Out of State rentals, keep or sell?

[joenorm]

Hi all,

I am in a partnership LLC as a Co-owner of three rental properties far away in another state.

We bought these properties at the low around 10 years ago with cash. Neither of us have ever seen one in person, only pictures. We work with a property manager who we generally trust.

As an investment, these have been 100% passive besides having to make decisions about repairs, renters, etc.
We have had a few very bad experiences with renters(trashing the place), but generally these have provided pretty trouble free income over the years.

As time has marched on, so of course have the values of the homes. The following is a list of the properties.

Property 1
Purchase Price: $65,000
Zillow Estimate 2020: $147,453
Rent $1025

Property 2
Purchase Price: $78,435
Zillow Estimate 2020: $184,723
Rent $1100

Property 3
Purchase: $65,000
Estimate 2020 : $147,506
Rent $1150

As you can see the values have climbed over the years. This of course is just a Zillow estimate, I am not sure if an actual sale price would be higher or lower, but it's likely a good ballpark(correct me if I am wrong).

I see one option as selling all or some of these, but in todays crazy expensive market I could never buy back into RE with the spoils. I could dump it all into my Vanguard account.

I have posted about these a couple years ago, but I am just resisting them to see what people think.

I am perfectly happy continuing to own these, and of course that is the path of least resistance because everything is in place and we're familiar with them at this point. But I just want to get peoples opinions here on what they may do if in my shoes?

You may be wondering about the partnership. It is a good relationship and easy, If I wanted to sell my partner would likely be accommodating to that idea.

thanks for looking! Please let me know what other numbers you need for a better judgment.

[waltworks]

Read the rent vs. sell sticky at the top of the forum and re-post.

-W

[PMJL34]

OP,

What are the actual cashflow of the properties over the past few years?

What percent of your net worth are these rental properties?

[joenorm]

I found 2019 as an Example:

Total rental Income: $37,925. Expenses: $5,180


Total cashflow: $32,745


As far as my net worth, That depends if I count my primary residence in there.....should it be?

[waltworks]

I give up.

-W

[Papa bear]

I give up.

-W

Nah. We need you to keep fighting the good fight here.  It’s a lot easier for me to just +1 your comments. Haha


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[joenorm]

I give up.

-W

I'm happy to provide the info, I was just answering the last question.

Isn't most everything asked for in the sticky listed already?

[PMJL34]

Joenorm,

Your numbers are amazing, just keep the rentals. It's 100% passive and cash cows. I'm jealous, everyone on this board has amazing rentals and fantastic cashflow. Even if you get the Zillow value, your passive income will not compare to your rental numbers provided.

With that said, how in the world does it only cost your 5K in expenses for 3 out of state properties? The property management alone should be close to 10% of rent. You should also have property taxes, insurance, repairs, and on and on and on.

It's also pointless to show one year numbers because it could be a year with no vacancy/maintenance. For example, one of those properties have needed or will need a new roof, correct? 

EDIT: Feel free to give a percentage of net worth with and without your primary just in case your primary is a million dollar home.

[Dicey]

I give up.

-W

Nah. We need you to keep fighting the good fight here.  It’s a lot easier for me to just +1 your comments. Haha


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I love you guys.

[PMJL34]

joenorm,

I just went through your post history like a psychotic ex would (pretty cool feature tbh).

I like your story a lot, consider me a fan of your set up.

so it sounds like you have been hands off on these rentals since day one. Your dad just offered you 50% of equity (with 50% payment) to help you get started, but he did all the work. Therefore, I'm guessing your dad just sends you money every month and you don't have to ask questions. Super cool dad BTW hope you two have a great relationship!

you also bought the vacant land next to you and built a house on it and that project seems to have recently completed (I would love to know more about this) so you are just getting the itch to make your next move.

In this case, just keep the out of state properties. It's you and your dad's "thing." You most likely don't even know if these buildings are still standing or if these buildings were sold 5 years ago without your knowledge (lol half kidding). Unless your dad wants to sell, just keep it forever.

Best of luck!

[joenorm]

joenorm,

I just went through your post history like a psychotic ex would (pretty cool feature tbh).

I like your story a lot, consider me a fan of your set up.

so it sounds like you have been hands off on these rentals since day one. Your dad just offered you 50% of equity (with 50% payment) to help you get started, but he did all the work. Therefore, I'm guessing your dad just sends you money every month and you don't have to ask questions. Super cool dad BTW hope you two have a great relationship!

you also bought the vacant land next to you and built a house on it and that project seems to have recently completed (I would love to know more about this) so you are just getting the itch to make your next move.

In this case, just keep the out of state properties. It's you and your dad's "thing." You most likely don't even know if these buildings are still standing or if these buildings were sold 5 years ago without your knowledge (lol half kidding). Unless your dad wants to sell, just keep it forever.

Best of luck!

Wow, thanks for taking the time. You pretty much got it all right. And yes, sort of looking for the next move but not really sure what direction to go.

The build went very well, thanks. I generally enjoy the work and I am still at a point in my life where I can grind it out. I am in an area where cost to build is very very high, so sweat equity holds a high value.

I like the idea of keeping the rentals. The main reason I brought up the question was noticing how the values have increased(I am a bit more involved with these than you suggest, but not by much). I see some people on here advocating for selling at a certain point. But these days it would be tough to reinvest that money anywhere better.

Cheers

[Papa bear]

Short answer, if they were mine, I’d keep them. If you sell, you have capital gains and depreciation recapture. Or 1031 them into other rentals, and right now, I’m not sure you’re going to find much better. 

So, keep.


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[PMJL34]

If you don't mind me asking,

what was the footprint of the first house you bought for 100k many many years ago? You say you put a lot of sweat and equity into it (did you sell this one or no?)

and what is the footprint of the current house you just finish building. and how much did it cost you total?

what was your reasoning for moving to the next lot over? was it just positioned better or did you grow out of your first house?

There is no vacant land where I am, but I would love to buy a SFH with a huge backyard and build my new primary on there from scratch all by myself (not the pour, but pretty much everything else).

Thanks!

[Mr. Green]

If your properties are cashflowing 32k per year they're the equivalent of 800k throwing off 4%. Their Zillow value is less than 500k. Also, the rents on them are approaching 2% of the purchase price you paid. Unless you have a compelling reason to divest yourself of real estate, these are a gold mine. You will not replicate these returns anywhere else.