Epic Real Estate Investing - When to Sell | HTH024 | 578

Episode Date: January 30, 2019

You should hold your houses! However, there are times and circumstances when selling them is beneficial and if you want to know where and how to do it, stay with us. You will learn why we sold some of our properties, why you should diversify your portfolio, and how real estate hedges against inflation. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Don't wait for appreciation to buy real estate. Buy for cash flow and wait. In other words, Hold That House! Your host's Matt Andrews and Matt Terrio. Hey there, flipping houses can make you rich. Holding them will make you wealthy.

This is the Hold That House show. I am Matt Terrio, and over there is Mr. Matt Andrews. Yeah, baby. And before we begin, we've got a free gift for you. A free gift just for you. Go to hold that house.com and download the four-hour work month. The Ten Commandments to managing property managers. That's the key ingredient, Matt, to financial independence, to real estate that they're not telling you about.

Property management, is that the most boring subject you can possibly think of? Yeah. It's boring. And it's excruciate. If you do it yourself, it's terrible. Right. I did that for a while. Right?

I know it. I know it. I know I was asking the right person. 400 hour work week. 400 hour work week, right? So that's what we call it the four hour work month, because that's the key ingredient to making that happen and making that be a reality.

And there's no real embellishment there either. And you can get that for free at hold thathouse.com. Hold that house.com. All right, you're Maddie. Here we are. Week number four of our summer vacation, our summer tour through Tampa Bay, Florida. That's right. That's right.

It's still hot out there. It's still hot out there. Beautiful, though. A lot of great advantages and nice benefits and perks to living Florida, but there's one element that keeps me in California. June, July, and August, just stay away from the state. I'm telling you right now, I spend most of my life here, stay away from it, but you're going to be hard-pressed to find any more beautiful weather in December, January, and February. Everybody wants to be here then. So yeah,

you know, it's just, you know, have a summer home elsewhere. Right? Spend the rest of the time for sure. If I let, if I, how much, how many months of the year do you have to live in a place to declare that your residence? Is it 51% of the time? I think it is. Is that enough? Yeah, I think it That qualify for Florida's. That's what the South Florida is. Yeah. Right? Yeah.

That's what the entire city of Sarasota is. People living there 51% of the time. Yeah, absolutely. Buying yachts with the money they save on one year of taxes and stuff. For sure. Again, if you live in California, that savings would amount to about a yacht. Yeah. A yacht a year.

I love it. What are we going to talk about today? Well, this is the hold that house show. But when do you actually sell? Do you hold it forever? And my quick example. answer is yes. You want to. Sure. Absolutely. I mean, the benefits, like we say, every single podcast, you build wealth by holding it, right? And so the longer you hold it makes sense,

the more you build. And the longer you hold, the more you come into the benefits of things like appreciation, even though we always say that's not what you buy it for. That's just icing on top, but that's how the wealth is created without long-term holds. So yeah, I'm with you. Let's hold them forever. Let's hold it. Show's over. All right. Next week. No, the reason I am a buy and hold investor is, you know, I went through my do-over and was in the music business for 15 years. The digital download came and just turned that whole industry upside down, age 34 hours, bag and groceries, and I had to recreate my wealth. And I said, this time I'm going to do it so it sticks. And I'm going to go out and learn from people that have been there and done it and made it stick.

and if you go to any of the real estate investing clubs and you just kind of look around the room for the old salty dog in a room. Maybe it's even the speaker that night that you need to talk to. And when you ask them, if you were to do this all over again, what would you have done differently? I mean, you will always get some variation of, I wish I would have bought more and sold less. Every single one of them. And these are like the, you know, this is the silver hair people. Right. Or the no hair people.

Sure, sure. That's us. That's us, yes. But you're right, though. And when you said the old salty dog, I got the picture in my mind of like three or four different clubs I've been to. And I know the guy at each one of those clubs. And I know who you're talking about.

I think people do too. Yeah, it's the guys who wished they had never sold anything. And I think back, I've been flipping properties and investing in properties for almost 16 years now. And I wish I wouldn't have sold anything either. Right. Now, the reason I did have to sell is because I needed to keep selling to keep buying. and I needed to keep doing it because I didn't understand what I understand now about leverage and about bringing in partners or about just leveraging people or money or whatever.

