All Forum Posts by: Ryan Spath

You’re right—this is a fairly common issue when selling rental properties, especially with the security deposits already in play. It sounds like you're in a tricky position, balancing the fairness to the tenants, your past expenses, and the new owner’s interests. Here’s how you can approach it:

1. Security Deposit Allocation: The primary purpose of the security deposit is to cover any damages, unpaid rent, or costs related to tenant turnover, so you’ve already accounted for the expenses where the deposit would have been applied. If the deposit has already been used (for repairs or unpaid rent), then you're right to feel that you're not obligated to hand over the full amount to the new owner. Essentially, the deposit has already been "spent" in your case, even if the tenant hasn't been officially informed about the exact balance used.
2. Documenting and Adjusting the Deposit: What you could do is adjust the deposit amount to reflect the remaining balance owed to the tenant, after accounting for any damages or missed rent. This would be a fair way to pass on the deposit to the new owner without either you or the tenant feeling unfairly treated. You can present the new owner with an updated ledger showing the tenant’s current deposit balance, which should include any deductions for damages or rent arrears.
3. Liability Agreement: A liability clause, like the one you suggested, is a solid idea. You could draft an agreement that the new owner assumes the deposit but you remain liable for any disputes that arise related to the deposit, especially if the tenant claims they should have received more. This way, you're protected in case the tenant challenges the amount or you’re asked to cover the full deposit in the future. The agreement should also clarify that you're not transferring the liability for pre-existing issues, only the remaining balance of the security deposit.
4. Communicating with Tenants: It's always a good idea to be transparent with tenants. If you're planning to reduce the deposit based on repairs or unpaid rent, they should know. In some cases, tenants may be willing to negotiate or pay outstanding amounts, which could resolve the issue before the transfer to the new owner.
5. Legal Considerations: Double-check the state or local laws around the transfer of security deposits during a property sale. In many places, sellers are legally required to provide an accounting of the security deposit to both the new owner and the tenant. You might also want to ensure that the tenant is properly notified about the transfer of their deposit to the new owner, which is typically required by law in many jurisdictions.

@Sunny Burns 

Congratulations! What an incredible achievement!

You've accomplished something that many only dream of, and that in itself is truly inspiring. I really admire how openly and vulnerably you’re sharing your journey—it takes courage to put your story out there and invite conversation and perspective from others.

From my view, you’ve absolutely made the right move. Life is short, and you've found a way to align your priorities with what matters most—being present with your family. That’s powerful.

I also think it's smart how you've intentionally kept your portfolio at a manageable size. That kind of clarity and control means you're not constantly putting out fires, which gives you both peace of mind and flexibility.

And let’s not forget—you’re only 35! If life throws a curveball or something doesn’t go quite as planned, you’ve got plenty of time and energy to pivot, adapt, and continue moving toward your goals. You're playing the long game—and doing it well.

@Bruce Marshall You're very welcome, and I’m glad the feedback was helpful! It’s great to hear that you’re putting together a list of potential agents to interview—being thorough in your search is key. I completely understand why working with an agent who is also an investor might be a high priority for you, as their experience and perspective can bring valuable insights to the table. It’s definitely worth exploring this option. Wishing you the best of luck with your interviews, and I'm confident you'll find the right fit for your needs! Keep up the great work!

While it's true that conflicts of interest can arise if an agent is also an investor, it doesn't automatically mean that all agents with such dual roles are acting with ulterior motives. The key lies in their professionalism and transparency. Many agents who are also investors have experience and insights that can benefit their clients. They're not necessarily trying to "keep the deal" for themselves but can actually offer valuable perspectives from both sides of the table.

The fact that an agent is also an investor can allow them to identify opportunities that others might overlook, providing clients with unique access to high-potential deals. And, while some may argue that "if it’s a good deal, it’s everyone’s deal," this is often true, but it doesn't preclude the agent from still seeking the best possible outcome for their clients.

