All Forum Posts by: Rick Venetico

Thank Joe I will certainly DM you. I only used the 50% expense comment for brevity on a hypothetical deal. We always calculate actual expenses when evaluating our houses. 

Thanks @Devin Redmond for the response. In relation to your comment

"What really matters is: How does your projected return (cash flow + expected appreciation) on the current equity value compare to the projected return from redeploying that equity elsewhere?"

What is your number or percentage that once it hits you sell vs hold? Or do you wait until you have a new investment already lined up to purchase then compare it to what you currently hold at that time?

Thanks @Joe Villeneuve! I was looking for something more mathematical to analyze each deal. For example when we decide to sell a house take a look at what we would make in profit at closing and determine how long it would take us to make that same profit while renting. I realize there are other factors like appreciation involved that can skew the decision.

So to use easy numbers here if we have a house we want to sell for 50k and we make 10k profit when we sell now. If we are renting the same house at $800 a month it would take us about a year to make that 10k in rent, and if we use the 50% method to assume half our rent collected will go to expenses it could take about 2 years to make the same 10k profit if we sold today. Sometimes we have opportunities to sell a house and make multiple years worth of profit in one day.

How much profit is enough to justify selling now so we can reinvest as Joe described and how much is too little that we should just rent the house for 5 years on a portfolio loan? Then re-evaluate when the pre payment penalty has been lifted on the loan...

As inventory continues to get harder to find I agree with the BRRRR method of just continuing to refinance and never sell. Although there always seems to be a number on every house that if a buyer actually paid it you would be willing to sell now.

Should we create a formula that says if you can ever make (X months) worth of profit by selling today we unload the house and if not put it on a 5 year portfolio loan? 

Thanks @Wesley W.I will need to research the Pareto principle. Not familiar with that one

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?