INVEST IN RESIDENTIAL INCOME PROPERTY
INVEST IN RESIDENTIAL INCOME PROPERTY
WHEN TO SELL
Years ago, we were listening to Suze Orman (she's a financial guru who has a plain speak program about Your Money on PBS) talk about stocks - which to hold onto and which to sell. Suze said something like this (and I think it's so important that I've repeated it twice on this web-site):
"If you have owned a particular stock for the past 10 years, for example, Disney, and it's been very good to you, you might say to me, 'Suze, My Disney stock has been very good to me, I don't want to sell it.', but here's what you should do.
You should evaluate that stock as if you didn't own it, as if it isn't in your investment portfolio. Look at that stock and ask yourself, 'Would I buy that stock TODAY, at TODAY’S PRICE, with the information that I have available to me TODAY?' If the answer is, 'Yes', then yes, you should keep that stock. If the answer is 'No', then you should sell that stock and buy a stock that YOU WOULD BUY TODAY."
Mark and I feel that Suze's strategy is 100% applicable to the buying and selling of real estate. Obviously, it's not a simple process, selling a house or a duplex that you've owned for 10 years. You may have tenants that are paying their monthly rent checks on time, each and every month, and you don't want to bother with it. Or you may have future plans to turn that duplex into a condo. Or you may be comfortable with the cash flow from that property. There are a hundred reasons NOT to sell.
However, whenever the timing seems right (perhaps your tenants have given you notice that they're moving out, OR, you feel that prices have topped out in a particular market), you should sell the property and 1031 exchange it for a new property in an area that you feel is going to go UP in value.
Our rule of thumb is that if we believe that a property is going to double in value in the coming 5-10 years, we buy it (or hold onto it). But if we feel the market is close to the top, or that it may only go up in value 10-20% in the coming five years, we don’t buy it (or we sell it).
Where to invest
- Right now, we HIGHLY recommend Austin, Texas
(not Dallas, not Houston...)
Buying a new home from the builder
Tenants
Property Management
Never pay capital gains tax - 1031 Exchanges
Depreciation is your friend
Leveraging your money (it's a beautiful
thing!)
Tenants in common -
TIC Investments
Excel Spreadsheet
Investment Property Analysis worksheet
(note: you must have Excel on your computer to open this)
When To Sell
Miscellaneous - And
recent remarks by Suze Orman