Should I Rent or Should I Sell? Let’s Run the Numbers!!!

Please note that this post is an excerpt of the webinar hosted by our sister company, The Landlord Code, where our co-founders coach DIY landlords how to avoid problem tenants and maximize rental profitability. Get access to more training like this in our (free!) private Facebook group HERE.

We have an exciting one today for you and something that’s sort of near and dear to my heart, something I engage in almost every single week, multiple times. And this is the big question, which is, should I rent or should I sell my home? If you’ve not been living under a rock, you know how hot the sales market is right now. And we have a lot of real estate agents tuning in for today’s training to help learn more about this topic so they can help answer the question that it’s getting shot at them as well. So props to you, anyone who’s here to educate yourselves, whether you’re a landlord, a prospective landlord, or an agent trying to assist your clients today, we are going to tell you our approach to answering the question for our clients of should I rent or should I sell? And you know, we had clients last year and actually I met with someone yesterday and I met with someone this morning, both having the same question and they’re facing what we’d like to call them a business option, paralysis or analysis paralysis, option paralysis. And this is something that Michael Pritchard, one of my mentors, local guy out here, but he used to talk about this all the time; it’s when you’re faced with so many great decisions. Like if you’re walking down the cereal aisle at a grocery store, you’ve got a million awesome decisions. Which one do you take the end of spending 15 minutes or way too long deliberating what the best decision is. And you might miss your opportunity. This happened to actually my aunt last year, who had sold her house in San Francisco, it was looking at what to do with the proceeds of her money. And she contacted us. We identified a few different properties and there was, and she just couldn’t make the, she had a great option. She had a lot of money. She had a lot of great options and she, she was like under the gun. And we really got down to the wire when, by going with a 1031, cause you only have like a little bit amount of time. We really got down to the wire. She made a great decision, ultimately, but you don’t want to get that close when you’re making a big financial decision, right?

Again, if you don’t know how to approach this question, you’re not alone. There are agents, there are experts that are gazillion calculators out there that sometimes can be overwhelming. So you’re not alone. And it’s not your fault if you don’t know how to approach us. So we are, we’re going to tell you our approach today. But before we do that, we are so excited to let you know that this summer we are going to be running a summer school. I think you got to get a little bit like, I mean, someare serious specials, not really selling it. It’s a summer series special to Bruce Buffer Landlord.

One-on-one we are taking you back to basics. If you have never sat down and thought about how to set up your rental property, like a business, it’s not too late. And again, you are not alone because there are a lot of landlords. I would say two thirds of our clients who DIY manage have not thought about how to set their properties up like a business. So This series is not going to be for you. If you’re not into maximizing your profit, getting more with less risk or having fun. If you just hate all those things, don’t show up. Don’t show up. But if you’re into maximizing your ROI, having less drama in your mind and having more fun with your life, you might want to stew today because we have got some amazing guests who are going to show you the holy grail for wealth building. So shout out to everyone who voted on the topics. We appreciate your input and we’re going to be announcing the lineup next week. So stay tuned for that. And we’ll be writing all summer long, every Thursday here at the rental rescue.

So here’s, here’s the thing. The problem is is that you don’t know what the future holds and I’m just going to use the sports analogy playing Monday morning quarterback that gives you make a decision today to sell your house. And tomorrow you find out that your house could have sold. I don’t know, for 50% or a hundred percent more, you’re going to be kicked in yourself. So oftentimes this sort of deliberation enters in the mind when people are considering what to do with their investment property or even the home that they’re living in right now. And if you, if you’re not, if you’re not paying attention to starts, you mentioned the market is on fire and not, not just in our area. I mean basically The same thing. So what we’re really hearing when we hear clients or perspective clients or landlords around the nation, come to us with this question. What we’re really hearing people ask is, am I making a smart decision?

