Timing of when/if to sell STR producing well

Member since 2023 · 9 posts · 9 votes

First time posting. Would gladly welcome feedback. Bought a 6/6.5, 3,600 sq ft home second row ocean facing Feb 2022. It is cash flowing very well. First yr 160k gross (end of May-December) and this year already over 210k gross. Bought for 1 million. Houses same as mine are selling for 1.9+ in one year. Got me thinking, when should I sell? I know some will say keep it forever others would sell. Looking for solid, reasonable wisdom on when/if to sell. Appreciate the feedback.

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

Quote from @Salvatore D'Agostino:

In my mind, it's a very simple answer: you sell when you can invest the money into something that produces a greater return or moves you closer to your goal.

The reason you can't decide what to do is because you haven't set goals for yourself.

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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y
This sounds like a keeper to me.
What are your net numbers looking like?
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Salvatore D'Agostino
OP
Member since 2023 · 9 posts · 9 votes
3y
@John Underwood around 10k month. What I think I’m just thinking generally is there ever a time to “cash out”? If you can accelerate cash then reinvest it into more properties, why wouldn’t you? Does that make sense?
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Andrew SteffensBusiness Member
Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
3y
This IMO is truly a personal decision. Obviously refi is probably out of question due to rates. If you can take the money out and make a higher return or drive growth to your portfolio you should. If not, keep it and keep paying it off with OPM.
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
3y
Hey @Salvatore D'Agostino, gratz on the success.
You have to ask yourself, what would I buy with that cash that performs better?
We have been approached about 2x a month on selling our lake house. We could make a killing on it, but I would never find another one that performs this well.
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
3y
Quote from @Salvatore D'Agostino:

@John Underwood around 10k month. What I think I’m just thinking generally is there ever a time to “cash out”? If you can accelerate cash then reinvest it into more properties, why wouldn’t you? Does that make sense?

Absolutely, if you can replace this house with more houses that net more money.
That is hard to do in this economic environment.
If you already have a great house, great location that is netting you 10k a month, I wouldn't mess with the goose laying the golden egg every month.
I would instead look for another property to add to my portfolio.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Salvatore D'Agostino:

In my mind, it's a very simple answer: you sell when you can invest the money into something that produces a greater return or moves you closer to your goal.
The reason you can't decide what to do is because you haven't set goals for yourself.

The DIY Landlord Book4.7248 Reviews
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
You sell when you want to, not when you need to. You don’t want to be a motivated seller.
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Salvatore D'Agostino
OP
Member since 2023 · 9 posts · 9 votes
3y
@Nathan Gesner appreciate the thoughts. We do have cash flow and net worth goals for sure. I think I'm more wondering when to leverage the cash to purchase more units which will in turn meet or beat the present net cash flow on the unit plus give me more appreciable units. I'm just guessing but thinking once the interest rates come down there will be a spike in buyers/sales driving up appreciation on all units. Get what I'm saying?
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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Salvatore D'Agostino:

First time posting. Would gladly welcome feedback. Bought a 6/6.5, 3,600 sq ft home second row ocean facing Feb 2022. It is cash flowing very well. First yr 160k gross (end of May-December) and this year already over 210k gross. Bought for 1 million. Houses same as mine are selling for 1.9+ in one year. Got me thinking, when should I sell? I know some will say keep it forever others would sell. Looking for solid, reasonable wisdom on when/if to sell. Appreciate the feedback.

when equity LTV hits 60%
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Sarah KensingerPro Member
Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
3y
Plenty of thoughts on here, but I'll had another one. I can tell you finding another property with revenue like that is going to be VERY hard. Interest rates and purchase prices are killing the cashflows of STR except in rare cases! I would not be selling this property right now, unless you want to get out of the STR space. Sometimes even though the grass, or in this case money, looks greener on the other side, it's really not.
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Mike Anderson
Rental Property Investor · Clayton, GA · Member since 2020 · 185 posts · 152 votes
3y
If you can get 1.9 for a 1million purchase, plus you cash flowed for a year and a half. Why not take that money off the table? I'm not sure what your net is off your income but how many years would you have to run it to make that 900k back?

No one has ever gone broke taking profits. That sort of run up almost double is not normal and not natural.
2 Reply
Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
3y
I concur with all those who posted before me...when it comes to vacation rentals, my thought process is more along the lines of 'have I maxed out the income potential or is there something else I can do/add to increase it.' I have a benchmark for each of my properties but I don't consider selling until it is reached, I'm in seller's market environment, and I have found another property or other investment for reinvestment. And, another reason to sell: it's more trouble than it's worth/bored with it/just done. Congrats on being in a position that you can ponder next steps. I do recommend waiting to sell until interest rates drop; I recently sold a successful vacation rental property located in a highly-sought after beach community - and the buyer pool was dramatically different than a year ago.
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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
3y
Quote from @Mike Anderson:
If you can get 1.9 for a 1million purchase, plus you cash flowed for a year and a half. Why not take that money off the table? I'm not sure what your net is off your income but how many years would you have to run it to make that 900k back?

