When to hold and when to sell?

[Jonathan Sowinski]

I am wondering what are some evaluation methods that can be used in determining when to sell a property and when to hold? I am familiar with reversion and I know that every situation is as individual as the owner, but was wondering if there may be anything that I might be overlooking. FYI, my investing goals are for long term passive income…

There are two different properties that I have been considering cashing out of via selling.

The first is great cash flowing small apartment building that we have successfully “repositioned”. It is great, has very little “routine” maintenance (no yard to mow/water, no parking to plow, brick so no painting…) and vacancies are very few and far between and re-rent with little effort as it is in one of the higher demand areas in the city.

It was purchased for $250,000 with 70% financed for 15 yrs @ 6%, NOI = ~$41,000 (cash flows nicely @ ~$2,000/month). I would assume that a CAP between 8-10% would be reasonable to use for selling in this area so say 9% = $455,555 sale price…less sales commission ($22,555), a 3% pre-pay penalty on the loan balance expires in 3 years ($5,000), loan balance ($163,400), initial rehab cost ($35,000), down payment ($75,000) and taxes leaves ~$135,000 profit.

Using the above numbers my reversion calcs show my annualized IRR dropping the further I move out into the future…should I sell now? 1031? Am I missing something?

The second is a recent purchase that I was planning on rehabbing until someone offered to buy it last week for $100k. It was purchased cash for $50,000. If we hold, we rehab ($35,000) and cash out refinance hopefully getting all $$ out at 70% of a $125,000 ARV and are able to rent collecting ~$11,000 NOI (conservatively using 50%), less assumed debt service equals $450/month cash flow…minimum

Again, I am looking for long term benefits/income and was not planning on selling but the numbers are tempting. I do not have large cash reserves to tap into for the next deal so cashing out one of or both of these may allow me to move into another property that may currently be out of reach. I probably left out some necessary info and understand that the market would help drive decisions but I want to know how to make an educated decision based on the #s.

I saw this post do most agree?

https://www.biggerpockets.com/forums/311/topics/84329-im-greedy-when-should-i-sell