Whether you decide to rent or sell or put differently, am I making the wrong decision? Because let’s face it. That’s really what everyone’s afraid of. When you get into this analysis paralysis, that’s what you fear that you’re making the wrong decision that you’ve got this money that’s set up for whether it’s a retirement money or just money. You’ve accumulated money from the sale of a business. However, this money comes to you or however this property has come to you. You’re afraid if you’re asking this question, you’re afraid that you’re making the wrong decision. Are you guys seeing This? Like this happens to us all the time where we’re like, what should we do? Where should we go on vacation? What should we wait? Went back before, you know, back when we could go on vacation back before children die. That was another whole thing. But we also in our, our, our path to buying an investment property or another property for ourselves, we’ve thought about this question a number of times, and we have missed out on opportunities. We thought we did couldn’t afford it. We thought it wasn’t worth the money. We thought we didn’t, we wouldn’t be able to handle it. And guess what we probably could have. And we didn’t, and we didn’t make the decision and not making a decision. People is still making a decision. It’s just not doing anything. So if you don’t, if you want to start building and start growing, you gotta start making some decisions and, and being worried about making the wrong decision is something you need to consider. But also think of it in a broader perspective, which is why we’re here today. So first before we get into the questions, want you to look at, we’re going to show you, we’re going to demo actually the world premier of our ROI tool. And we’re going to run through a few examples.

So you can see what we’re actually talking about when we’re dealing with rentals. So we’re going to do a quick screen share. Yeah. So the ROI is drum roll.<inaudible> I can’t do this forever, but it’s this is, this is something we’ve been working on for several months to get it right. We’ve had experts in the Excel spreadsheet, space and Sheila who’s our operations person spearheading this. And we’ve developed this really awesome tool, which you were going to be able to experience right now. So which example do we want to run first? We want to run the cash flow. It’s cashflow positive. So in this scenario, this is a real life scenario. So we’re going to start from the beginning. When was this property purchase as, and how much was the purchase for? So this probably is purchased for, I think 500, $565,000, actually back in 2012. And this property just for everybody’s edification, this property was in original condition. It had not been touched probably in about, I don’t know, 30 years when it was originally purchased. So, and the home, the whole value today is probably about $1.4 million in this, after a significant remodel to the interior and exterior of this house. So now it’s coming up over the past nine years. Wasthat 148%? Yeah. So the first thing We’re going to look at here is how many approximate years and the dates are just approximate. What the appreciation has been since this property has been purchased. And then this is the average year on year historical appreciation.

So it’s worth looking at when you own a property, how much it’s appreciated to date. But when we go down to use this number for projections below, we’re not necessarily going to use that number because as we all know, we’ve been in a pretty hot market, but a lot of us who’ve been around the block, which this one has remember a little year called 2007, or even before that Two thousands, 2000, the market Is dipped and it’s coming back up and dipped. And so this is sort of an average over the past nine years, this property is going to be renting for $5,500 per month. The average monthly rental income is there’s no other rental income. So in this box you might put in like pet rent or if you’re getting storage rent or something like that, but that’s not, that’s not appropriate for this exam. So what we’re going To do here is calculate the, the days vacant. Now, a lot of calculators are going to have you use a percentage, but to us, we find that’s confusing. Cause that’s not how your everyday landlord thinks you think about in days or in weeks, how much vacancy I have my hat and you’re going to want to use an average.

So generally when a property is in our portfolio and under our care, it’s going to run less than 30 days vacant. Usually it’s like 10 to 14 actual vacant days. And then it’s not per year, right? So in our market tenants stay on average two years. So we’re going to use seven days. This example, because this is calculating yearly.

So seven days per year is going to be two- 82 week vacancy over the over two years. Over two years, average is out to seven days. Is that, do you guys see that? If you’re not seeing that I’m still confused, but we can get back to it if you are, let’s say so let’s move into the next part. So now you’re, now we know what the monthly rent is. We know that average days vacant is we’re going to talk about expenses, causeyou definitely want to make sure that you calculate your expenses. We know the monthly mortgage for this property is $4,000 per month. That includes taxes and mortgage altogether. The leasing, the monthly leasing property management costs for this property is we thought,  so we’re going to go with 10% here. This is a property that is actively managed by a professional management company, and then has the leasing and or renewal fees built in. So we’re going to use 10% as an average. And just so you, for the, for the audience, usually when a property is managed, there’s a leasing fee on the front end.

