Why I’m Selling Real Estate

By | 06/23/2014

I am a contrarian investor.  When the masses start moving into real estate investing and private equity firms are purchasing 100,000’s homes then it is time for me to exit.  So, I recently sold one of my 3 rental properties.

I purchased 4948 Thorn Hollow out of foreclosure for $120,900 in December of 2009 when few were investing in real estate.  Lending was tough so it required 20% down but it didn’t need much work.   It rented quickly for $1295/mo with a net income of roughly $400/mo after taxes, insurance and mortgage.  I had turnover roughly every 18 months so I rented again in August 2011 for $1395/mo in and Sept 2012 for $1495/mo.  When it came available this year I could have easily rented for $1600.

This wasn’t my favorite rental.  It was a large house at 2900 sqft, 4 bedrooms, 4 bathrooms so maintenance was higher and it didn’t generate any more profit than my 1300 sqft and 1600 sqft rentals.  The sales prices in the area had spiked recently so I decided to sell.   I had it painted inside, added some inexpensive stainless steel appliances and sold it in one day for $168,500.  After rental income and all expenses the total profit was roughly $65,000.  I’ll use the proceeds to either pay off the one of the other rentals or hold on until the real estate market tanks again and buy on the cheap.

Interestingly, the house sold to a California investor who put 25% down ($42k), will rent it for $1,700 and pay 10% management fee. After maintenance and vacancies he might break even.

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