No one has ever gone broke taking profits. That sort of run up almost double is not normal and not natural.

Agree I think the number doesn't make sense , we know better if we know the actual per square feet price ranges and its trend.
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Scott K.
Member since 2020 · 223 posts · 233 votes
3y
It's a simple math problem. What is the total amount of money you've invested creating per year as ROI?
Let's say you put 20 percent down, plus 100k in furniture, repairs, rehab, setup costs (months of mortgage during setting up etc) that's 300k invested. You're making 120k profit a year (plus some equity appreciation of course)
120/300 = 40% ROI. You will be very, very hard pressed to find a better property return than that. However! You said it could sell for 1.9 million. So if you sell, you're getting back 200k + 900k (value increase) roughly, so 1.1 million.
Now the math asks - could you invest that 1.1 million and produce more than the 120k profit a year you're getting now. In stocks? Probably not. In other STRs? Yes, but you'd also be looking at months, if not years to find enough properties to get that back (also consider you'd have to change markets, otherwise you're just exchanging one house for another, and you reap no significant benefits). Also consider if your income can support a mortgage for 1.9 million. Especially once you sell your cash producing property.
Overall I'd argue keep your 40 percent ROI property. Use the profits to buy more in a year or two. But that's my personal preference of buy and hold, instead of flip. You have to ask yourself which type of business do you prefer?
3 Reply
Monique P.
Member since 2023 · 88 posts · 62 votes
3y
@Salvatore D'Agostino Just wanted to say congratulations on this killer investment property!!
3 Reply
Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
3y
@Salvatore D'Agostino
I don't think anyone can answer this for you without knowing your personal situation and your ultimate goals.
Are you tired of managing properties? Is this something that produces cash flow with little headache each month?
Are you more interested in cashing out now and putting it in something even more passive for a lower return?
Very difficult to answer.
Personally, I don't sell and I don't recommend selling unless you have a SPECIFIC plan for the funds.
What makes me beyond anxious is having unused capital. If you have an exact plan for the proceeds that's one thing, if not then I would hold on to it until you do.
There aren't many good places to park capital right now - in my opinion so if you're already in a good investment it might be best to stay there.
5 Reply
Marcus R.
Real Estate Agent · Denver CO · Member since 2019 · 209 posts · 332 votes
3y
You don't draft Michael Jordan and then trade him...keep the property.
4 Reply
Melissa Nash
Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
3y
It sounds like you are already successful in that property- so my answer is:
Never. The first rule of real estate is to never sell a cash flowing income producing property unless you can 1031 exchange into more and higher producing properties. :)
Almost every single client that I work with says these two things: "I wish I started sooner", and "I wish I never sold my property (blank) years ago".
What is your end goal and strategy? Financial freedom? Generational wealth? And what is your timeline? The good thing is its just math and planning. Easy right?
Best of luck out there and continued success.
2 Reply
Brooklyn McCarty
Investor · Member since 2022 · 1k+ posts · 754 votes
3y
Well done!
IMO, I’d hold to it and let it keep doing its job. If you already have that much equity unit, it’s only going to grow even more in the next 5-7 years
0 Reply
Vicky L.
Investor · Simi Valley, CA · Member since 2019 · 46 posts · 35 votes
3y
@Salvatore D'Agostino are you in danger of losing the STR because the city is making new regulations that will shut down STRs?
1 Reply
Salvatore D'Agostino
OP
Member since 2023 · 9 posts · 9 votes
3y
@Vicky L. I haven't heard that plus STR's are a huge part of the economy here
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
3y
It goes back to the Old Testament. “ buy low, sell high”. “Collect early, pay late”. “NEVER pay retail”
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Mike Anderson
Rental Property Investor · Clayton, GA · Member since 2020 · 185 posts · 152 votes
3y
Quote from @Marcus R.:

You don't draft Michael Jordan and then trade him...keep the property.

Jordan for Kobe and Shaq in their prime straight up you don't do that trade? Point is nothing is 100% nuance is important.
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Marcus R.
Real Estate Agent · Denver CO · Member since 2019 · 209 posts · 332 votes
3y
@Mike Anderson - Love a good sports debate! In hindsight, yeah I'd make that trade 10/10 times but at the time I would consider it to be too risky. How it relates to the OP is he has a homerun asset already, I'd hang onto it vs chasing something else.
The numbers will only get better with time and he'd have to 1031 which adds some add'l complexity. No wrong or right answer but IMO I think the best dynasties draft good players (assets), develop the players (assets), and keep them.
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Salvatore D'Agostino
OP
Member since 2023 · 9 posts · 9 votes
3y
@Mike Anderson @Marcus R.loving the sports debate as well. Both of you, everyone on this thread has provided great insight and thoughts. Genuinely appreciate the feedback. Now, do I stick with Jordan or trade and get me Kobe and Shaq? Ha!
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