We’re Selling Our Rentals (Here’s Why)

21:43Brandon Turner:So if this was 2025 or late 2024, I might consider fixing an asset and keeping it because the cash on cash return I would get from buying a new asset was not as good as it is now. And so now the decision in this year might be, hey, let's just take this and go buy a different asset because I can get so much better numbers. I can get a higher return for that money that I'm going to spend. Whereas a year ago, that wasn't the case. That makes so much sense. I think Henry and I could probably do this by vibes because we just have, as an investor over time, you will get there if you're not there yet.

22:25You will just be able to walk into a building and be like, this has potential or it doesn't. You just know. If you know your market well, if you know what construction costs, you know what rents are going to be in the area, you know what people want to rent or buy, you'll be able to know. And the vibes that I'm talking about is basically just a cost benefit analysis that you're doing in your head. I'll actually just give you an example. I'm choosing to sell a property. It's a duplex. I got a great buy on it. I haven't hold it that long, but because I've got a good buy, I can sell it and make money off the equity.

22:56But, you know, the layout of one of the units is weird. And I was like getting quotes for doing the layout. I think it was going to be around 30, 35 grand to do the renovation. the amount that it was going to increase my rents was like 200 bucks a month which is not very good in my opinion and you know it was going to be 30 grand to i talked to my agent maybe you know the arv was 50 higher than you know it was going to be it's like so am i going to invest 35 grand to make 15 grand in equity and 200 bucks a month in rent i was like no i could just keep that property but it's not going to rent very well as well as i want to with the weird layout and I have a lot of equity that I've built in this property.

23:38So why wouldn't I go do, find a property, find a project where I could do a better bird, do the kind of renovation I'm talking about where the numbers are just better, where it's gonna increase my rent more than 200 bucks a month, where I'm gonna earn more than 15K in equity for investing 35K. Like for me, it didn't take that mathematical analysis. I could just walk in and be like, okay, this is not gonna work. But that's kind of what's going on in my head. And if you're in a sort of a newer investor, you should just do the numbers, get the quotes, run the comps and figure that out. And I think you'll see that sometimes selling actually makes a lot of sense.

24:14Brandon Turner:Yes. Some of the other reasons I sell, look, I'd be lying to you if I told you I hadn't sold a property that positively cash flows just because it's a big pain in my butt. So I will sell a headache property. Well, like what kind of headaches? I'm just curious because I have a good example. I'm thinking of this, but what do you see as headaches? Is it maintenance? Two reasons. It's either maintenance or it's just super hard to rent. When it rents, great. Cash flow is great. But maybe something weird about it makes it hard to rent. And that is a big headache in my butt because vacancies kill you.

24:50That's the one I was thinking of. I sold a property because my neighbor just kept bothering my tenants and they kept moving out. I would get all of these great tenants and they're just like, this guy, Ed, that's his real name.

25:02Brandon Turner:it's so weird we are not hiding names to protect the innocent i won't share his last name but ed dude killing me uh and like i would have these great tenants they're like we're sorry we like love the house but we're leaving because this guy won't leave us alone and i tried talking to him and like eventually i was like you know what i was just gonna do something where i don't have to deal with this guy because he's annoying to me and i think the key is like i could do that because i had a good buy because i executed my business plan and I had already built enough equity in this property that if I went to sell, the transaction costs aren't going to kill me.

25:37I think the problem you get in, and I think that we should talk about this a little bit, is when you're forced to sell within first year, two years, that's where I think you really can get in a little bit of trouble. That's the situation that I think I personally try and avoid.

25:53Brandon Turner:All right, Dave. Since we are landlords talking about selling properties, either because they got the wrong vibes or the numbers don't make sense to us or we've maxed out the equity. Are we saying that new investors should be scared to buy properties from older investors? Hold that thought because I want to hear your answer right after the break. If my house had a resume, it would probably say great at structure and not much else. I'm the one paying the mortgage. My house mostly just stands there looking supportive. When you're away, it doesn't actually have to sit empty though. you can list your space on Airbnb.

