Rental Properties

[Nords]

Perhaps that's because the ones who sold are no longer landlords, so don't identify themselves as such?
I bought 3 houses in 2002, fully intending to keep them for decades, as part of a retirement strategy. After a year, each had increased in value by almost 70%, so I sold them. I don't think we'll be seeing that kind of price appreciation again anytime soon.

You're the first guy I remember on this board who's taken profits.

We get plenty of "I have way too much cash flow to sell!" and "I don't have enough cash flow to sell-- yet!" but very few people seem to cash out at a profit.

I suspect the ones who "don't identify themselves as such" are the ones who lost money.

 

[Major Tom]

You're the first guy I remember on this board who's taken profits.

I had a small positive cash flow but realized that ongoing maintenance, cost of vacancies etc would, over time, turn into a negative cash flow. That, combined with the sudden increase in the value of the houses, caused me to rapidly develop an exit strategy

Like many, the concept of an exit strategy was the last thing I learned when figuring out how to invest. That lack of knowledge cost me a lot of money in the 2001 stock market crash (I was 100% equities), and I didn't really want to take another bath. The timing was lucky; as it turned out, I sold pretty close to the top of the market.

 

[jannyf]

Thanks for all the reading advice from everyone! DH & I were/are starting to consider rentals as a possibility for our portfolio. There are some deals in our part of FL, and right now DH loves the DIY stuff (he's 44, I'm 40). I guess we have a lot of reading to do & figure out if this is something we can and want to do. The advantage is DH works from home & is self-employed, so he finds himself with ALOT of downtime during the day or sometimes for several days in a row, which gives him freedom to take care of maintenance, etc.

Great advice, everyone!

 

[tryan]

Anecdotally, I have yet to find a landlord with an exit strategy other than "probate". In other words they may claim to buy a bargain, but they tend to hold it for the cash flow and never sell it for the capital appreciation.

Guilty as charged ... I did bail 2 near the peak (one at the peak). But - needless to say - wish I had dumped the other half dozen.

I was putting them on the market when/if they vacated. SF homes don't vacate like multis. But when the mortgage market curuption was in full swing ... it didn't matter who/what was in the building. An oversight on my part.

 

[sunsnow]

I don't think holding properties for cash flow is a bad idea, at least for someone in a situation like mine. I own several rental properties, and I expect to need an inflation-protected income source for a very long time (50+ years). Rent seems like a decent way to get that, so I'm OK with not having an exit strategy.

 

[Nords]

Rent seems like a decent way to get that, so I'm OK with not having an exit strategy.

Agreed. The only flaw I see in the landlording strategy is managing the property when I'm 82 years old, and for the next couple decades after that...

 

[sunsnow]

true enough -- I've been fortunate to have purchased properties at a price that supports having a management company deal with that. Otherwise, I would not want to own a rental property. As folks say, it would be like having a job.

 

[almost there]

I bought a 4 bd room home in Nov. Paid 270k. Fixed it up in Dec. / Jan, rented it out for $1900 in Feb.
(took a month off & worked 12-14 hr days on it straight)
Needed something additional after the 2 crash's I went through in my 401k & Roth. Put 1/2 down, owe 99k today. (I hate loans)
Plan to pay it off in the next 4.5 yrs when I retire at 55. Also decided to take the $1750 annuity from my (will be) 340k cash balance pension in 2016.
So for me I needed the added diversity after the 2002 & 2009 bottoms. I just dont have the stomach to go "all" market. For me it makes sence. I actually like working on things from time to time. Am 50 now, who knows what it will be like 20 yrs from now.
But the house was 500k+ at the peak, so I am OK with bailing out 10-20 yrs down the road. At this time, I am looking cross eyed at the 7% gain in my 401k & roth this year. Tempted to cash out and wait. But the monthly $3250 of the house and annunity makes the scarriness a bit less than it would be otherwise.
Just my situation / perspective ...... YMMV......

 

[sengsational]

You're the first guy I remember on this board who's taken profits.

We get plenty of "I have way too much cash flow to sell!" and "I don't have enough cash flow to sell-- yet!" but very few people seem to cash out at a profit.

I recall the day I sold my last rental, I felt as free as a bird! But my memory must be fading, because I'm thinking of getting back into the business, hehe.

But I made money on both of the rentals I owned! I chalk it up to dumb luck in both cases (1)fallen tree, (2) someone else's law suit.

1) Moved out of my personal residence in Atlanta right before the olympics. Real estate at the time was dead, so rented it. Had one set of renters, engineers, who always paid and fixed everything themselves (I was a 4 hour drive away). Then a tree fell on the house. Best thing that could have happened! New roof, 100% outside paint, 80% inside paint, resanded the floors. The place looked like new, and besides, the market was on fire. Sold it instead of re-renting.

2) Aunt couldn't afford the house after uncle died, so I bought her house as a charity (expected to loose money since I was giving her below market rent, and way less than she would have been paying on her first and second mortgate). Not too much time later, she needed assisted living, so moved out. Then the dumb luck...someone in this 55 and older community won a judgement to allow kids, and the house was zoned to go to the top elementary school in the county. Price went up 80% overnight. Banged the bid on that one, and I was free of rentals.

So twice lucky. Should I get back into renting and see if my luck holds? I just requested the two books from the library

--Dale--

 

[Nords]

I recall the day I sold my last rental, I felt as free as a bird! But my memory must be fading, because I'm thinking of getting back into the business, hehe.

Well, if there's anything worse than:
"No exit strategy",
it's:
"Escaped the trap twice, and I'm goin' back for more cheese!"

 

[Bimmerbill]

Yeah, I just don't see any home working out well in Southern NH. It just doesn't look like the rents can pay the mortgage. Even tho housing is at a 10 year low up here it is still expensive.

I thought I could possibly pick up some property in the event there is another BRAC since I don't see my base surviving.

Even condos seem like a bad deal. $45K 2 bedroom, rents for 900 to 1000, with $450 condo fees (includes heat and AC).

 

[njonge01]

Like Rising Sun Bob, I also have 2 rental properties that were once my primary residence. Both are occupied and I have recently refinanced for 15 & 20 year terms at 4.2 and 4.0 % respectively. I wish I had exited these investments back in 2002-2005, but... it is what it is. I will sell them both and walk away with cash before I retire, within 8 years. I would think there are some great deals out there right now. I too would recommend a Property Management company.

 

[FIREd]

Our current home was supposed to be our retirement home, so we paid it off last year. Then, DW decided to postpone her retirement to take advantage of a job opportunity on the west coast. So we have decided to rent out our home and move out west for a few years. The house should generate a positive cash flow for us so we can afford to hire a property management company.

With interest rates as low as they are, I entertained the idea of taking a huge mortgage to buy a property in California which could have been used as our primary residence for the next few years then turned into a rental when we moved back into our current house. But no. Real estate already represents over 40% of our net worth, and I don't want to push it further.