The comparison with NFL coaches is a great analogy: just because a coach didn’t play in the league doesn’t mean they lack the expertise to guide players and teams to success. Similarly, agents who are not investors themselves can still provide excellent guidance. It’s about the knowledge, skill, and ability to navigate complex deals, not just having firsthand experience in every aspect.

At the end of the day, the best agents—whether they are investors or not—are those who prioritize their clients' best interests, communicate transparently, and demonstrate proven expertise.

@Daniel Jodrey Glad to hear you are ready to jump in! If I were you I would buy a small multi-unit most likely a 4plex with FHA financing. I would put as little money down as possible and underwrite the deal such that when I moved out of one of the units it was cash flow positive. I would live in this unit for the required 1 year. I'm not familiar with your area, so I would either find a realtor that is and invests or I would start attending meet-ups and become the expert myself. After living in this unit for the 1 year, I would purchase another 4 unit and have guidance as to the best type of product to use from a trusted loan officer. I would keep doing this until have run out of money, then I would save and keep going. Even if you end up with two four unit properties, you are going to be extremely happy in ~10 years. Personally, its more about simplicity and achieving a certain amount of cash flow to be free, vs having tons of doors, tons of headache, just to be a door warrior. Best of luck, please let us know what you decide to do.

@Benson Davis understand. We primarily look at market data for that area. 

@Benson Davis How in tune are you with your market? What is the average vacancy? Often times we can get excited about rental increases and not consider that the unit will sit vacant 20 days and cost ~3-5k to prepare for market. Have you been increasing the rent a nominal amount annually and the demand (value) has simply outpaced your increases? Did you purchase the property with a tenant and now the lease is coming to an end and you want to increase? Personally, we do not consider "current economic climates" every state and city can have its own economic climate, not necessarily the same as what we are seeing on national news. Looking forward to your response.   

@Bruce Marshall 

Great question! I would recommend starting by building relationships with a few agents to see which one aligns best with your goals. Once you've established that connection, you can choose the agent who feels like the best fit and move forward with them.

Keep in mind that most agents won’t fully commit to working with you until you’ve committed to them. This means that they typically won’t send you deals, analyze properties, or offer more extensive support until there’s a formal representation agreement in place.

When you're "interviewing" agents, be clear about your objectives, your preferred approach, and the timeline you have in mind. An agent who is familiar with the market you’re looking to invest in will be able to offer guidance on whether your goals are achievable or not, based on their knowledge of the local market.

One important consideration: Does the agent you're thinking about working with invest in real estate themselves? This is crucial. Think of it this way—if your doctor isn’t in good shape, would you take advice on fitness from them? Similarly, if your agent doesn't actively invest, can they truly offer valuable guidance on the investing process?

Ultimately, choosing an agent who is both knowledgeable and experienced in the market—and ideally invests themselves—will give you the best chance at success.

@Michael J.

This is a great conversation starter, and I completely agree with the concept you're discussing here. While this path may not be for everyone, I believe anything is possible. Ultimately, it all comes down to time. How much time will it take to achieve everything you've mentioned?

With the right systems in place and the right team members, it's certainly possible to manage all of these goals. However, the real question is: how long will it take, and how big will the challenges become as you build?

In my opinion, it all boils down to one's personal goals. If someone is passionate about achieving everything you've outlined, that's amazing! But have you considered narrowing your focus to just two or three of these goals?

For example, what if you focused all your time on becoming a top agent, managing your team (if you have one), and investing in real estate? While nothing is truly passive, investment real estate tends to be more passive than running businesses. If you aimed to acquire two properties a year for the next 10 years, by the end of the decade, you could own 20 properties. Not only would your wealth grow exponentially, but the cash flow from those properties could also help offset some living expenses.

I just wanted to offer a different perspective. Sometimes, we can fall victim to our own success and end up trading time for business achievements. Finding the balance between growth and personal time is key.

@Gash Nookala, every state has state specific laws. You will want to find these and be familiar with them. 

Brandon Turner wrote a great book on how to manage properties:

https://www.amazon.com/Book-Managing-Rental-Properties-Scree...

Create a system for yourself and stick to it!