Sell Out Now or Sell Out Later


One of the things that keeps folks in the owner-occupant side of the business up late into the night is the fear that the hundreds of thousands of small real estate investors who saved their cookies during the depths of the housing depression now are going to sell their rental properties all at once because prices are rising…rising in answer to seven years of prayers from the very same owner-occupant folks.

You see, it’s OK for homeowners to sell because they are making way for another worthy homeowner and maybe they’ll use their proceeds to buy another home.  That’s called the housing ladder.

When an investor sells a rental that they bought as a foreclosure and spent serious money to rehab–even if there’s such a shortage of homes that people are “flash selling” houses in 24 hours–that’s called flipping.

In response to this phobia, several organizations have conducted “cash out or rent on” surveys to provide some sort of perspective.

I must confess that I include a question on cashing out in a Memphis Invest survey we released in early June, about seven months ago.

We found that 9 percent of investors plan to sell out within a year and 23 percent in one to five years.  Over half of investors who own rental properties plan to hold them for at least five years or more.  One-third, 33 percent, of investors plan to keep them for 10 years or more.

Today the California Association of Realtors released a similar study of investors, which found, in part, that 64 percent of investors who worked with a Realtor indicated they are going to keep the property for more than a year, while about one-third (36 percent) of investors intend to sell the property within a year. Three-fourths of buyers intend to keep the property for less than six years.

Taken together and purged of spin, these surveys could send a chill up an economist’s spine.  Between 9 and 36 percent want to sell within the year.  The higher figure is CAR, which makes sense since prices have been zooming there. In our national survey, 23 percent want to sell within five years.

I’m not going to extrapolate those percentages to real numbers because the data is not very good, but you get the picture.  Because of higher prices resulting from the housing economy, enough landlords want to sell to make a dent on the housing recovery.  Go figure.


About Author

Steve Cook is the editor of Real Estate Economy Watch and writes for a several leading outlets in addition to BiggerPockets, including Equifax and Total Mortgage. He also provides communications consulting services to leading real estate companies. Previously he was vice president of public affairs for the National Association of Realtors.


  1. Interesting numbers! I have a couple questions.
    1. Are there any prior studies to compare these to to see a rise or fall from previous years?
    2. How many of these investors are fix and flippers? Many investors buy homes to fix and flip and plan to sell within a year as soon as they buy.

    • Hi Mafk;
      Thanks for the querstionms.

      1. I’m not aware of any historical research on the questnion of how low investors hold their properties. I have addressed that question in research i conducted for Move several years ago (See SFR: Birth of a Category) and more recently in the[his Invest survey last Auhust and the one cited in the article. There could very well be proprietary data from Zelman and Associaties or John Burns that I havent seen. NAR also has done a study of invenstors over the past two years.

      2. In the Memphis Invest siurvey, we found that 9 percent planned to sell in a year or less.The CAR survey found that about one-third of the Realtors who work for investors interviewed in the California survey hold for less than a year.

  2. jeffrey gordon on

    hi steve, not sure I follow on how investors selling is a phobia that I guess you are saying is bad for the housing recovery? I would love to read some reasoning as to how increasing house prices from the worst cycle bottom in my 30+ years as a real estate professional is going to be a bad sign for the future market–maybe an increase in inventory, but given how little is available now, I am not sure I buy that, maybe pricing folks out of the market with rising prices, but seeing as how we are still below the historical housing price trend line I am not convinced that people encouraged by a rising market will find a way to get the necessary financing to buy–I remember folks buying at 16% and being happy to get a house–You are probably right, as you are very experienced investor, but I would love to see the hard data supporting the supposition.


    jeffrey gordon

    • Jeffrey,

      Thanks for your question.

      I agree with you. I remember askng Mark Fleming of CoreLogic two years ago whether the settmentt of the AG agreement would create a glut of floreclosures and impact local markets. He assured me that lenders wouldnt do something so dumb as to lower the value of foreclosures they were trying to sell. I think that the same can be said today for investtors.

      See more in my recent post, “The Elephant in the Room.”


  3. In Philadelphia certain areas are literally in a building frenzy. At the same time folks who have income that would not allow walking away during the crash, are wanting to sell and finding no buyers in their price range. This is creating a whole new breed of landlords renting the one property they cannot sell.

    Besides all of the new construction, existing homes especially those to be rented are being renovated for future rentals at a fever pace. I do not fear or speculate but will go from past experience if the interest rates tick up two percent, or for that matter stay the same the eventual glut of luxury rentals and vacant spec houses are going to cause another round of foreclosures.

    Who knows maybe the standard in the future for Section 8 rental will be granite counter tops and homes in the $600k-$800k price range.

    Btw, I am selling a few flip properties I have been holding since the last bubble into this frenzy.

    Thank you Ben Bernanke!

  4. Dennis,

    Thanks for a really interesting commnent. The Philly market has had some very interesting developments over the past year, with large volumes of foreclosrues and low prices. Like you I have a hard time putting my finger on future rental demand, in light of all the confflicting reports and surveys.