That’s half of that management fee and there’s a monthly management fee ongoing. So that’s the other half of it. So if we’re working with you, if you’re one of our platinum property management clients and we’re running through your annual ROI consult, we’re going to look at what your averages are and what your turnover has been. So we can calculate this, but 10% anywhere between 10 to 12 is a good number to use for anyone running a demo like this. Okay? So this property doesn’t have, we already included the taxes in the, the, the monthly mortgage portion. There’s no HOA. So we’re not going to include that. So the monthly estimated repair at capital improvement costs, this is an often overlooked item that a lot of DIY landlords, real estate agents, and even our current clients don’t think about when they put their property on the market for rent. And what we like to use is a percentage of the valuation of the property to calculate an on average year on your investment, that you’re going to make back into your investment to ensure that it continues to be maintained and the health is preserved.

Yeah. So we ran the numbers because we know most people know the average rule of thumb is about 1% of yourproperty’s value should be saved and or spent on ongoing maintenance and saving for longterm capital expense or preventative maintenance. Right? So what we did was we looked at our portfolio of, you know, hundreds of properties over the last three years. And we ran the average at this and we got to half a percent, which is what we expected to see. So what was that? So what you can take away from this is if you own a property, a rental that’s worth, let’s call it less than half a million dollars. Probably that 1% rule of thumb is still a good rule of thumb for you. But as you start to get above 500,000 and above in value, you can start creeping that down to about half a percent. And I do want to be clear this number, this estimated half, half a percent includes gardening and pool. So this is basically all in per month, what this, in this example, this landlord would need to be saving and or planning to spend per month to keep the property in tip top.

So are you guys seeing this? This would include like Darcy mentioned ongoing monthly services, those repairs that come up, clog toilets, if you need to do a paint job or tweak some stuff between tenancies, that kind of stuff, those, this is where this other monthly costs or improvement costs will come into play. And this Includes long-term savings for big expenses like roofs or something like that, or sewer lateral lines. We’re seeing a lot of that in our portfolio, right? So for Example, on my property, I didn’t put any money into it a couple of years ago at all, it was in great shape, but then I decided to put a new fence in which costs $17,000, which makes it all of the zero capital improvement costs from the year before and increased it dramatically from that, from that year. So just something to consider there’s big there’s years where are going to be big expenses and there’s years, there’s going to be little to no expenses, but just something to factor in when you’re considering this. Okay, moving on. So If this property had other costs that don’t have to do with maintenance, we just left. We have an area here. I mean, what’s an example. Maybe if someone’s got an unusual like HOA fee or any kind of additional cost, like an Assessment, like let’s see you had an assessment come up or new decks to new rooms for your condo or your community.Yeah. Or a new pool for your, your, your share of shared pool for your community. Something like that.

We’re not going to do that. So other monthly costs annual inflation. We’re not gonna include that cause that’s not pertinent to this example. Okay. So here’s what we like to use. We like to use conservative numbers because when we are FutureCasting we like to give you a best case example to work from I’m sorry, not a best case, like a worst case example to work from knowing that the property is very much likely to over-perform that, but we want to use really longterm averages. So I know it’s tempting to want to throw in 10% because property prices nationally are just like slowing up. We’re Talking about the appreciation and just to dumb it down for anybody who doesn’t know what that means, that that means the valuation that your property is increasing in every single day, month, year ongoing, we’re using a 3% appreciation rate in this case.

