I’ve spent the last week going back to page 360 (2005) and reading back through the more memorable threads. It was interesting to see how the downturn impacted the board. In 05/06 there were many post about great deals with negative cash flow, 100% financing, etc. It really gave me perspective on where we’re at in the cycle. I invest here in San Antonio and I’m still seeing good deals. I’d say there’s another 12-18 months before it gets over priced again. You can see where it’s heading. Deals can still be had but its much tougher than even a year ago.
The perspective side of it is that there are always good deals to be made in real estate - it just depends on which side of the table you are on. As the market turns in favor of sellers (as it has in many markets), the deals now favor the seller. This can be a good time to investors to hold on to their investments and when the market is fat and ripe to sell. When the market takes a downturn again (and it will), the cycle starts all over.
Simon brings up a good point. I’ve wondered before about how it would be to sell our portfolio once REI was really back in as a fad and prices were really high. That would be a possibility and I’m sure some people do that. We could always buy more in the future when prices were depressed again.
We’re cashflow investors and don’t care much about appreciation. My concern with unloading the portfolio at the highs and then going back in at a future low point would be the work involved in getting the properties in shape to rent again. IMO, it’s much easier for us to take the ongoing repairs as they come and just hold on to everything rather than trying to rebuild the business from the ground up again.
The argument could also be made that someone in our situation could use the money from selling the SFH portfolio and move into large multi-family projects. That’s valid and I could also see doing that. I just know how many wrecks of houses were out there this time around from the crash. Things you see like people letting the houses run down to the point where they finally lose them because they can’t afford to fix them up.
I just have reservations about killing the goose that lays the golden monthly cashflow egg…
I couldn’t agree more. If the cash flow is working well, then why take the risk and sell out only to go searching for the same cash flow. Property is going to appreciate whether you buy it today or you have owned it for 10 years. Passing on these investments as an inheritance is not a bad gift to the family.
There is a good case, however, for cashing out of SFR and getting into larger MF properties. MF properties sell for less per unit than SFR. Often total expenses are less as well. This can be a smart move to diversify a large SFR portfolio. Selling the properties that show the largest difference between purchase price and market value can free up cash to move the portfolio up one level.