Long-term management of rental portfolio

[Balane Frece]

Hi all, 

I hope your week is going well (halfway to the weekend)! I'm curious if anyone could share any literature (or podcasts) concerning how to manage a rental portfolio long-term. For more context, we are in our late 20s and have a handful rental properties that are positively cash flowing (about $200/mth/door). Our intention is to hold them for 60+ years. (After 30 yrs, they'll be paid off and then we will use the enhanced positive cash flow ($1000/mth/door) as passive income in retirement). Now, I know that we won't be able to keep the same properties for that long so my question really is, when is it a good time to exchange one property for another? (My concern is that 2 of our houses were already built in the 70s so I'm not sure I see them standing the test of time.) Is anyone doing something similar? 

Best,
Balane

[Jaysen Medhurst]

There's quite a lot in this question, @Balane Frece. When to sell depends on the market conditions, your long-term strategy, your current Return on Equity, and tax considerations (especially depreciation).

Holding older properties long term isn't a problem as long as you're keeping up with repairs and CapEx. A well made building can essentially survive forever as long as it's properly maintained. Sure, you could purchase new properties that (should) have lower repair/CapEx in the short term, but you're also paying a higher price.

Generally, consolidating and scaling is a good strategy for maximizing returns. You would expect that for the same price as 20 SFRs you could buy one 30-40 unit apartment complex and see better returns through economies of scale.

Lastly, it really doesn't make sense to hold a property for 60 years, because for over half that time you won't be able to realize any depreciation. I'm also not a fan of completely de-leveraging, but that onion certainly gets peeled and argued about enough here on BP.