I just didn't know that back in the day. Had I known that, had I known about owner finance strategies and just different things like that, I probably wouldn't have sold anything, you know, and all these properties I bought for 30, they're all worth 150 now and stuff like that, you know? I mean, yeah, I'd like to have every one of those, you know, for sure. So how do you do that and how do you make sure you're not missing those opportunities? And that's a good point. I mean, you and I were both emphasized on the whole strategy, but we've both sold properties.

We've both sold a lot of properties. We'll be back in 30 seconds. Right after this. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so that it pays you right now and in retirement. Change one thing one time and that revolution can be yours. That's bad news for Wall Street. But great news for you.

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I was like, you think you're so smart. Like, you just think you've got me. You got me. Oh, man. All right. Disolve the business. Why do you sell properties then? So that does a great question, though.

And it might, some people went, well, yeah, Matt, explain that one. Tell me why. So there are reasons to sell. Sure. Okay, so let's talk about the reasons. You already mentioned one, ignorance. You didn't know any better. Right.

So that might be a reason to sell. Yeah. But let's talk about if you do have the knowledge and you are being strategic about that to continue your holding strategy. And one of the reasons that I sell is it raises capital for me to buy more property. There it is. That's a biggie. Yeah, you have to determine the highest and best use of your funds or equity or whatever it is. And if you can parlay that into something bigger and better that does more, why not keep doing that, right? Yeah. And, you know, Matt, you and I, we've done this, you've done this probably about twice as long as I have, but we've

both gotten very good at finding deals. Finding a good deal is not that big of a deal for us. Yeah, you're better at finding them in more different places because you're in so many different markets, you know. I'm in a few. You're in a bunch. Right, right. But we can find those deals and they might not be deals that we necessarily want to hold

on to or doesn't fit our profile of our portfolio. It doesn't mean they're bad properties. No. Not by any means. But because of the way that we can find deals, we can still sell that for a profit to somebody else, which is still a deal to them. Right. Because they do something else during the day.

Sure. You know, they got their own business. business going on. They got their own family stuff going on. They got their career going on, whatever it may be. So that's one way to reason we sell. Well, and every investor's criteria is different. What they need is different. The kind of properties that I primarily bought to buy and hold early on when I started my real estate investing business are not the kind of properties I buy now. Now, they still generate good cash flow for people that are buying those properties, but I bought a lot of real low-income properties in certain areas of Tampa because they were easy to get and people didn't know how to manage them. And I hate it. I hated managing them, but I knew how to do it. Now, eventually, I figured out, hey, this is not the best use of my time. I feel like I'm hitting my head up against the wall every time I do this. And so I started getting to a slightly higher grade of properties and kind of found my sweet spot.

So for me, it wasn't even so much like, hey, I'm buying these to make a lot more. The cash flow was really good on those properties. But the headaches that came with them were detracting from other areas of my business. So sometimes, like you said, and like we talked about, it's about finding the highest and best use of those funds, of that money, of that equity, and then putting it into something else, sometimes it's the highest and best use of your time, too. If you're making really, really good money at something,

but you hate it, and it's pulling and draining your energy, there's a value loss there. And it's hard to tabulate that loss, right? If it's money, we look at our bank account, okay, it was this much, but we can't tabulate the loss of productivity, you know, that we lose when we're doing the wrong thing. So for me, I had to get out of those properties into something else. And those properties still exist, and I guarantee,

you know, somebody probably owns him pretty well, is making pretty good cash flow on it. They may not like managing them either, but they're doing okay because they're good. Right. You know, they're good properties. So, so many times it's, it's about, you know, what's right for the investor because we all have different goals. You know, those weren't right for me anymore. Right. So, yeah, that's a big piece of it. So certainly, so I would say number one is to raise capital. Number two, which you pretty much covered what is to eliminate headaches. Yeah. Get rid of the problem properties. Absolutely. And I've certainly had those where I was like, I regretted buying this property. And sometimes that, I mean,

I mean, we both have the knowledge and experience to turn a property around. Sure. But now we get to a point where we're so invested in that property, it doesn't make sense to put any more dollars there, throwing the good money after the bad. Yeah, exactly. So go ahead and just cut your losses and pass those losses onto someone else and let them give it a go. Absolutely. It's done all the time, and I see it happen all the time. So get rid of headaches.

