Selling a good performing rental property to simplify

[Kevin Aster Tin Obin]

Spent last 3 years building up rental properties to cover expenses, but now with 4 mortgages and no free time between spouse and I managing rentals, put first one on zillow to sell and now under contract.  Hard to believe that all that work over last 3 years improving a multi family rental and getting ROI maxed out, building stable, great tenants, now I am stepping away.

Market forces are scaring me away from the long view I once had on multi family rentals in my area.  Thought I would hold for 30 years and live off the rents, but feels like every weekend I have to divert my attention to paying bills, tenant concerns, having to relist apartment, all the hours spent to keep a rental aren't worth the 17% ROE I am receiving for 3rd year now.

With net assets on track to reach 7 figures this year, feel its time to simplify and cash out some rental properties.  There are new competing apartment buildings arising in our area and affordable housing subsidies now competing for my tenants.  If we hire a property manager and have a 20% reduction in rents, any vacancy and I am at 3-4% returns on equity.  Feel its better to cash out and look for other investments.  Any suggestions?

In Summary, any new aspiring landlords beware that it take a lot of time!  I try to optimize and find efficiency wherever I can, but when I balance cost, I usually find myself playing handyman, showing properties, taking calls, writing leases, landscaping yards, etc.  That $1000 a month from a property isn't worth the 20 hours a month it takes to keep the business alive and keep my mind at ease.

I do have a few other properties I am keeping for time being, but selling the best performer due to new apartment building in that town.

[PadAdventure]

Man, I cannot tell you how many times I have felt the same way.  Over the past few months though, mine have all stabilized and there has been very little (I'm sure I just screwed myself) and smooth sailing.

I do have 3 or 4 leases expiring soon, with tenant turnover...but man do I know where you're coming from.  It can be a lot of work...I did a ton up front...don't know that I'd do it again that way.

BTW, this is great advice, and very candid...good of you to share this viewpoint. 

[CashFlowDiaries]

Spent last 3 years building up rental properties to cover expenses, but now with 4 mortgages and no free time between spouse and I managing rentals, put first one on zillow to sell and now under contract.  Hard to believe that all that work over last 3 years improving a multi family rental and getting ROI maxed out, building stable, great tenants, now I am stepping away.

Market forces are scaring me away from the long view I once had on multi family rentals in my area.  Thought I would hold for 30 years and live off the rents, but feels like every weekend I have to divert my attention to paying bills, tenant concerns, having to relist apartment, all the hours spent to keep a rental aren't worth the 17% ROE I am receiving for 3rd year now.

With net assets on track to reach 7 figures this year, feel its time to simplify and cash out some rental properties.  There are new competing apartment buildings arising in our area and affordable housing subsidies now competing for my tenants.  If we hire a property manager and have a 20% reduction in rents, any vacancy and I am at 3-4% returns on equity.  Feel its better to cash out and look for other investments.  Any suggestions?

In Summary, any new aspiring landlords beware that it take a lot of time!  I try to optimize and find efficiency wherever I can, but when I balance cost, I usually find myself playing handyman, showing properties, taking calls, writing leases, landscaping yards, etc.  That $1000 a month from a property isn't worth the 20 hours a month it takes to keep the business alive and keep my mind at ease.

I do have a few other properties I am keeping for time being, but selling the best performer due to new apartment building in that town.

That is crazy the amount of time you have to spend to upkeep you rentals.  How many units do you own?  I have 5 rental properties but they are single family homes and I go months without doing anything or handling any calls sometimes.  its great.  Maybe the problem is apartment buildings?

[bobechs]

I have a question.

As a seller of a rental unit with a history, how do you decide what the sale price you list will be?

I understand that the market in general will determine the actual equilibrium between supply and demand, but I read often that potential buyers around here are looking to purchase property at 50 or 60 months rent, or advising others not to touch something offered at 100 months or more rent.

As a seller of course you would like to get as much not only of past rentals, but whatever the seller is willing to give up of the future rent as well.

So, how do you set a price?

[Kevin Aster Tin Obin]

I have 2 and 3 families. Single family is usually less maintenance.  I have to do all yard work, keep trash area clear, snow plow, place tenants who usually move out after 12 month lease, etc. Not hands off like SFR.

I usually talk CAP when thinking price, hadn't heard about months rent.  But my sale price is 96 months rent.. cap rate around 9%.

[clarkfan1979]

Single family homes require much less maintenance. I have two single family home rentals and I average around 15 hours/year for each. I usually get about 2-3 phone calls during the year to fix something. I spend about 1 hour for each repair making phone calls to make sure the repair is done.

I do one-year leases. If the tenants re-new the lease, it takes about 2 hours to write out the new lease and get signatures. I usually like to do one small day of minor repairs each year (5 hours) because I don't like little things to add up. This means that I'm at about 10 hours of work for the entire year for a single family home. 

If the tenants do not re-new, then it's more like 20 hours for the entire year. The additional time includes showing the property (5 hours) and going through applications (5 hours).

I used to do many repairs on my own because I wanted to learn how to do them. I appreciate all that I learned. However, I now tend to pay for most repairs.