You Should Never Sell Off You Real Estate Portfolio, Unless…

by | BiggerPockets.com

I absolutely love this quote: “The best time to buy real estate is now, and the best time to sell it is never.” There’s probably a lot of folks out there who have spent five, 10, or 15 years building up these large single family home portfolios. You’re doing really well, you’re living the life, you’ve got passive income coming in every single month, and you’ve probably seen quite a bit of capital growth in your portfolio. There is no real reason why you should sell because at the end of the day, your property portfolio is producing your income, and you are living the life that you desire. Still, I think there are few instances where you should consider selling out of your portfolio.


Related: How to Boost Profits (& Reduce Hassle) When Selling Your Investment Property

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3 Instances You Should Consider Liquidating Your Real Estate

1. When a life emergency happens.

If, for whatever reason, there is some kind of emergency that happens within your family, then that is a good time to potentially look at liquidating some properties because you will probably have to cover some unexpected costs. Personally, I think you should have a buffer in place at any given moment just in case something unexpected like that happens so it doesn’t affect your property portfolio. However, it is still something that you should keep in mind because you never know what’s going to happen tomorrow.

2. When the market starts to shift dangerously.

We all saw the bust of 2008. I think at that time, things were completely out of hand. Everyone was talking about investing in real estate. You had cab drivers owning five properties. When this time of thing happens, there is most likely some sort of bubble. So, if you kind of get a sense of the market leaning that way, I think you should consider liquidating out of your portfolio and sitting on cash because cash is king. You want everything to tank, and then you can jump back in.

3. When you’re ready to move to the next investing level.

I’ve built up a very large single family home portfolio. It’s doing well, but I’ve slowly started liquidating out of it. The only reason for that is I am starting to go to the next level of investing. I’ve been around the block, I’ve done over 500 real estate deals, predominantly single-family homes, and now I’m starting to explore multifamily. I just bought a six-unit, I’m in the process of buying a 10-unit, and who knows where else I may end up. So I need that liquid capital to continue buying multifamily properties because I believe that is the next level for me, my business, and all of my entrepreneurial endeavors.

At the end of the day, if you’ve got a solid portfolio and it’s producing you money, I really don’t see any reason why you should sell out of it. Keep the cash flow coming in, keep enjoying your lifestyle, and keep doing great things.

What do you think?

Any questions, comments or suggestions comment below.

About Author

Engelo Rumora

Engelo Rumora, the Real Estate Dingo and your favorite Australian, quit school at the age of 14 and played professional soccer at the age of 18. From there, he began to invest in real estate. He now owns real estate all over the world and has bought, renovated, and sold over 500 properties. He is currently in the process of launching an ICO that will “Decentralize The Real Estate Industry.” He’s also known for giving houses away to people in need and his crazy videos on YouTube. His life’s mission is to be remembered as someone who gave it his all and gave it all away.

5 Comments

  1. Jerry W.

    Engelo,
    Thanks for sharing. It looks like you are still growing and branching out. Congratulations. Hard work and careful investing are a good combination. The only point that I disagree on in your article is point 1. When you have a family emergency it is a very bad time to sale. That is when you need to pull some equity out perhaps, but most likely that is when you need sustained cash flow. When you sell the golden goose you don’t get anymore golden eggs. Definitely sell to move up, or if you need capital for more deals, but don’t sale because you need money for personal expenses, even medical. Work out a payment plan and let the income pull you out slowly. I do like selling when your market goes crazy. it is very hard to know when that time is, but if you can keep the hype out of it most folks know what is a good and bad deal. When we mess up is when we get in the frenzy that the crowd mentality generates,

  2. karen rittenhouse

    I’ve had over 100 single family rental properties for years. The exact number changes because we sell for various reasons: I put it up for rent and someone buys it instead, not producing income like we want so we sell it, need influx of cash so we sell as properties become vacant.

    But, I’m also always buying for a number of reasons: I can buy and put in a tenant with very little out of my pocket, cash flow is high and property would be free and clear in no more than 3-5 years, etc.

    I plan to always keep a good portfolio because these are my “oil wells” that will produce income even when we stop working at investing. And, my heirs inherit at a stepped up basis so tax free inheritance. My kids and grand kids will rake in!

    Add to that the fact that they give me TREMENDOUS tax write offs allowing me to make tons of profit from flipping and wholesaling tax free and the advantages have me convinced to never give up my rentals!

  3. Christopher Smith

    Most of my properties bought in the 2010 to 2013 time frame have more than doubled in value so folks keep asking me why I don’t sell them. I have a number of reasons:

    1) I would be hit with a massive tax bill that would greatly reduce my gain
    2) They continue to appreciate (free from current taxation until I sell, and perhaps free from any taxation if I plan it well down the road)
    3) They generate tremendous current cash flow (which would be almost impossible to replace), at least half of which is offset by depreciation and other expensing techniques.
    4) I have professional management so my time input is both minimal from a time perspective, and not at all unpleasant from a palatability perspective.

    Absent some incredible opportunity or other truly extraordinary event, I intend to just let it ride.

  4. Richard Sherman

    @ENGELO RUMORA I agree 100% with your post! I am in a similar boat to you, though far fewer SFHs. I started moving out of SFH in my market (greater Portland, OR) and into Multi families about 2 years ago. I have explored going back into SFHs in different markets due to the cost of properties in my market. I bring that up because I had seen it as a natural progression to go from SFH to Multifamily…sort of “graduating”… I am not sure that is always the answer….I found myself getting PLEASURE out of talking about the larger properties…and the idea of being a “big time” apartment guy.

    This worried me. In my normal business, I care about PROFIT…I don’t care about fancy offices, how MANY employees I have with big titles and direct reports…PROFIT matters, everything else is for our ego.

    So, GO big, GO small, GO medium, but do it for the NUMBERS and the return…who cares about how “cool” people think you are (not saying that’s you, but I think that might help some people out, it has been a big breakthrough for me.

  5. Ali Hashemi

    Interesting article, though I disagree. I would argue investors should live by mottos such as “Always be ready to liquidate” or “Begin with an exit strategy in mind”

    A professional investor always goes in with a strategy that includes an EXIT STRATEGY.

    Barring unforeseen events, a professional investor sticks to his/her strategy. Evaluate at predetermined and as-needed intervals.

    In the event of an unforeseen event (financial emergency, market shift….etc) then the strategy (exit strategy included) should be revisited.

    Just because an investment property is “performing” doesn’t mean you shouldn’t sell. Performance evaluation should be checked against a variety of things (market benchmark, available cash, how much work you’re willing/able to put into re-investing…..etc)

    Even the Oracle of Omaha who hardly ever sells has a liquidation strategy if necessary.

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