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27:06It's about the income from your properties. That's where DSCR lending comes in. And it's why a lot of investors end up working with lenders like Host Financial. Host Financial qualifies deals based on property income, not personal income. So you're not dealing with W-2s or tax returns or DTI constraints. And with 80 to 85 % LTV, you can stay more flexible as you scale. It's just a different framework, one that tends to align better with how investing actually works. If you're buying rentals, refinancing, or growing your portfolio, go to hostfinancial.com. That's H-O-S-T financial.com and see what you qualify for.

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30:32Brandon Turner:All right, we are back on the BiggerPockets podcast. I am here with Dave Meyer, and we are talking about why we are selling off some of the properties in our portfolios. And some of the things that we've covered is basically understanding and tracking the data for your portfolio so that you can make informed decisions about what you should or shouldn't sell based on what your return on investment's gonna be for selling, based on whether you think you could buy something new that's gonna give you a better return than either fixing or selling something that you currently have. But just in general, being able to evaluate your portfolio on a consistent basis and make informed decisions.

31:09I believe that every real estate investor has to do this and has to do this well if

31:16Brandon Turner:they want to maximize their portfolio. But we've been talking a lot about what we are selling or why we're selling some of these things. And I bet it's giving some new aspiring real estate investors pause about buying properties from old crotchety landlords like us. So I want to hear your thoughts. Should new investors be scared to buy properties from landlords who've owned properties for ages? Absolutely not. I actually think it's some of the better opportunities, to be honest. Like I have definitely sold properties where I'm just like, I don't have the hustle anymore to do this. Or my portfolio is so big that like, I don't want to dedicate all of my time to this one property.

31:58but I've definitely left meat on the bone when I've sold properties for to people. Like I, you know, I think that this happens quite a lot because investors like Henry and I, or you talk to James, who's always like trading out properties as well. It's just, sometimes it's not your buy box at that perfect time, but different properties work well for different people at different times in their life. So like, I can just think of properties I've sold that would have been a perfect live in flip or perfect house hack for someone, but I'm not house hacking anymore. So it's not a good idea. I'll also just throw out, like I was looking at a deal, a landlord who owned a couple of properties.

32:38It was three, four units in a neighborhood I like. And unfortunately he passed away and his wife had the property, didn't know what to do with it. There had been a lot of deferred maintenance over the last couple of years, but like, I was like, this is a pretty good deal. The deferred maintenance rents are well under, so they're pricing it low, but I can actually make something out of this. I think you see that a lot with older landlords is that they don't keep up with current rents and that's an opportunity. Are there some people who are going to demand top dollar and they're hiding something?

33:08Yes. But if you do your due diligence, I think actually buying portfolios or buying from old landlords is probably one of the better options right now.

33:18Brandon Turner:Yeah, I mean, a solid chunk of my portfolio came from landlords getting out of the business. But this is the entire point of the underwriting and due diligence process. Like, that's what it's for. Focus your time and efforts on getting really good at understanding your buy box and getting really good at analyzing deals and making the offer that makes sense for you. Not the offer that you think the seller will accept. And I think that new investors especially get caught up in this. They either don't make an offer because they just assume the seller will say no. And so they make a decision for the seller or they increase their offer because they feel like what they need to pay is too low, but they really want the deal.

34:05Brandon Turner:And so they fudge the numbers a little bit and increase their offer because they don't want to hurt somebody's feelings. You cannot do this. Do not be afraid to buy from anyone. That's right. Get good at underwriting. Get good at analyzing. Get good at knowing what questions to ask about deals to give you the comfort you need for that deal. And then buy the ones that work. It doesn't matter who owns it. Control what you can and you can control how you underwrite. You can control what you offer. What a seller wants for their property is between them and Jesus. That ain't got nothing to do with what I can pay for it.

34:41Brandon Turner:And that goes for me too, as a seller of properties right now, just because I'm asking 500 ,000 for a property doesn't mean that's what somebody has to offer me. If somebody offers me something for 250 for it, I'll look at it. Does it mean I'm going to accept it? Nah, but shoot your shot. Yeah. A hundred percent. That makes total sense. I, you know, this property I was just talking about the one that the duplex I decided to, to post on the market. My agent was like, you know, he could list it for, you know, I think it was like 290, 295. He's like, or I might be able to find someone off market who will buy it for like$285.

