awhile?

0 Reply

This might be dumb. I want to sell it.

This might be dumb. I want to sell it.

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