Okay. Likewise, We like to use 3% for the rent when we track it. That is actually the annual renewal increase we aregenerally doing. We’ve got some rent control rules right now, which are sort of changing our strategy. So this may creep up closer to 5%. But again, we like to give you really conservative estimates when we’re looking at these things.

So your property over performance, rather than certain Areas of the country, you can increase the rent a certain percentage plus CPI. And just depending on where you are, you can make that decision on how you want to move forward with your rent increase. Alright? Okay. So now we can talk about time and years. This is now where the Monday morning quarterback comes in, but not Monday morning. This is like Monday 20, 23. You can check it out and so forth. Okay. So we’re going to look at three years, five years and seven years now, depending on how you would need to look at your scenario, you can run these calculators with any number of years, right? Maybe you want to see your tenure and your 20 year projections.

Right. But for right now, we’re going to, since we’re talking about renting or selling, we’re assuming someone’s going to want to know in the near future, how am I likely to be performing? All right. So we’re talking about the initial operating expenses and incomes to totally monthly operating income right now is $5,500 per month. Our total monthly operating expenses are 52 50, which means our annual at the end of the year, cash in the pocket money spent on gas and great gifts for my wife is $3,000. That’s before tax. So looking at this for the kids, that’s three bands, three bands. That’s where the kids outsideYour first instinct is going to be like, holy crap. I’m only making three grand on this bad boy.

It is time to sell and abandoned this asset Glass half empty. Or you can think about it in another way, which means that someone was paying my mortgage and all my expenses, and I still made $3,000. Awesome. Right. So if we use our conservative numbers of 3% annual projected appreciation for this example, property you’re looking at taking home or having your net worth increased by an additional $42,000 in the first year. Not A little bit, because I didn’t get that at all. And I think that we should talk about it because this is a really important, really important fact. So talk, say that one more time. You made $3,000 is your net operating income, but the projected appreciation was what? $42,042,000. This is based on a 3% appreciation over the year. Okay. You guys seen that. All right. So then you add your $3,000 actual cash in hand to get your total return on your investment, to be an estimated $45,000 Action emoji. One of these That’s easily to 3%. So you can play with it. If you’re like, look, I need to know based on 10%, because I believe my market’s going up 10%. I want to see those numbers. You can play with it and look at it that way too. All right. So That’s $45,000. You made 42 of which you made while you were sleeping. Okay. So now we’re going to look at the 12 month, the way, if, when you’re talking to your CPA, they may want to talk to you about it, right? We’re gonna look at your cap rate. We’re gonna look at your adjusted cap rate. We’re going to look at the property value, the increase in the value, your mortgage costs, the capital improvements costs the property management costand the other property and the other operating.

So let’s answer the big question. What is a cap rate? How do you calculate cap rate? So you can ask this question to 10 different investors and you can actually get 10 different methods for calculating the cap rate. We look, you can look at it in your return, on the cash put in, which is another way I like to run this example. That’s how personally I think about it. Or you can look about it on the value of the property. So we have for the cap rate here. I mean, I don’t want to, I probably don’t want to get into too much. I just wanna, I wanna, I wanna paint the picture so people understand what a cap rate is. Okay. So this one is the ratio of a rental properties, net operating income to the value of the property, including any upfront repairs. So for this number to be accurate, we would have had to enter the top number in a different way, because you would want to include like more specifically the money you put down. And then the adjusted cap rate is looking at the current market value divided by today. So I think we should do another session where we really go into in depth in cap rate, because I know a lot of people’s eyes, glass over loss over. When we talk about that, Just to simplify it for you guys, we knew that $3,000 was the number of our net operating income. And we know the valuation of the property is $1.4 million. So you divide 1.4 million to $3,000 and you’d get this 0.2, 1% in terms of cap rate, but which is not a great cap rate for investors that now, if you throw into the mix that annual appreciation of a property, now it goes up to 3.2, 1%, which is a lot more attractive. All right? So the net net of what we’re trying to get here is in your first year, your ROI is 45,000, the projected value.