35:13And I was like, great, sell for$285. You know, like for me, the time is more important. And so someone could be walking into 10 grand of equity because I don't want to be inconvenienced. And like, that's just how it works, right? Like that's how investors, a lot of investors work. Like sometimes you trade money for convenience. And if you're an early investor, you trade convenience for money. Like that's kind of the way this works. If you were going to hustle and go do these things, maybe you're going to be a little inconvenienced, but you can get 10 grand of equity off me today. That's just how investors work.

35:45So I think that's why you need to be able to underwrite, understand what the value of this property is, and be able to understand where it fits, what role it plays in your portfolio. And you can absolutely find good deals from existing landlords.

36:00Brandon Turner:What would you say should be the timeframe that investors should be analyzing their portfolio? Like, should they do this once a month, once a year? What do you think makes the most sense? I would recommend most people do it twice a year, at least. I probably do it quarterly because I'm just a crazy person. But I think twice a year is the right number for most people. You can get away with once a year if you just know you're not going to do anything that year. Sometimes you're like, I'm so busy. I have a new job. I have a new baby, whatever. You're just like, fine. But if you're trying to grow your portfolio and actively manage, I think six months, something like that.

36:38Brandon Turner:I think you should be doing it in the winter and in the spring at a minimum because it may take you a year to get a property ready to sell so that you can maximize the value. It may take you six months, right? And so if you want to be strategic with it, like we are right now, I am listing several properties that I probably could have listed a couple of months ago, but we held off on listing them until the spring. And we were actively getting those ready to sell so that we could list them in the spring. So had I not been looking at this six months ago, I wouldn't be able to capitalize on what I'm hoping is more bang for my buck by having them ready to go and put on the market in spring.

37:17Brandon Turner:It may be that you've got a non-renew a tenant, right? And just put them on month to month so that you can be ready to list that property. It may be that you've got to get a tenant out so that you can do some refreshes to that property before you list it. There are things that are going to have to happen with a property before you can get the most value out of it. And if you're not doing this at least twice a year, you're going to miss out on opportunities to list them in favorable times in order to maximize the return that you're going to get for selling that property. That just kind of happened to me.

37:49There's this property I'm thinking about selling. I haven't decided yet, but I was looking at this in January and I was like, oh, the lease isn't up till the end of July. So like, there's no reason for me to really think about it. But I like said in my calendar, like, think about this again in April, because then I would have three months to figure out whether or not I'm going to sell it, talk to the tenant, if they're going to re-up, you know, just do the analysis. It sort of just reminds you. And I know if you only have one property, you probably know when your leases are up, But when you get to a bigger portfolio, like you forget.

38:20And so you just kind of need to be doing this continuously. I think that makes a lot more sense. So Henry, before we get out of here, one last question. What do you say to the, you know, people who say buy and never sell? Like, what's your last piece of advice for people listening here?

38:33Brandon Turner:I think buy and never sell is just unrealistic advice. Let me give you an example. If I bought a hundred year old house, right? And even if I spent some money renovating that property, and now I'm 20 years in, well, now that house is 120 years old. If the market is favorable in terms of being able to buy something that's going to give me a higher cash on cash return than the property that I currently own, even though I've been paying on it for 20 years, if the maintenance is kicking you in the teeth, it may make sense to sell that asset to go buy a better quality asset because my goals and what I want for my family and what I want out of my real estate business, that older property is not the best fit for my goals.

39:23Brandon Turner:So it's too much of a blanket statement to say you should never sell. Sometimes you just gotta sell an asset because you might need some cash. Like people who say they never sell is crazy to me. That just means to me, I just think you have a bank account full of money and you never, ever, ever have to worry about any of the expenses involved in real estate because you're just flush with cash all the time. Yep. I mean, it doesn't make any sense. I'm glad we're doing this episode. And part of the reason I wanted to do it right now is because the other day, my real estate agent in Denver just sent me a text and was like, this property that I used to own and sold just hit the market again.

