When to Sell vs Hold Rentals?

[Rick Venetico]

Im 36 years old and have built my business on sales. Im a real estate broker by trade and have spent most of my career helping builders and investors buy and sell houses. In the past 5 years my business parter and I started selling turn key rental properties to investors. We take a run down house, get it cash flowing with a tenant then sell it and usually retain the property management after the sale. We have an inventory of about 50 rental properties now that we are constantly using for sales and enjoy the rental returns in the process for those that don't sell. Seems like our best houses sell right away and we are usually left with the least desirable houses or those that are still being renovated which don't bring income.

At some point in the last year or two we noticed its been harder and harder to replace the houses we sell with new fixer uppers at a decent price. So we have now decided to go out and get portfolio loans to hold some of the properties long term. These are 5-10 year loans and have some pretty big penalties if you sell early. (I have more questions on which loans we should take but will save for another thread) 

Heres my question: How do you decide which houses are best to keep long term or sell for a profit now? Do you use a mathematical approach (using ROI) or more gut instinct for which ones you think will appreciate long term? Hybrid of both?

One of my best clients when I first got stated told me that he keeps his portfolio 50/50 mixed between sales and long term rentals. He said too heavy in sales and you don't have consistent cash flow and too heavy in the hold model and you wont have cash on hand for larger repairs or acquiring good deals when they come along.

Thoughts on how to determine which houses to sell now and which one to hold long term?