    Much of the search has been done with the Millienial generation. With young peoplem what they want and what they end up getting are two different things, especially with the Millenuials today. Most want to be homeowners but how many will end up in single family rentals?


  5. Cheryl Carrier on

    Hi Steve. This is an issue that I have been concerned about for a couple of years. I had planned on a 5yr sell date. The institutional buying over the past couple of years has ramped-up the worry level for me. I just can’t see how their business model will work and I believe that their hold time was only meant to be 5yrs. Due to age considerations (I’ll be 60 in 5yrs) and my personal prediction of the next peak, I thought 2018 or whenever I felt the time was right – serious inventory increases, etc. – I would bail. I have had some of my properties for 20yrs+. I’m starting to think that I might do some trimming next spring, but I don’t need the cash, don’t want to pay Uncle Sam, like the RE Pro benefits… I am in the process of training a personal assistant to handle more and more of the “nonsense”. I’d like to go to triple net. I wish that I could bundle more than 3 properties. Hmm…maybe I can accomplish that by doing some 1031’s now to get into more expensive properties – to later trade.

  6. Jeff Brown

    I love how all these investors ‘plan’ to sell in X years. It begs the question. Where are they gettin’ their crystal balls, right? Let’s look at history and remind ourselves of the results generated by ‘planning’ to sell, OR buy.

    At the tail end of ’75 experienced pros, certainly not me back then, mostly said to buy now, buy a lot. They were dead on. A couple years later they amped up on that message, big time. Sell in 5 years they said, and you’ll make a killing. 5 years from then was the bottom of the ’81 recession. FHA hit an historical high of 17.5% or so. Nobody was making good on their ‘plans’ to sell. Fast forward to the sequel, beginning in ’86.

    Almost literally the same script, word for word. Folks saw a year of quickly rising prices in ’86 and in ’87 began buyin’ like they were possessed. 4 years later we’re in the middle of the S & L Crisis. Oops, they ain’t sellin’. Rinse and repeat for those who jumped on the band wagon with the ‘plan’ to buy property in the last bubble, then sell in X years. If it wasn’t so sad, it’d be a joke.

    The takeaway is that it’s beyond irrelevant what all these folks are ‘planning’.

  7. jeffrey gordon on

    Jeff, well said, timing real estate is about as tough as timing stocks and a falling knife you want to catch. I have thought a bit about interest rates lately and am completely unsure what happens–my dear friend’s World Class Bank CEO relative says “folks are going to be very surprised by how fast and how far up interest rates are going to move going forward” and yet some damn smart analysts seem to think deflation and money printing is going to keep rates lower and more stable than one might expect.

    My son is in town and we are talking about his DC RE portfolio this week and our acreage here in the country–talk about polar opposite portfolios!–my best advice with 35+ years in the RE business is to lock in longterm financing on the lowest possible interest rates and focus on the best located properties and wait to see what the market gives you and take a “longer” view with the expectation that there is going to be a lot of volatility going forward.

    Flipping real estate is a very low margin business when sellers can liquidate their property at market prices, this window the last few years with incredible discounts has been a “goldrush” but I doubt it will provide more than a small percentage of “short term” re investors with an ongoing business model. Unless you are doing most of the labor yourself and creating sweat equity–trading hours for dollars–the margins are just not going to be there for short term investing unless we see a very unlikely sustained annual increase in housing values above 5-8% per year.

    Blueberries are ripe, got to get out and pick some this am!


  8. Cheryl Carrier on

    Jeff and Jeff, I claim no crystal ball and none of my plans are set in stone. I’ve been in the DC area since 1981 and first bought in 1982 – had 10 or 12 properties by 1989 when the S&L crisis hit. I learned some lessons buying in the late ’80’s. There are many metrics that I follow in deciding to buy or sell. The majority of my transactions have been 1031’s. I have doubled my portfolio since late 2008, but haven’t bought in a while. I “believe” that I will have a decent idea of where the Market is trending. But I am no soothsayer. I took the last peak as an oportunity to trade (1031) out of underperforming properties into some great deals. I do think that “the writing on the wall” can be visible in advance. That said, I got stuck mid-flip on 9/11. I looked back at previous cycles to make a guesstimate – the hedge funds are a new wrinkle, although I had a friend in law school in the early-mid 80’s who worked for “Epic” (a local firm that bought up distressed properties and rented them out) who I believe went bankrupt. My stage in life drives my decision to capitalize on the next peak (or close to it).

  9. Forgive me for being new, but I’m not sure if I follow. From the research you had partaken in, are you implying that when investors accomplish selling their properties at a higher price within the next few years right when the market picks up that they are contributing to the detriment of the housing market recovery?

    • Frank,

      Good questtion. The answer, of course, is maybe,.

      Today would be a great time to sell without marketplace ramifications since inventory is so low. In a few years, probably not so great; all depends on future inventories.



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