Another reason to sell that I've sold in the past is to diversify my portfolio more, whether that's into a different property type or in. into a different market. Absolutely. I love real estate, but if you own everything in the lower ninth ward in Louisiana, you're subject to certain types of risks. If you're dealing with insurance a lot. Right. If you're in everything's in Oklahoma, you're subject to certain types of risks.

Sure. Or if you're in an area that's dependent on one industry, like a Detroit, you're subject to certain types of risks. I guess that's kind of gone now, but that's what that's a vulnerability that market had. I remember back in the, I think it was late 80s, in Southern California, in the Long Beach Lakewood area, you know, it was very much aerospace-centric. And when the aerospace started really downsizing, that just crashed the whole area. So those are a reason to diversify.

Yeah, I had friends that were heavily invested around the, you know, the automotive industry in Michigan. And, you know, and we still know what's going on in Detroit and those kinds of areas. You know, if all you had were rental properties in that area, you took a hit. You took a giant hit. Yeah. And I saw that there and saw that in other places. So, you know, for the same reason as you, I diversified. I thought, hey, I'm in Florida, pretty much in a certain area of Florida here.

It's been a good market. I think it's going to keep being a good market. But I started really seeing the necessity a few years ago to move into West Michigan, not Detroit, but West Michigan and Ohio and Indiana and some of these other states that I'm investing in now. And more recently, you know, like Memphis and a couple markets in Alabama and, you know, diversifying. And some of those will do really, really well. And some of those might flatline and every once while something bad. might happen in one of those markets, but I'm in six markets. Right. You know, and you're in, what? Ten markets, yeah. So diversifying, we probably should have an entire episode on that at some point.

And how do you diversify and how do you choose how to do that by price or by market and kind of what are the, what are the delineations there? But that's huge. And that's definitely been huge in my business for sure. For shezy. For shezy. Love it. Yeah. The other reason that I've, the reason I, I, I, I, would sell a property. And this is probably the number, let's see, number one, maybe between raising capital and this one, is I constantly looking at my portfolio and monitoring the return on investment, the return on equity. And if I can get a certain amount of appreciation in a property, and I can go ahead and sell that for a good profit and I can go buy two more to increase my return on investment, I will do that. That's one strategy I look at very closely all the time.

Sure. Or if, you know, I come across a really hot property and I don't have the cash disposal of liquid at that time to acquire it, I can, I'll go ahead and sell my lowest performing property to pick up this next one up. Right. You know, everything, I don't think I have anything in less than a 20% cash on cash return. But it didn't start that way. Right.

Like 9% was a great return for me when I got started. And I've just over time. Great for most people. Right? Yeah. Absolutely. Very happy with that. And just over time, I've just kind of slowly.

leapfrogged my lowest one up into the higher one, into the higher one, the higher one, and so that's another reason to sell. And I think you make a great point there and everybody who's listening to right now and all of us, me and Matt and all of you guys, we're all about building wealth. That's why we're here. And so building wealth

is Matt just kind of displayed. You kind of just tweak things and make it a little bit better, make it a little bit better. You learn more, you put your time to better use, you learn more, you put your money to better use, and you slowly enhance that portfolio and that's that's really part of the fun part I think you know once you're once you own properties once you have good passive income coming in

then you get to like you just said kind of look at that on a monthly basis and kind of look at it like an architect you know and it gets to be fun like you know what this market over here with these 20 properties is is doing this and I see that and that's cool this one over here is not doing that well that's interesting you know you can decide well maybe I should sell a couple of those and put it over here and and you start to kind of play you know you start to kind of engineer your portfolio and slowly make it better and better And you can only do that if you're long-term holding property, right?

So I love that piece about it. And when you have one or two properties, you don't quite get it yet, you know, because you can't really do a ton with one or two properties. Once you start to build that portfolio and a real wealth engine, then it's about, you know, engineering that the right way and little tweaks here and there and subtle improvements. And then 10 years later, you've gone from 9% to, you don't think you have 1 under 20% now. Guys, that's, I know sometimes property management and holding properties is boring,

but going from 9 to 20% that's sexy. Yeah. I'm just going to go on to say it. Yeah. That's straight up sexy. And when you get those seller finance deals and those returns are infinite returns, those are a whole lot of fun. Exactly, exactly.

