I Just Sold Half of My Rental Portfolio. Here’s Why That Should Make You Nervous!

by | dolinsksite.ru

If you listened to the Do linsk site Podcast over the past few weeks, you’ll already know this:

I just sold half of my portfolio.

Out of my 52 rental units, I just sold 24 in one swoop by unloading my 24-unit apartment complex. (At the same time, I also sold two of my single family houses.)

Since then, I’ve been asked numerous times:

“WHY!?”

Is the real estate market crashing?

Is it time to get out of real estate?

Is the sky falling?

Should I buy Bitcoin instead? (No.)

Today, I wanted to explain just why I sold my portfolio—and why that should make you a little nervous.

But don’t worry, it’s not what you think.

Why I Sold

When I started investing in real estate, I made a lot of mistakes. We all do.

One of those mistakes was very simple, and something many people do: When I analyzed deals, I assumed I would be able to do the property management myself, forever. After all, when I was buying my 24-unit apartment complex, I was just 25 years old, so it was easy. I had no kids, and my wife and I could spend all our time dealing with the drama that comes with owning lower-income rental properties.

However, time’s have changed. Specifically, this happened last year:

That’s right—I’m now a dad and it’s the best thing in the world.

So, managing tenants wasn’t as fun as it once was, because frankly, I’d rather spend my time with Rosie.

But remember, when I analyzed my early deals, including my 24-unit apartment, I didn’t plan for property management. So, if I decided to outsource it at this point, a large chunk of my cash flow would be destroyed, AND because of my location, I don’t think I could find a decent property manager.

In other words, I had painted myself into a corner. Whoopsies. So when someone randomly offered to buy my apartment complex, I said, “Sure.”

Related: How to Beat the Coming Housing Slowdown With a Value-Add Multifamily

[Subtle lesson here: I was contacted by a local investor, completely out of the blue. I had not been thinking of selling at all. He just hit me at the right time and bought a great deal from me. This should motivate you to contact every landlord in your area. There is a good chance many of them are in the same boat I was.]

No, real estate is not collapsing. Will the market decline again? Of course. It’s just a matter of time. Statistically, we’re in for a recession soon.

But does that mean I’m no longer buying real estate? Far from it. In fact, I’m just starting.

And that should make you nervous.

Why You Should Be Nervous About What I’m Doing

It’s simple: I’m going to compete with you—and I’m going to win.

Yes, I just said it.

I’m taking your next deal.

I’m going to out-hustle you.

I’m going to out-market you.

I’m going to out-smart you. 

And I’m not the only one. Smart investors, everywhere, are still looking—and still finding—deals. So, are you going to sit on the sideline and wait for the market to decline? Or are you going to get out there and compete with me?

Real estate investing is a wild sport, and amateur hour is over. I’m ready to play.

Are you?

buy-first-property

The Next Step for You

Look, the end of 2017 is approaching quickly. You had some pretty lofty goals set at the beginning of the year. How are you doing on them?

Are you ready to get serious about CRUSHING your goals? If so—and if you are ready to SPRINT to the end of the year—then listen up: Take the “90-Day Challenge” with me.

Related: Buying a House: The Ultimate Guide to Purchasing Your First Property

It’s a 90-day sprint to buy your first (or next) property before the end of the year, and the entire dolinsksite.rumunity is going to be doing it together.

To kick off the challenge, you need to attend this week’s Do linsk site Webinar.

It happened on Wednesday, October 4th at 4:00 p.m. Pacific (7:00 p.m. Eastern) BUT if you missed it – you can watch the replay right now!

It’s time to sprint to the finish line.

See ya there?

How have your yearly goals been going? Will you participate in the 90-Day Challenge?

Comment below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on dolinsksite.ru. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

56 Comments

  1. Cindy Larsen

    Brandon,

    HA! You had me going for a minute. i was wondering if you knew some secret I had missed. After all, I’ve learned a lot from you in the past. Good to know you are still confident in the WA multifamily market.
    So am I. As soon as my house in CA closes, I’ll be buying in WA again, Hopefully this year. And I will only be buying great deals. In fact, I bought a great BRRR in your backyard less than a year ago. I’m also looking in a few other areas of WA. So, challenge accepted.

  2. Erik Whiting

    No issues with your decision. I’m a proud dad of 3 young ‘uns myself.

    Here’s why I’m doing the exact opposite of what you’re doing, and why you don’t need to be scared. Yeah, I know that won’t generate as many clicks/responses, but anyway…

    My kids’ futures depend on us making good deals that can be managed without more work from Dad. When I had 12 units, I was like you…busy with drama and repairs, working on them all the time (I did my own maintenance too, back then).

    What I’ve since learned is that by outsourcing of rote tasks (and btw, 95% of tasks are rote!), you can grow to be the guy who owns a company with 10,000 units and still gets to enjoy month long vacations with the family and see Sissy learn to ride her first bike.