So when you are trying to ask yourself, is it a good idea to keep this rental or to sell this rental? This is what we’re looking at in year one. Now we want to get into our projected features and this is where it gets kind of fun. So here’s the annual property value. Again, based on 3%, year three, we’re popping up to 1.5 and change your five one six and change your seven one seven in change. And with that, we’re also going to go ahead and kick up your operating expenses, right? Cause they’re going to go, especially with inflation and whatnot, and then we’re getting your annual rent. Here’s what we’re looking at. Projected annual rent’s year three year five year seven annual net income year three year five, year seven. We’re looking at 7,000, 11,000, 14,000. Here’s our ROI on your three. Now we’re looking at 53,000 and change your five. We’re looking at 59,000 and change your seven. We’re looking at 66,000 and change. And again, you can play with these numbers. However you want to look at them. How however many years forward you want to go whenever you’re working with one of these calculators, because only, you know that the time that you’re comparing the performance of the two assets to answer the question, should I sell? Or should I write? So This is a great, great example of, for someone who’s cash flowing at the end of the year, but why don’t we do it? An example where someone who’s not cashflow, because generally speaking, a lot of newbie investors or people who are just kind of jumping into the landlord game, unless they’ve owned their property for a long time and they have a very low mortgage. They’re generally not cash flowing on the front end. So this, this just a couple of numbers here. Sure. So let’s just go with someone let’s say they’ve purchased more recently.

Let’s say they bought in 2019. There you go. Take it to today. Let’s say it hasn’t appreciated quite as much. Let’s say this bad boy is worth a 1.3. Okay. Right. So you still had some nice appreciation, Which you only, your appreciation presenters is 30%, which isn’t fast. It’s not bad. 14% over the timeframe that you’ve owned it, but let’s talk about the rent and they say the rent’s only $5,000 per month on his property. Okay. So we’ll go with the same vacancy. Okay. And now your mortgage is going to be a little bit higher. This person probably paying closer to 4,500 all in with tax insurance. Right? So you can already see right now we’re getting a little closer. We’ve got 5,000 coming in, in rent, but we’ve got 45,000 in monthly mortgage before we get into cost. Okay. The same person, same property management costs. Let’s call it 10%. Okay. So they’re right now they’re breaking even up, wait, hold on. Mostly estimated repair cost or improvement costs. That’s another six 50 per month. So now they’re in the negative, right? So we’re gonna go with the same 3% appreciation for rent and for property value. Okay. And so now The spicy people strap on your seatbelts, grab that water. So Now we’re looking at negative 7,800 for the year. So those of you who follow bigger pockets and especially the 1% rule you’re saying no, sell this asset, get out. Now You’re losing your shirts on.

And this is the very easy way to look at it and it’s not wrong. Right? You can look at this and say, I am losing money on this. Clearly I need to dump this asset and move into something else. It’s not a wrong assessment because you are losing money. But if you do follow bigger pockets, you know, there’s two lines of thinking. One is the investing for cashflow and the other option is investing for equity. So part of your answer, when you’re looking at a scenario at a property with this scenario is which category do you fall into? Are you in a market where you believe in the appreciation, the strength of the economy and the local local hiring market, the local tenant pool, or are you somewhere where maybe it’s a little more subject to market conditions? That’s a question that you need to ask yourself when you find yourself in a negative cashflow situation. So, but when I was talking about the projected appreciation on this property, and this is where things get a little bit more fun, a little bit brighter, a little rose colored, the annual average appreciation is $39,000 for this property, which means even with that negative cashflow, they’re still up $31,200 at the end of the year, which is great. And that we’re in net worth on that property. So why you might have spent a little bit money during the course of this, of ownership over the past year or two years, you’re actually up $31,200. Meaning selling has been paying your mortgage a good portion of your services. And you’re owning this.

