Rookie investor. Sell or rent out?

Question

Hi all,

I am a rookie investor. I do operate a business outside of real estate in California that gave me the opportunity to hire a builder and build a duplex in Florida 20 minutes away from the beach. The property is going to be completely done this month and i don't know what to do with it. Should I rent it out? or should I try to sell it?

If i were to rent it out, where would i start? LLC, no LLC? Property management company, or no? Keep in mind i live in CA and the property is in FL.

Any advice would be appreciated.

Garrett Crosby · Answer

Hi @Petr Topov - thanks for the post.

Lot's of good comments here, so I don't want to reiterate too much of what others have said. Instead, I will share a piece of advice that I give a lot of my clients who are investors here in LA.

In all my years, I've never had someone tell me "I'm glad I sold when I did." unless they were a house flipper or investor 1031 exchanging the property for another. I share this because, in my opinion, as long as the property is cash-flowing and you have no other immediate use for the funds from selling right now, I would continue to hold the property, get a property manager and collect the rent. Real estate always appreciates over time, and there may come a time in life when you are glad you held on to this property... whether you need to cash-out refinance for your kid's college, sell it for retirement, pay for emergency medical treatment, or simply use it to leverage funds to buy more. My general rule of thumb is "if you can hold an asset, you should." :)

Hope this helps. Always available to chat offline if you have any questions or need help selling. :)

Nathan Gesner · Answer

Petr, do you know why you're having difficulty making a decision? Because you don't have a goal.

You're asking us to give you directions, but we don't really know where you are and we definitely don't know where you want to go. Imagine calling a stranger on the phone and asking them, "How do I get to the place I want to be?"

Where are you? Where are you trying to go? When do you want to get there? Are you walking or rollerblading? If you have a car, do you have the money for gas?

Buying property just because it's sexy may work out if you get lucky. Having a plan, even a weak one, is far more likely to make you successful. And if you can share that plan with us, we're better able to help you when you hit a dead end.

Petr Topov · Answer

Nailed it. Thank you for the input.

Petr Topov · Answer

Thank you for the advice James,

Is there a service that helps out-of-state investors get set up properly with paperwork in FL? I have no clue where to start. Someone that has the experience would help me greatly. Thank you.

Ricardo Hidalgo · Answer

Look at your net operating income and divide it by your total amount of cash invested. This will give your cash on cash return to see if thats a good return in your eyes.

I would compare how many years it would take to collect your initial investment in comparison to selling it. If it takes less than 2-3 years to regain your investment I would considering keeping but if its longer, I think having more cash on hand serves a better purpose as the economy continues to go lower.

Richard Bechtol · Answer

I think that the answer largely depends on what your overall goal is. If you are looking to scale the business then maybe look at a Series LLC if you are content with one home then you can look at having a couple LLCs. One thing I would recommend is to having separate LLCs to keep property management separate from the asset holding business.

Jared Hottle · Answer

I would rent it out. Short term rental. Find a lawyer in your area on bigger pockets and ask what he recommends but I think an entity would be the best idea.

Drew Sygit · Answer

Why did you build in the first place?

What changed for you to question that original strategy?

Additionally, research your potential ROI from long-term renting and STR, to compare to your ROI from selling. Having all the numbers typically makes decisions easier.

If you keep it, look long and hard at the cost of putting it into an LLC. Whatever state you start the LLC in, you will usually have to register that LLC in the other state - increasing costs.

Eliott Elias · Answer

Rent it out, market is very slow and you want to build wealth. Have your tenant pay off your mortgage

Nate Sanow · Answer

I’d lean towards renting it. Your major maintenance issues should be low / non existent for years to come. I’d love to get into BTR someday especially if it could be BTR-brrrr type hybrid.

Sounds like you need to interview some quality property managers, specifically. I’d begin researching that.

I’d also suggest renting one side out for long term leases and the other side as short term, assuming the area is desirable for vacationing.

Rookie investor. Sell or rent out?

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