    So it’s not size. It’s systems.

    Maybe your 24-plex didn’t allow someone to manage it, but my question is did you do an 80/20 analysis or did you just get overwhelmed and sell? For those who don’t know, and 80/20 analysis follows the trend in business that 80% of your positive results come from only 20% of your work. I believe I heard that one a BP podcast once as well. Furthermore, you can iterate the 80/20 on the original 20 and fine even more ways to hire out, outsource, remove yourself from the daily rote tasks that don’t add value. Folks who become experts at this end up doing nothing but making decisions. They don’t cut grass, they don’t fix the faucets, they don’t screen the tenants, they don’t sign the leases….Everything is outsourced to the point where you make 1 decisions that triggers 10-1,000 other events (depending on your scale) like clock work.

    I have a friend who owns and sits at the top of the systems for over 500 units. He “works” 15 hours a week on them or less. How? Systems. 80/20…then 80/20 on the 1st 20….then 80/20 on the 2nd 20, etc. He could add 100 more units and add no more than 1-2 hours per week to his workload. You can see why this guy is my mentor!

    So Brandon, did you do your 80/20 iteration(s) on this building? Maybe you did and it still made sense to sell. That’s fine, no worries. But if not…well…sad to see them go because I bet you could have kept them, profitably, and with little to no extra work vs. what it’s going to take you to hustle and outwit all of us per your claim! (wink)

    Go ahead and hustle. Best wishes. I’m hustling in a different market, so I’m not too concerted we’ll be in competition. With my systems and a number of units comparable to where you were at just were pre-sale, I “work on” my rentals about 3 hours a week, tops. Honestly, my kids wouldn’t know we had rentals if I didn’t take them on Sunday drives by them occasionally!

  3. As long as you don’t come to California I won’t MAKE you eat your words by not allowing you to buy anything! Great move on the sale of the 24 plex and yes spending time with your kid bets dealing with tenants. They grow up so fast…..

  4. David Krulac

    Brandon,
    I also sold apartment building that weren’t listed either. I had some SFH for sale, somebody asked if I had any apartment buildings and I said yes but they’re not listed for sale. They looked at he apartments and they bought them. I sold for about 6X what I paid for the properties, and had accelerated the depreciation so they were depreciated to zero. And I had done just about ever improvement I could to make the property better and increase cash flow.

    And of course like you I did a 1031 exchange so that I would have that big tax bill on property depreciated to zero. Good luck in your quest to complete the 1031, its a lot harder than people realize.

    David Krulac

    PS even though I sold 40 of my properties in the last two years, I’m not getting out of the biz and am still buying property. Going to an auction this week where they are selling 400 properties, just might get one or more?

    • Jeff Rabinowitz

      Unless you plan on leaving the property to your heirs, that tax bill hasn’t gone anywhere, it is just deferred. In fact, depending on what our congresscritters concoct in the coming years it could become larger than if you took the hit now (or delayed it a bit with an installment sale).

  5. Michael Woodward

    Thanks for the article Brandon….. I’m a little confused though. From the subject of your article, I thought you were going to say that you feel like we’ve reached the market peak and you’re liquidating in preparation to scoop up good deals after an upcoming correction but instead you’re going back on the hunt right away for a new deal. I’m a little surprised that you would give up your “bird in the hand” in the hopes that you’ll find a better deal soon given that inventory is low and the market is hot. You must feel like you can find a better deal than the one you had in this hot market or you wouldn’t have done it. Is there more to the story….??…..

    • Nathan Richmond

      I can’t speak for Brandon, but on a recent podcast, he mentioned he’s looking for a mobile home park. One in which the people who live there own their own homes, so therefore they are responsible for any repairs. He would just own the land and they would pay him rent on the space. Much more passive than managing any actual units.

      Again, I can’t speak for him, but I believe that’s where he’s looking at going with his money.

      Am I right Brandon?

  6. Julieta Pina

    Brandon, I thoroughly enjoyed reading this! When I clicked on the link to read this I was totally expecting to read about how the apocalypse is coming…I love how this is written. On a more serious note though, thank you for the message…pushed me to stay up just a little longer finishing up some to-do’s all in the name of crushing this last quarter.

  7. Dante Pirouz

    I accept the challenge Brandon!! We (my husband and I) currently own 7 units and we just signed a PA today to buy 8 more units from a seller who is retiring and will hopefully buy his remaining 12 units (if my numbers are all correct on the 8) in a few months. That will put us at 27 units which is my freedom number so I can finally retire from my horrible job as a b-school prof…but to be honest I am still a little bit nervous taking on such a huge deal (for me anyway)! But in your post you said bring it, right??!!! 🙂

  8. Evan Licht

    Hey Brandon, had a quick question about contacting local landlords in your area…Are you knocking on doors and asking tenants who the owner is? Is this purely based off of mailers and networking? I have a very specific area where I am looking to purchase a duplex and am trying to figure out how to get in touch with the landlords of the duplexes I am interested in. Thanks so much!

