Selling a house to reinvest in multiple properties

Homeowner · San Jose · Member since 2019 · 8 posts · 2 votes

We bought a small house in San Jose that we outgrew. At the time we couldn’t offload it so saved for a second house. We rented it for a time and have used it as a very successful Airbnb since 2015. Now we have about $500k equity and Airbnb in the area is saturated so we have decided to sell it and buy cheaper properties to rent.

We plan to put it on the market in March. Considering listing it flat rate. Any suggestions on this?

Areas of interest to purchase include Fresno, Merced, Visalia, Cincinnati, Detroit. Also consider Artesia and Clovis NM.

How does one buy a property if they aren’t sure where to buy but mainly interested in deals?

Would definitely consider Airbnb again in an area not so saturated.

Any suggestions appreciated!

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Jeff Zimmerman

Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes

@Lisa Hill, great questions. first, off I'd really advise you to spend time in the area you want to invest in, I've heard too many horror stories of people who bought something sight unseen and then had a rude awakening when they actually visited. Some investors do it this way and have success but it's a pretty big risk, so when you talk about buying a property at a distance, that's the first thing to do...visit and research.

2nd, make sure you have a team in the area that you trust, especially if you can't drive there on a weekend to check on it. After you have your team in place (agent, manager, etc...) you should be pretty good to go.

As far as FSBO of your current property, it just depends on how competent you feel in the sale of your home. If you know what you are doing and understand the sale market, negotiating, ethics, and the typical way transactions are done in your area it could be a nice way to go and the money you save in paying for a listing agent is truly a saving. If you don't feel competent then you could leave quite a bit of money on the table by not using RE pros to handle the sale. Really good real estate agents pay for themselves and then some while helping to take a lot of liability off your plate. It really just depends on your own competency level.

If I can help further in giving you some questions to ask agents when/if you choose to interview them or if I can tell you anything about Fresno I'm more than happy to do that, feel free to message me.

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Deene Souza
Rental Property Investor · Visalia, CA · Member since 2019 · 2 posts · 0 votes
6y
@Lisa Hill curious. What is the connection to those particular cities?
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Lisa Hill
OP
Homeowner · San Jose · Member since 2019 · 8 posts · 2 votes
6y
@Deene Souza great question. They are affordable in comparison to San Jose. I lived in a superb of Detroit for a time and my husband lived in Cincinnati.
0 Reply
Edgar Butler
Real Estate Agent · Metro Detroit, MI · Member since 2019 · 19 posts · 12 votes
6y
@Lisa Hill That amount of equity can go a long way to funding a profitable portfolio in Detroit or Cincinnati.
Couple of things I’d recommend is The BP book on “Long Distance rental investing”. The book has a lot to offer for a person in your situation.
Search the forums here for the different cities your looking at, a lot of people with great knowledge on investing in these areas.
Lastly when you figure out where, reach out to some investors, realtors, contractors etc to pick their brains on the topic. Most people are receptive and will be willing to help.
1 Reply
Kris Wong
Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes
6y
Depending on how active you want to be in building your team and managing your portfolio of investment properties, you may want to consider a passive investment in multiple apartment syndications. This can be a great way to earn a nice return, with very little investment of your time.
2 Reply
Lisa Hill
OP
Homeowner · San Jose · Member since 2019 · 8 posts · 2 votes
6y
Kris Wong, I will look into that option. Thanks!
0 Reply
Kenneth Donaghy
Real Estate Broker · San Diego, CA · Member since 2016 · 355 posts · 195 votes
6y
@Lisa Hill, looks like you have a lot of options. If you do sell, rather than cash-out-refi, Be sure to look into tax deferred 1031 exchange. There are strict timeframes you must obey, so it's better to know your strategy first. If you lived in the property 2 of the last 5 years, you will also may not have to pay capital gains tax up to 500k when married.
If you want to get the most value for you home, I would stay away from flat rate and discount brokers. There is less incentive to bring value to help you reach your goals. A reputable Realtor will negotiate better on your behalf, help set realistic expectations, create better exposure, allowing for a smoother transaction, most likely creating more value than you would've saved going with a flat rate or discounted broker. I'm happy to refer you great candidates.
2 Reply
Jeff Zimmerman
Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes
6y
@Lisa Hill, great questions. first, off I'd really advise you to spend time in the area you want to invest in, I've heard too many horror stories of people who bought something sight unseen and then had a rude awakening when they actually visited. Some investors do it this way and have success but it's a pretty big risk, so when you talk about buying a property at a distance, that's the first thing to do...visit and research.
2nd, make sure you have a team in the area that you trust, especially if you can't drive there on a weekend to check on it. After you have your team in place (agent, manager, etc...) you should be pretty good to go.
As far as FSBO of your current property, it just depends on how competent you feel in the sale of your home. If you know what you are doing and understand the sale market, negotiating, ethics, and the typical way transactions are done in your area it could be a nice way to go and the money you save in paying for a listing agent is truly a saving. If you don't feel competent then you could leave quite a bit of money on the table by not using RE pros to handle the sale. Really good real estate agents pay for themselves and then some while helping to take a lot of liability off your plate. It really just depends on your own competency level.
If I can help further in giving you some questions to ask agents when/if you choose to interview them or if I can tell you anything about Fresno I'm more than happy to do that, feel free to message me.
5 Reply
Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
6y
@Lisa Hill, Whatever you do, answer your question before you put your property on the market. You're going to want to do a 1031 exchange because otherwise you'll end up paying a whole heap in taxes that could otherwise go towards your new purchases.
But to go into the relatively tight timelines of a 1031 exchange with half the country being your target market is a recipe for disaster. I'm watching a client lose an exchange now because they didn't decide on sector and location before they sold. Now they're at their 45 days and still trying to find a "deal" and the pressure of effort to research and find those deals is killing them.
Too many options will short circuit your thinking very quickly. Take those target markets now and ask why. Then put them into a hierarchy of your first priorities. Then look at the first two deeply gathering every bit of intel you can about current status in those markets. Find out what a deal means in those two markets. Then identify "deals" available right now. Chances those same "deals" will be available in 60-90 days. The deals will just have different addresses. .
Once you know this then select the one market and spend 60 days looking at every potential deal that comes along while your old property is on the market. You can always go into contract on your new property before your old property closes in a 1031 exchange. So you can act as quickly as you want. But even if you can't pull a trigger before you sell you still have another 45 days from the closing of your sale to find a property. And you have extensive experience in that market so you'll know a deal better when you see one.
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Lisa Hill
OP
Homeowner · San Jose · Member since 2019 · 8 posts · 2 votes
6y
@Dave Foster thanks for your input. We haven't really lived in the house for the last 7 years so I dont think we can do a 1031. It has been a short term rental with all bills in our name so wondering how they would know?
1 Reply
DJ DawsonBusiness Member
Real Estate Agent · Sacramento, CA · Member since 2015 · 394 posts · 259 votes
6y
Originally posted by @Lisa Hill:
We bought a small house in San Jose that we outgrew. At the time we couldn’t offload it so saved for a second house. We rented it for a time and have used it as a very successful Airbnb since 2015. Now we have about $500k equity and Airbnb in the area is saturated so we have decided to sell it and buy cheaper properties to rent.