It averages that real nicely. And you didn't know that 10 years ago either, did you? I did not. No. So, yeah, and so we're all in the process, guys, of just learning and adding to our business. And every new podcast you listen to, every new person you meet, everybody you learn from, every investor you work with opens a new door. to learning something you didn't know, and that all comes together to help you build wealth.

So it's, you know, I'm always learning, Matt's always learning, you're always learning, and we're always getting better and better and better. The one thing we don't want to do is stop learning, stop growing, right? And that would be the kiss of death to have your portfolio flatline or decrease because of mismanagement or whatever because you're not growing and changing and making it better all the time. Right. So that's huge. I would say the last one, just to maybe expand on that last one a little bit, When to sell.

I always look at it to increase or bolster strength in my own portfolio. Sure. When that makes sense. Multiply it or increase the ROI. Also, I guess the other thing to sell or why you wouldn't want to sell is what are you going to do with your money anyway once you do sell it? Right. Right.

So I would say the last reason to sell is if just a better opportunity comes along. Sure. Something, but better. Right. Money's got to keep moving. Be sure that it's still going to move you forward and it's going to preserve your wealth. because taking, you know, experiencing a giant uptake if you're timed the market right

and you've got to pull $100,000 bucks, a half a million dollars out, and you're like, you're really excited because you feel like you just totally scored and you pull that out, what are you going to do with it? Right. Please do not put it in the bank. Yeah, don't put it on your mattress.

Please not put it on your mattress. Please not bury it in the backyard. Please not put in the stock market or mutual fund. Don't do that. Just the way that inflation works and the way that our dollar is moving. It will disappear. It will disappear.

Yeah, you won't even know what happened to it. You will still have your half a million dollars, but it won't buy you anything. Yeah. So you've got to stay ahead of inflation at the very least. And one of the great things that we don't talk about that much about real estate is it's a hedge against inflation. Right. The value of real estate and inflation rate are neck and neck over history. They go back and forth, but they are neck and neck.

And, you know, if you can hedge against inflation, and you get that 9% cash on cash return, that's a true 9%. And 9% in your savings account is not a true 9%. You've got a 3.5, 4.5% inflation that takes half of it away from you. So keep that in mind. Look for a better opportunity. If you can put that money to work for you better, easier, harder, stronger, and faster, quicker, then go for that.

That would be another reason to consider selling. And how do you learn that stuff and how do you know that stuff? by listening to a podcast like, hold this house. That's right. I mean, that's exactly why you educate yourself. So you know what those opportunities are because there's always a better opportunity out there. The question is, do you know where it is or what it is or how to access it, right? I mean, there's always something better than you can do with your money.

You're constantly looking at new markets. You're constantly looking at different types of properties. Why are you doing that? You've got something that's working really, really well already, Matt. So why are you doing that? Because you know there's something else better out there. Right. There always is.

and the only separation between us and that is the knowledge, right? The knowing the door is there, the experience, the people that can open that door for us. That's what it's all about. And that's what we want to be for you guys. So, you know, we want to open doors just like people are opening doors for us. So keep giving us feedback. You know, you guys have had great feedback on the podcast. So keep giving us that feedback.

We're going to keep giving you the info. Love it. You know, you just brought something up, you know, four weeks ago when I flew out here to hang out with you for the next three months. Yeah. that I was listening to one of the episodes because I was doing, we had someone doing post-production on the actual podcast. I was like, let me check, let me just do a little quality control check because I never really listened to these after we record them.

And I found myself listening to three in a row on the plane. I was like, oh my God, if I had this information when we first started. And what's, you know, what else surprising is we probably did have that information. Someone probably did share that with us. Maybe. But because we didn't have the experience, we didn't recognize it for what it was. No. And I think we even said in one of those early podcasts, we didn't know what we didn't know, right?

Right. You don't. You don't. No, absolutely. Wow, this is, and it's free. I know. I know, absolutely. Again, being a professional podcaster, there's nothing really professional about it.

You can take that to the bank. Well, no, actually, you can. You can't. You can't take that with the bank. All righty. Well, we'll see you next week. That's it for today. Flipping houses can make you rich.

Holding them will make you wealthy. We will be back. Until then, remember, don't wait to buy real estate. Buy real estate. And wait. That House. Contrary to popular belief, a lack of funding is not the biggest barrier to starting a business. It's excuses.

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