All Forum Posts by: Jenning Y.

@Brant Richardson  Yes, I bought in good times. I plan to sell 3 properties which were held for 7, 7 and 5 years separately.  And if do rehab which can bring huge equity increase in short time,  sell to scale up is also not a bad idea.

I consider myself being a long-term buy-and-hold investor. When I started my investing, I told myself I would hold long and never, ever sell any my rental property. But after I invested about $100k my own money, bought about 4m properties and increase my equity more than ten folds, just using cashout and conventional financing, without any partner, and without using any private money, I found myself in an awkward position: I have a 4m portfolio, over 1m equity, but I just do not have any cash flow. How can that happen? Then I checked my 2018 tax return, I know the reason: the first several properties that I bought were all in hard-hit area, some prices are doubles, some are even triple, but their MARKET cap rate decrease from the time that I bought them, which was more than 8, to just 3.5 right now. That means I hold a portfolio whose cap rate is just 3.5%, and the properties are not in great cities and great area, and also I use huge leverage. How can I withstand downturn if I hold some stuffs with cap rate just 3.5? The answer is no, I can not withstand that and I hold wrong properties. I need to get rid of them and buy more higher cap rate properties, thus can increase both my holding value and cash flow. The conclusion for me is that I had some great buys but they are not worth holding long.

In my previous example, current market price is $300k, I still have about $160k mortgage left  with interest rate of 4.5%,  and the current market cap rate is 3.5.  If I continue holding it, will become negative leverage, also have about $140k dead equity left there doing nothing.  Also, the property is not in a great market. in this case, I think it is much better just to sell it.  So the main point is, how can we best make use of our capital, whether sell or not. 

I bought a property in 2012 for about $100k, cap rate is about 8 at that time.  Right now the market price is about $300k, market cap rate reduces to about 3.5%. I cashed out several times, mortgage interest rate is about 4.5%,  with no cash flow.  I plan to sell it and do a 1031 exchange.  Will be a fool trying to keep the property.  If the market is down, it may become cash flow negative, and may go underwater.   SO the point is, if you have good  MARKET cap rate ALL the time, you can keep it and continue cashout, but if the   MARKET cap rate becomes too low, it is much better to sell it and find a better use of your precious fund.