Anyone "cashing out" of RE right now?

Question

Wondering how many of you out there are selling into the recent real estate run up in prices. Not all markets are the same but some including LV, PHX, SF, LA have seen 100% plus gains in certain asset types. I know many people that started investing in 2009 and built large portfolios of homes purchased at bargain basement prices. Now that those homes have significantly appreciated many are beginning to sell out although everyone I know is holding and continuing to buy.

Please share your strategy to "cash out" and where your planning on parking that money. Or if you plan to hold the course, why do you think that is prudent?

Serge S. · Answer

I too am considering selling off some holdings. Problem like everyone mentions is where to move the money. I have loans at 5-7% for 30 year fixed so te thought is to sell enough property to pay down all the debt and then sit on the minimal amount of properties with no debt with cash flow that will provide for all living expenses. This was the goal all along so maybe now is the time.

I'm struggling finding property that can return 10% at this point and unwilling to buy old war zone junk. I've learned there is no money to be made in that asset class, simply big headaches. Although purchase price is critical to achieving success in RE, I'm a firm believer in owning the correct asset class. If you have high turnover and constant repairs it makes no difference how cheap your purchase price will be. This is a trap we all strugle with.

Troy Fisher · Answer

I'm cashing out of LV right now.  I've realized my gains in residential and am looking to move into MFH which is 6-12months behind SFH.  It depends on your goals.  I needed to release some capital to continue to grow, and I realized I could move into large properties more quickly by completely cashing out rather than stitching together a bunch of smaller properties.

So like so much in real estate, it "Depends"

Patrick L. · Answer

Still buying for me, I picked up another house and a 4 unit property in the last week.  I am getting ready to sell one of my rentals this month after a light rehab because I can make a good profit with the prices being up and unload one that's become too far to deal with.  When I bought it I had fewer than 10 rentals, now I have more than 40 so it makes one that's 30 minutes away from any of the other rentals a pain to deal with.  If you need to get rid of something it's a good opportunity, but I'm in it for the long haul so I'll keep buying as long as the numbers work.

Jeremiah B. · Answer

Two things:

• For me, REI is a long-term investment.  So, if the market spikes or craters, I hope to have the disciple to rely on dollar cost averaging to meet my long-term goals.
• I think real estate is well poised for growth over the next 4-8 years.  I doubt we will see increases like we have in the last 12 months, but I do expect good prolonged returns.

With that said, the recent increase certainly is a good time to exit or liquidate if you've been looking for these opportunities.

Pat L. · Answer

Still in the game closed 5 in the last couple months & 2 next month I hope.

It's just getting tougher to find deals, too many out there trying to get in.

Matt Lavinder · Answer

I'm one of those who has been acquiring a lot since 2009. I'm selling as much as I can to build cash.   One thing I've learned in this business is that cash is king.  The more you have,  the easier it is to get and use other people's money.  So,  my strategy is to build cash and use opm going forward.  If you've got cash in your pocket,  you can make money in any market cycle.  Where will I park it?  In a liquid account so I can use it for transitional funding and take as much stress out of my life as possible.

Serge S. · Answer

I do invest in PHX. There are different perspectives on the market here. In the sub $100 segment we are close to 80%. Homes that sold at peak for $200k could have been had for $60-100k 2009-2011. Right now they are comping at $150k-180k. If you look at median across PHX we are at $185k median and it was $225k for a while. Regardless of where we are the appreciation has been very real.

George Kalogeropoulos · Answer

Serge,

The major issue that I see with cashing out is exactly what you've pointed out in your post - with investment yields as low as they are across asset classes (money market accounts, bonds, you name it) where will you park the money if you cash out? Real estate might still be the least-worst thing to be invested in right now.

There's also the very real possibility of higher inflation - the Federal Reserve is actively targeting higher inflation so as to make the huge amount of both government debt and household debt out there more manageable. This is a good thing for the economy, but it hurts savers, and particularly those who are holding so-called nominal assets like cash.

George

Carole G. · Answer

Do you have rental property in the Phoenix area?  I do, and I don't see my properties at 80% of peak...more like 50%.  And I base that value on an estimate a realtor gave me just a day or two ago.  Maybe yours are in faster climbing area.