  9. John Thedford

    There is never a bad time to buy real estate–only sell. Selling can make sense as you stated. Am I buying anything and everything? No way. I am buying smart deals? I HOPE SO–I have one under contract I can’t wait to close:)
    Congrats on the beautiful baby! I have an aunt named Rosie:)

  10. Jay C.

    You wrote,
    I’m taking your next deal.
    I’m going to out-hustle you.
    I’m going to out-market you.
    I’m going to out-smart you.,

    Most of us are not the least concerned cause you exposed yourself. You have a priority(weakness) now that has nothing to do with money. If any thing its the reverse. You will lose deals now more then ever. Trust me.

    On your prop why did you sell it? If you owned it 100% then it should have been a cash cow. If you didn’t I get it dumping it. I dont get the go in hock for tons of doors. Just a buy opp for us cash buyers when the more more more crowd gets in over their heads. If your waiting for a pullback good luck. The market is not rational and and it can outlast you and everyone else.. Hopefully you wont look back at your 24 units in a decade if the guy flips it for double what he paid you when the mill opens back up.

  11. Bernie Neyer

    Brandon,

    Are you still looking for a trailer court? I ran across an RV court with an additional 7 acres over in Missouri.

    Also, you might want in interview Tim Zomermmaand for you pod cast. He used to own some trailer courts in Wichita. He sold all but one I think and has his own management company running it. He also manages my properties in Wichita. He has a unique story.

  12. Jerome Kaidor

    Something similar happened to me. I was doing all the back office work for 90 units, and boom! Two babies, a boy & a girl! We just celebrated their fourth birthday.

    I tell everybody I have two jobs: a big one and a little one. The little one is the buildings.

    Until a few months ago, Mommy worked at the paint factory, and I was the stay at home dad. It was easy when they were babies; you’d put them in their bassinette, then crib, then playpen, and they would lay there and eat, sleep & poop. Got harder when they crawled, even harder when they walked.

    Around when they hit 1.5 y/o I started getting an occasional babysitter for a few hours, just so I could have time to do some office work. At 2, we got them both in half-day day care – mostly because we felt they needed to be with other children.

    So I streamlined my operation. I discovered timesaving tricks. Here in no particular order:
    * Started using the bank’s billpay extensively. This was a big deal – now I can pay a bill in about one minute, including the bookkeeping.

    * I abandoned my upstairs office with the file cabinets and printer, and relocated to an office corner in the downstairs bedroom – with the babies. No file cabinets, so no paper. Bought a decent desktop scanner ( Fujitsu IX500 ) and started scanning and tossing every scrap of incoming paper. To support this, I keep all the business data & documents on a well backed up Linux server.

    * I identified time consuming tasks, and wrote software to automate them. For example, a payroll module cut the onerous task of doing a payroll for my onsite staff from 8+ hours down to an hour and a half.

    * Here’s another onerous task that just went away: The property tax folks ( here in CA ) have a “personal property tax” return that you fill out early each year. It lists the personal property – appliances, supplies, tools, inventory – that you have at your building. You have to list and depreciate everything on this form. “Say, what about that rooter machine we bought two years ago?” Next year, you depreciate this year’s stuff, the year before that, the year before that…. I used to sweat blood filling out these things. After the babies were born, I got so wrapped around the axle that I neglected to do them…and guess what? The only consequence was a 10% penalty on the personal property tax. That came out to $50 ( fifty bucks ) on my big complex. Money well spent, IMHO. I haven’t filled out one of those things in four years.

  13. Scott M.

    Hi Brandon, I applaud you for your priorities of what really is most important in life!
    Second, could you briefly explain how the buyer contacted you and how they initiated the question of asking if you wanted to sell and what made you take them seriously? Would love to hear how they did this on a cold call…..

    Scott

  14. Amy A.

    Quick question: Is your sale contingent upon you buying an appropriate 1031 exchange property? I’ve read that a big mistake investors often make is buying a poor investment in an exchange because of the deadline.

    What a beautiful daughter you have! Yes, dealing with tenant drama is particularly difficult when you have a young child to take around with you. You can’t always get childcare at the last minute in an emergency. They hear words that they wouldn’t hear at home!

  15. Debbie Murphy

    Good story. It’s good that you are changing with the events in your life. That is wonderful your priorities change and you change with the times. Congratulations. If you are looking for a single-family home investment in a market that is down right now but will soon go up – please look at my marketplace posting of home built in 2016 on 40 acres in Potter, Nebraska. Beautiful country. No work needed, we just need a buyer. Thanks!

  16. Cole Starin

    I watched and accepted the 90 day challenge last week following the webinar. In response, I went under contract on a new duplex, will be my second property, today and should close before the end of the year. Guess what? Deals are always out there! Its up to you to find them and take action. Thanks Brandon for the motivation, I’ll see you at the finish line.

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