We plan to put it on the market in March. Considering listing it flat rate. Any suggestions on this?

Areas of interest to purchase include Fresno, Merced, Visalia, Cincinnati, Detroit. Also consider Artesia and Clovis NM.

How does one buy a property if they aren’t sure where to buy but mainly interested in deals?

Would definitely consider Airbnb again in an area not so saturated.

Any suggestions appreciated!

Lisa I would just advise you tread lightly on the flat rate agents, you tend to get what you pay for when working with them from my experience.
to your point on not being sure where to buy I would suggest like the others to come up with a game plan in which you would like to execute BEFORE you list your home, if you are looking to 1031 that would be very important and decrease the stress as you watch the clock tick :)
Best of luck. I have a couple of agents in the central valley I could recommend as well :)
1 Reply
Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
6y
Actually @Lisa Hill, that is exactly the property that would qualify for 1031 treatment. For the last several years you have been using it for productive investment use. Bills in your name is fine. As long as you declared the income?? Absolutely you need to 1031 it. You also have quite a bit of depreciation you will need to recapture without a 1031.
I just sent you a white paper on the 1031 process. That part looks good for you. Now you've just got to decide what and where to buy :)
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Darryl PutnamPro Member
Investor · Mountain View, CA · Member since 2016 · 40 posts · 25 votes
6y
@Lisa Hill congratulations on the equity you have built in your rental. You are wise to be looking outside the San Jose area. Many places can provide a higher return on your equity.
In the Fresno area I can personally recommend @Jeff Zimmerman as a great agent to work with for investment properties. He is not only an agent but an investor.
As far as selling your property in San Jose you should consider talking to @David Greene Team. He is not only are favorite cohost of the BP podcast but he and his team are Rock Star agents in the Bay Area. David can thoughtfully walk you through FSBO vs using an agent. For what it is worth I have been in the Real Estate game for a long time and have always used a broker to sell my properties. They always earn every penny.
3 Reply
Arlen Chou
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
6y
@Lisa Hill have you considered placing a HELOC or even a cash-out refi on the property and turning it into a standard rental? San Jose is a big place but the housing shortage in the region should allow you to find good tenants quickly. Most investors who leave the Bay Area look back years later and regret the appreciation that they will no longer enjoy.
2 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
6y
@Lisa Hill: If you're interested in Detroit let's connect and have a conversation:)
Also, please read our articles about Detroit here on BP as we pretty much tell it like it is. We've encountered too many out of state investors that leaped before looking and regretted their decision because the reality of Detroit didn't meet their expectations.
[email protected]248-209-6824
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