All Forum Posts by: Deborah Wodell

Its simple. Its when I can get a higher rate of return elsewhere risk adjusted. Its a math game that is a based upon your own situation. One can calculate the expected roi based upon cash flows and appreciation and that is fairly easy to calculate. It gets a little more complicated when one factors in income taxes.  Real estate has the 1031 exchange gift and the many write offs that makes it preferable for many people. Its really a math game. 

Your returns in investing ultimately come from exchanging terminally abundant goods (fiat dollars, debt/future fiat dollars) for terminally scarce goods (high quality, supply constrained real estate).

Selling to go into cash isn’t of interest unless I have a short term need for that cash or am funding another purchase. In order for that purchase to make sense, I must believe that I am getting a better deal than I have now. I don’t try to time the market because I have seen the M2 money supply chart and understand the government will always print money.

@Deborah Wodell ok let's first get 1-thing straight: EVERYONE sells, e-v-e-r-y-o-n-e. The only question is *when, *why and *how. 

Any with the "I will NEVER sell" mantra, well, this little thing called mortality may have other plans for them. 

Real Estate is a river, always moving, always changing, cutting new bank and turning old into bog's. What was vibrant becomes stagnant. Simple examples; Detroit and Austin. One was everything and became nothing, the other nothing and became everything. CHANGE is the 1 constant. 

The 1 universal rule is ALWAYS BE ANALYZING. 

My first metric of weight I consider is CAP-X. Where is the property in it's life cycle? What expenses are coming to bear? A market can remain strong and an assets performance goes to hell simply from suffering the ravages of time and cap-x.     Yes, sometimes it's great to exit a performing asset in a good performing market because your exiting before cap-x comes to bear. 

Equity Accrual and Opportunity Cost. I have not heard any speak of the most paramount factor "opportunity cost". Say you got a property at $250k, it's done well over a decade and now your sitting a-top $225k in equitable returns.     And it stands a "opportunity" of Pyramiding gains via 1031 into securing 3 similar units in market.     You "could" be accruing new equity gains of 3X if sold and made new acquisitions, as well as roll the cap-x clock back a bit.    THAT is a BIG "opportunity cost" to NOT selling. If math's hold, that's about half a million $ "opportunity cost" to NOT selling. Because your sacrificing gains on 3 for gains on 1 AND the cap-x that comes with the 1. 

Lastly Market Analysis: How does the market stand? Where is it going? What factors have changed? Again, change is the 1 constant so what is the changes now, up coming and on the horizon? 

What I do NOT consider is interest rates, that is a horrible reason to follow. For simple fact you're not paying that, your tenants are. All that matters is the performance in total. An older property with low interest rate and into cap-x can easily do much more poorly than a newer unit with double or even triple the interest rate but limited or no cap-x. 

So many get the maths wrong in REI.

You, the investor, pay capital contribution to gain control of property, and reinvestments. Tenants pay the rest and ideally, as much of all this as possible, right. Who cares if the mortgage is $2k a month or $7k per month if vacancy is low and tenants always cover that in full?     

And when rates are high, competition is lower, meaning cost basis is lower. Rates can change, rates can be negotiated. As saying goes you "date the rate but marry the mortgage". 

As for a generational lineage plan, it's best to assume at a future date you will liquidate EVERYTHING, roll it into a fund of some type be it in syndications, W.S. or what-not, and than the heirs will "manage the managers" as this is the most realistic long-term multi-gen inheritance structure.     If argue this just do some research on inherited wealth, it does not hold a good track record, failure rate is astronomically high. Hell, Ford's don't even own Ford anymore..... 

Summary: Always be analyzing. Don't use singular metric tunnel vision, take the whole into account and always follow the maths. 

 I've only been in the game since 2022 so I don't have anything to report yet! Although I do keep an eye on their performance relative to value, and this is how I plan to rearrange my portfolio in 3-5ish years once I can see the annual earnings relative to the values of the properties. Idea would be to sell off the low ROE properties and funnel the profits into paying down those that cash flow better. 

I've sold a lot since 2017.  Looking back I don't regret any of them.  They represented headaches and hassles.  Does yours do that?  What's your first thought when you think of it?  

Case by case, one by one, I sold my least favorite smalls by owner as they became vacant while the market was good.  

Other cases- hazard insurance was not renewing or placing high subject to repairs/improvements to maintain or the market cap of my commercial apts was rising as fast as interest rates like in '22. 

I rarely refinanced unless rates were exceptionally low like in 2012 and later 20 teens.  Costs and hassles are high. That's the con of your refi 1 per year plan. 

Always consider taxes.  I chose to carry contracts/ the paper and exit.  1031 if you want to stay in, but have your replacecement property in mind to avoid becoming a motivated buyer.  

Really, you always re-finance and keep holding when rates dip significantly & underlying asset has appreciated significantly. You want to likely do these in bunches and work with a lender that'll cut off some of the BS fees. 

You only sell when you realize you bought a below tier investment, and roll it into a better one.

You never sell otherwise. Forget that noise. 

I have sold when I have seen a better opportunity elsewhere (1031exchange).  Refinancing will kill you in fees if you are not careful.  Refinancing is for when you can get lower rates (1.5% to 2% lower) on a longterm hold or to pull equity to redeploy into another asset.  The key is to leverage but not over leverage.  I have seen a few STRs fire sale in the past 90 days due to over leveraged owners.  Most over leveraged owners are like addicted gamblers, they don't believe they have a problem (over leveraged) until the market turns and they go broke/bankrupt.