You have control of this property. So let’s talk about cap rate. The cap rate on this thing is like, what? Negative a 0.6. But at the adjusted cap right now is up to 2.4%. Right? So when you’re thinking about the, if you’re thinking about owning and leaving you definitely, if you were just going to buy this thing for two to five years, yeah. You’re losing money. You should probably jump out of it. But if you’re thinking about an investment, that’s going to be wealth-building over the long-term. This is something you might want to say in, because it’s showing you that it’s increasing the value significantly every single year, which is a lot more than we can say about the stock market. It’s not lawless volatile.

And it’s actually a tangible asset that you can watch and hold. Yeah. So here, if you find yourself in a negative cashflow situation, this is where we’re going to want you to focus, right? When you’re looking at the annual ROI on year three at $39,000 in net worth gross growth, your five 44,000 and your 750,000. So these are the numbers you’re going to want to run through with your CPA. And again, these are conservative projections and in our market, I mean, it’s probably more realistic to use. You could use something like 5%, even though things are shooting up like 10 and 12 and 20%, we can’t count on that for the three-year and five-year and seven, it could happen, but you can’t count on that. Well, it’s Happening, it’s happening. But if are you guys seeing this, that holding a property, even though it’s at a negative cashflow can actually benefit you longterm just because it’s not making you money every single month. And you might be spending a little bit of extra dough to keep to hold onto it is still a good investment. There’s one of the questions you need to ask yourself if you are in this negative, or even if you’re in kind of like a break even scenario, right. Is what are my long-term goals? How long can I hold ontothis property? Because if you’re thinking you would sell it within the next one to two years, well, it may not make sense. What if the real estate market does take a dive? What if this is the top of the market when you should have sold out?

Now, if you have a very short term, a short timeframe you’re working with the answer may be to sell it. But if you can hold it, if you have flexibility in your life and in your financial plans, and you have the ability to control when you’re going to sell it, like you won’t be forced to sell it in two years, then you can withstand it. If the market takes a little bit of a dip and you can come out on the other side and let me give you a real life example of that. So back in the crash, 2007, 2008, we worked with a lot of investors who came to us with high-end properties and low end properties. They were in over their head. They were underwater. They needed to rent the homes, the Mo the rental market tanked at the same time, 20 to 30%, so much, so much. And like, it was so bad that our phones would ring. And we would be like, please don’t be the owner of another $2 million home in Tiburon asking us to rent your home. Cause we can’t do it.

There was no one around, There was a lot of people in that time who decided to jump out of the market, short, sell their property, take a loss and move on. And they want and lick their wounds somewhere else. And there was another select group of individuals who were like, you know what, I’m just gonna pull up my pants, tighten up the belt and I’m gonna hold onto this thing and ride this wave and see what happens. And the people who did that made a ton of money and three or four years later, their properties not only came back, but were worth more than they were during the crash. Cigna gets a hundred thousand dollars more and they were, they crushed it.

They left, they got out of it, held onto that money wave. And then they jumped back into the market. They could buy something even bigger and Better. You want to like, if you can hold onto it, if you’re negative or you’re breaking even, and you have the ability to hang onto it. Well, hang on to that thing. That’s when you run a run, run a three or five-year, seven-year run a 10 year run a 15 year projection and see where you’re going to be at the end of that. If there’s a reason that may drive you to have to sell that home in a non-ideal market. Well, there’s an argument to be made that we’re at the top of the market now. So that could be a big driver for you in deciding that now is actually the time to sell. So we have two more questions. Okay. Well I just, just, I actually just, I actually spoke with somebody the other day, who is in that position. Like the market is hot. We’re like, she’s like, should I sell? Or should I rent it?

Well, she’s making some improvements to the property, take to get into a condition where it can rent, but the rent is really critical. If she takes any, anywhere near a loss on that property, it’s going to be devastating for her on a monthly basis. So they asked her, her question is, should I rent? Or should I sell? You should sell. You should definitely sell this property because it could end up really hurting you if you held onto it.

