All Forum Posts by: Jacob Sampson

Looking for your decision making process.  Here is my current scenario:

I am a buy and hold guy.  I have 44 units started purchasing in 2005.  My goal is to get to 50 units then pay them off and semi retire.  That being said, this current housing market is making me wonder if I need to shift just a bit in order to take advantage of what might be a once in a decade or more scenario.

I have a 2 bed 1 bath home on a slab in a B- neighborhood that I purchased for $29k.  I will likely put about $20k into the remodel and it will likely rent for $800/month.  I have several homes and a long history in the area.  I consider this property my bread and butter.  It is the type of property I am always looking for.  Good area and solid rent to purchase/remodel price. Plus I love slabs.  With that in mind I had not entertained the idea of selling.

But my realtor came a long and after evaluating the property and current market thinks she can ask $95k.  Assuming $8k in transactions costs I clear $37k.  This seems like a no brainer to sell even if my long term goal is buy and hold.

So my question is what is your decision making process for this scenario?  Do you stick to your long term goal or is their some calculation like, if I can make 10 years worth of profit all at once then I go ahead and sell?

I appreciate the feedback.

I would just start a whole new lease with only the current three tenants on it.  In addition just send a letter saying you are no longer on the lease.  The other question I would have is how is the deposit going to be handled?  Are you giving that person their portion of the deposit back and the other 3 will give you that amount back or is the person leaving just giving up their portion of the deposit.

Both me and my partner sign for the debt and thus both of our financial situations are considered. 

I wouldn't trust the BP calculator.  How much rent will the property generate per month?

I recommend a local bank. They usually have more flexibility. In my situation, my bank does a loan that spans multiple properties. This allows me to utilize my equity by keeping the loan to asset value where the bank wants it. I am not aware of banks tightening up at this point. I just got a 150k HELOC, no problem.

 I agree with Patrick and would add:  Profit doesn't just happen, you have to manage it into existence.

I can't speak for all banks (or any for that matter), but I can say that it has never been an issue for me. Primarily, because it doesn't matter what entity holds title (the bank doesn't care). The bank cares about the people signing for the debt, which will be you. Now you may run into trouble if your debt to income ratio is unattractive, but that is a different issue from whether or not you have an LLC.

I guess it depends on your goals.  If your goal is to build a buy and hold portfolio then it may not make sense to sell.  All of your properties will eventually get to the point where you could sell the one and buy multiple more.  Also, you don't need to sell to get access to the equity.  Many banks will allow you to use the equity from the one property to fund the purchase of another.

Now, it might make sense to sell and stock pile the cash away, waiting for a better time to invest.  I would not recommend rapidly growing your portfolio in this current market.  It is way too hot.

Another reason you might sell is that it sounds like you purchased this as a past personal residence.  Most people don't purchase their personal residence for a price that makes it a good investment.  Take advantage of this lucky market (for sellers).

There shouldn't be any issue refinancing with your properties held by an LLC. Happens all the time. The biggest reason it is no problem is that your bank is going to require you to personally sign for the debt. In fact you are probably personally liable for your current debt. The LLC does not protect you from the debt side, only the lawsuit side.

Additionally, and not to be an a-hole, but that is the exact sort of research you should be doing.  You need to know the answer to that question for your area or you are not yet prepared to invest.  I would suggest looking at local real estate advertisement, posting your own fake ad, talking to local investors, etc.