39:59So I'm just going to give you the numbers right now. I bought this in 2010. It was my first deal. I bought it in 2010 for$462. I sold it in 2018, so eight years later, for$1.025 million. So huge, huge return. I had three partners on that deal, but huge return there, right? Massive. But it was a pain in the butt. We had some issues with tenants. We had break-ins. It was a pain in my butt. You know what they're selling it for now? 1.050. So I made about$600 ,000. And then in the eight years since, people have made$25 ,000. I'm just saying, I haven't timed all of them that well, but I just want to show that I took that money.

40:46I 1030 to one it into two other deals that have done very well. And I just think I saw the writing on the wall that the property had reached its maximum age. Now, this might go back on scaring people from buying from people like I said, but I just want to show people that this actually works. Like I didn't pull all my money out of the market. I reinvested it. Those deals have done well. I've actually sold both of those deals and I've reinvested those again. So I just, that's my style of investing. I like optimizing, but I just want to show you that it actually works. Had I held onto that deal forever, like everyone said you should have, I would have made a lot less money.

41:24So I just want to give you some examples and I have plenty more where this actually works. So just think critically about the best way to use your time and money. That's the job of the investor and selling is a crucial tool in your tool belt as an investor.

41:38Brandon Turner:Again, I know people are listening to that and thinking, oh, you got lucky in time to market. And was there some luck to it? Sure. But there's a lot of experience and research to that too, right? At the beginning of this episode, you talked about, you think that values are going to either stay flat or come down a little bit over the next few years, right? And if you've been in this business for the last five years, you know, we got huge equity bumps in between 2020 and like early 2023, like drastic equity bumps. And so like, if you have an understanding of real estate in general, the general, what's going on on a national perspective, and then diving deeper into what's going on locally in terms of values, it can help you make decisions like this.

42:23Brandon Turner:So what Dave was essentially saying is, I don't think I'm going to get a massive equity bump in the next few years. So if I'm going to sell something, now's probably a good time to do it because it's not like I'm going to miss out on massive amounts of equity by selling that asset over the next couple of years, right? So it's not just luck. It is critical thinking and it is understanding your market and knowing what data points are important to those things. I think in the kind of market, in a buyer's market that we're in, it's a good time to reload right now. It's a good time to take stock and say, hey, my portfolio has been great.

42:58I am super grateful for everything that it's done for me so far. Might need to change what it looks like a little bit for the next phase of my investing career. That's where I'm at, but I encourage people to think like that all the time, every year. Think, is this the right portfolio for me at this point in my life? If not, bite the bullet, sell some stuff, reallocate, use some of your money, have fun, go on vacation, whatever you want to do.

43:23Brandon Turner:Buy the Lambo, post it on social media, tell everybody how to get rich in six years. That is what I'm going to do. What's this property? What's this duplex sells? I'm going to go buy a Lambo. Oh gosh, that'd be the day. For the record, Dave will not do that. Dave would buy like a brand new 4Runner before he buys a Lambo and then drive it for the next 50 years is what he would do. All right, everybody. Thank you so much for joining us on this episode of the BiggerPockets podcast. Again, it is okay to sell assets. Just be strategic about when and how you do it. And in order to do that, you're going to need information, which means you need to have your accounting and bookkeeping in order so you know which assets in your portfolio are ripe for selling.

44:07Brandon Turner:And you're going to need to understand a little bit about the real estate market so that you can know if it is a good time to actually turn around and try to sell those properties. But don't listen to anybody that tells you you should never sell. You can't make blanket statements. Every investor has a reason for investing. Every investor has a life. So build your business and make business decisions around the performance of your assets and the life you want to live. And I think you will be a much happier investor than trying to hang on to something just because you think you're supposed to. As always, this is Henry Washington.

44:37Brandon Turner:He is Dave Meyer. We appreciate you being here and we'll see you on the next episode of the Bigger Pockets podcast. Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian Kay. Copywriting is by Calico Content. And editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com.

45:12The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.