SFR rental return question (GRM vs. Other Markets)

[Colton T.]

This might be a bit too in-depth for a forum post, but maybe someone can assist in answering it. 

Been buying real estate through-out my career, but not much experience in other investment industries. What are some ways to compare real estate holdings to other investment classes in order to help know when to sell / liquidate a portion of them to cash? 

I'm sure REITs have advanced ways of approaching this, and I realize it's not an easy question. But for a smaller investor (say <100 units), are there some good benchmarks to look at in comparison to other investment classes or the macro-economic environment as a whole? Let's assume there's no concern about a crash or major worldwide event, but rather just normal fluctuating markets. 

For example, if properties used to have a 8-10 GRM, but are now pushing 13-15 GRM, due to home prices appreciating faster than rents, that might appear like a sell signal, but only if there was better looking returns elsewhere. What are some ways to validate that and compare it to alternative investment returns?

Thanks.

[Steve Vaughan]

Quote from @Colton T.:

What are some ways to compare real estate holdings to other investment classes in order to help know when to sell / liquidate a portion of them to cash? 

are there some good benchmarks to look at in comparison to other investment classes or the macro-economic environment as a whole?  

For example, if properties used to have a 8-10 GRM, but are now pushing 13-15 GRM, due to home prices appreciating faster than rents, that might appear like a sell signal, but only if there was better looking returns elsewhere. What are some ways to validate that and compare it to alternative investment returns? Thanks.

I've been selling the last couple years.

My biggest considerations were headache factor and tax implications. Also if they need updating/cap ex.  I can usually sell for less of a discount than it would cost to retail it up.

I don't see GRM used much outside of MF but it is a relative comparison. I use that and cap rate and ROE vs alternative expected returns in REITs, mutual funds, stocks.

Last summer it was clear as day to me that cap rates were low low and so was the stock market.   I converted a bunch of 6% ROE mf into index funds.  I sold on contracts interest-only by owner to help spread out the tax hit and provide a nice annuity. 

Then there's the obvious comparison of cap rate vs effort and risk-free returns.  They are similar so why bother with RE without a hassle and risk premium? 

But I'm tired, 20 years self-managed. My headache threshold is low.    Just don't wait to try and sell too much cash out in 1 calendar year.