sold my first rental property

[Bernard B.]

Good evening bigger pockets members. I just sold the first rental property that I ever bought. I saw several forum posts about buying your first rental property, but I did not see any about selling your first rental property.  To me , it was bitter sweet , because I gained so much experience with this property. When I purchased it, they had a tenant occupying it. I had to go through the process of signing a new lease, meeting the existing tenants, doing repairs, enforcing rent payment rules, violations from code enforcement and finally an eviction. 

    I held this property for ten years and collected a decent amount of rent. After total rent , minus repairs, and my purchase price, I still managed to squeak out a minor profit( however, for tax purposes, it will still show a loss after the depreciation is added back in to calculate the cost basis, just my opinion). I chose not to do a 1031 tax deferral. The lessons that I learned the most, were to be firm with your rules, and definitely follow tenant screening, and don't take crap from contractors. Good luck to everyone pursuing cash flow through real estate, it can be done, but it is not easy.  

[Jay Hinrichs]

Originally posted by @Steve Vaughan:

Originally posted by @Bernard B.:

Good evening bigger pockets members. I just sold the first rental property that I ever bought. I saw several forum posts about buying your first rental property, but I did not see any about selling your first rental property.  To me , it was bitter sweet , because I gained so much experience with this property. When I purchased it, they had a tenant occupying it. I had to go through the process of signing a new lease, meeting the existing tenants, doing repairs, enforcing rent payment rules, violations from code enforcement and finally an eviction. 

    I held this property for ten years and collected a decent amount of rent. After total rent , minus repairs, and my purchase price, I still managed to squeak out a minor profit( however, for tax purposes, it will still show a loss after the depreciation is added back in to calculate the cost basis, just my opinion). I chose not to do a 1031 tax deferral. The lessons that I learned the most, were to be firm with your rules, and definitely follow tenant screening, and don't take crap from contractors. Good luck to everyone pursuing cash flow through real estate, it can be done, but it is not easy.  

You're right, sales aren't discussed much so glad you are sharing your experience.

Selling a rental you've had for a while is kind of weird.  Good and bad happen in each property and they kind of grow on us.  'I re-did my first sprinkler system there.  Had my first flooded basement, too.'  Funny what we remember, right?

I sold 3 of my least favorite long-time rentals over the last 15 months as they became vacant.  Tax time last year was weird. Had to separate the land sale from the house (improvememt) part.  Also, that depreciation you took needs to be recaptured.  Set aside 25% of all of it.  One of mine was $5200 a year for 11 years and increased my tax burden $13k.  Your 'loss' is Uncle Sam's gain!

paying recapture is the most NON talked about event on BP or in real estate.. and why when folks talk about buying for only cash flow and appreciation IE speculation or gambling those folks totally miss the point and do not have a full picture of the Lifecyle of a real estate investment.. if you have NO appreciation your recapture tax is going to eat into your IRR in a negative manner.

and for a lot of folks to 1031 one little house with 20k coming out of it is hard to do.. since the house never went up.. 

the other thing is people that say they are buy and hold forever.. this rarely happens.. life happens life changes.. and so 7 to 10 years down the track MOST folks unless they have decided to make it their lifes work IE be a full time professional landlord.. they sell .

and then that pesky recapture they never knew about or thought about bites them .. :)