When to “hold” em and when to “sold” em!

[Phillip Mazur]

We currently hold 5 rental properties totaling 15 doors. All properties are in northern Illinois and we have since moved to Arizona. We have been self managing from afar utilizing previous service providers and friends with an occasional new hire. The properties all cash flow nicely and current interest rates range from 4.25-5.25%.

We have owned these properties from 5-10 years and some will be needing some larger expense repairs. We currently have one vacancy and another coming up 5/1/24. It is very easy to get to market rents and increase cash flow if we place new tenants.

Property values have spiked in the area along with rising rental rates. There is limited inventory for purchase and average market time is less than a week with multiple offers.

About 1/3 of our current tenants pay regularly and on time. The rest of them have been slacking and usually 2-4 weeks late. We serve notice at 30 days and follow through with eviction if terms are not met. Needless to say, these late-payers are grinding down our tolerance and we are thinking of cashing out and moving onto a different investment or something within reasonable travel distance.

Current monthly cash flow ranges between $7200-$7700. If we sell everything, we will have about $1.1m to reinvest.

It has been difficult locating anything that would meet or beat our current cash flow given current interest rates.

We are looking to our fellow investors for ideas and support!! Thank you all!!!

[Nathan Gesner]

1. Don't ever sell unless you have a rock-solid plan to invest in something that produces a better return or moves you closer to your goals. I don't know your intended destination, so it's impossible to give you directions.

2. I recommend starting with a solid property manager. A good manager can protect your property, income, time, and sanity. Turning things over to a pro will free you up to focus on growth, family, hobbies, or whatever. If you find a good manager, you can still make as much money (or more) because they will attract better tenants at higher prices, reduce turnover, maintain the property better, reduce losses from amateurish mistakes, etc.

3. Sometimes, you must know when the cards are stacked against you. If this situation harms you, it may be worth selling and trading for something that produces less return but requires less work. For example, you could sell everything and invest 1/3 in stocks, 1/3 in syndication, and 1/3 in self-storage or some other real estate. Stocks and syndication don't require much attention/effort, and self-storage requires much less than residential storage. That gives you diversification, more freedom, and you are still invested without all the effort.

Self-storage is hot right now, but it may be worth looking for a facility in your area that you can improve and self-manage. I currently own 135 units and manage another 300 for others, and it takes less than five hours a week.