To sell or not to sell...

[Lauren Breiner]

Hi BP Team, 

I am a relatively novice real estate investor in the Nashville area and have 3 LTRS. I am trying to figure out my next investment move and am considering any and all strategies. Originally my goal was to buy and hold (and still what I prefer to do) but I also know that the properties I have, have accrued a lot of equity.  By selling, I would be able to put all of the earnings into a larger commercial property- I am thinking multifamily/ small apartment complex. I am focused mostly on cashflow but building appreciation is also very important to me. 

So a couple of questions: 

1. Is selling a good option to consider right now? 

                 If yes, why selling verse other options? If no, what options and why? 

2. What is the best way to calculate if selling would be more fruitful than tapping into the equity via a HELOC or any other funding options?

Thanks in advance for all your help! 

P.S. If anyone is in the Nashville area and interested in networking, please let me know and I would be happy to get together and collaborate! 

[William Anderson]

If you stay with 4 plex units, you fly under the HUD radar. Lots more requirements if you own 5+ units. If you have a good property manager you could be ok. I like 2-3-4 unit buildings. Revenue is always coming in even when there is a vacancy.

Regarding selling now, that is a tough one. If you are cashflowing and hitting your desired ROI you may want to stay there for a while. The reason I say this is that I have noticed a shortage of well-priced multi-family properties. These are hot now because of rising rents.

Check your market, rent is cooling off in some markets after a two-year march upward.  You will need to do a 1031 exchange and it's going to be hard to unload all three at the same time as you are buying one or more new properties.  

Don't rush into this.  Too many multi-family properties have deferred maintenance so you will need to investigate with someone who knows building regs.  Also, check the legal stuff e.g. eviction process.  Do the tenants have contracts?  

I am a real estate broker and when I list a multi-family property it is based on the current income, not forecasted income.  The teaser is that somehow the new buyer is better at raising rents so they would buy and increase their income.  Not always true.

To summarize, you would have a lot of moving parts, do you have the time and can you avoid the stress?  Good luck