So the two questions you need to ask yourself are, if I sell now, what am I going to do with this money? This is a question of leverage, which is going to which option selling or renting is going to bring you better leverage in the longterm, which, which option is going to help you accomplish your dreams of we’re going to go out on a limb here and say retirement, making money while you sleep toes on the sand, peanut colada in hand, Increasing your rental, your, your investment property portfolio, whatever that might look like for you, but what are you going to do with that? What are you gonna do with it? And the other question is, and this is something that you should definitely ask your real estate agent. If you’re considering selling, is what is it going to cost for me to sell this thing? Because Just talking agent commissions, right? All of it, all of it, the agent commissions, the transfer tax, the escrow title fees, staging, the carry costs, the repairs you’re going to have to make the inspections. All of it. You want to write up of all the costs. Yeah. And sometimes this can be for in our market. It can be, you know, a hundred thousand dollars at the end of the day in other markets, it could be 25 to $50,000, but there is an opportunity cost to maximize the sale price on your home. So you want to look at that and compare it to what the potential losses, if you held onto the property versus, and the opportunity cost of holding on the property versus selling it and getting to something else.

You guys seeing what I’m talking about here? I know it’s a lot of information to download, especially when you start talking about dollar size and money, because oftentimes in this market, we were like, I just want my, I want to make some money. Right? So let me give an example of what you just mentioned in number two. So let’s say you have a home, you have a rental it’s worth $500,000, right? So your cost, if we just look at agents, commissions alone is in 5%. That’s $25,000, right? Like, like how we can calculate that right away. That’s easy. That’s an easy one. And we can calculate 20, 20% all day long. We can tell You the cheapskates where right away are really, really, you’re not good tip on wine. That’s awful, awful. Anyways, $1,000 Property, it’s going to cost you $25,000 alone just in the agent’s commissions. Let’s forget about all the other costs right now, right? If you’re evaluating, keeping that same property as a rental, let’s say this rental is causing you a lot of headache, right?

You’re tired of the calls. You’re tired of tenants, tenants damaging the property. Well, you could top out at any time hire property management and that same $25,000 that you’re ready to part with to give to an agent to list your home, to sell well, that buys you a heck of a lot of property management. A lot of repairs, it buys you, I think A lot of negatives.

So if you’ve been, if you’re going in a negative $500 per month, that’s $6,000 at the end of the year, total that’s $19,000, better than the cost of paying an agent to sell your property. And We’re not saying this in an, in an anti agent way, we’re saying this in a look at the costs that it’s going to cost to sell your home and, and stop your appreciation from growing, right? It’s going to stop it right there. It’s going to halt it. If you instead take that money that you’re willing to part with and invest it into your property, into top grade management, into the repairs that need to be made into the investments that need to be made in the property to help you get an even higher rent.

That’s the comparison that you need to make. So I have an example. We had a, I had a client a couple of years ago, we managed their property. They actually lived overseas and they bought this house. They bought it. It was A really, sorry, sorry, sorry. Wow. Stay away from the desk. It’s very sensitive.

So they bought this property is they spend a lot of money on it and they realized in where they’re living overseas, that there was actually a really great opportunity for them. And they decided to sell this house after only owning it for 18 months at a loss, just so they could take that capital and really invest in something else. It was worth them taking the loss because they knew the gain on the other side of that was going to be dramatically higher.

So they took the loss here to get something else there. And that’s your path. I’m definitely behind that. I think that’s a good way to go. No matter what it costs. If you can see growth on the other side of that, do it. And that’s a question, honestly, we just asked ourselves with our primary residence, as we converted to a rental, we’ve got hundreds of thousands of dollars in equity in this insane sales market. We’re like, should we be selling this thing? I know rentals is our business, but should we be taking this cash? And we looked at it and we said, you know what, no, we are cash flowing nicely. And we believe in this home as a longterm rental and we are going to keep it as a rental, forget about all the cash that’s out there right now and keep it as a rental because we looked at what’s going to give us the best leverage, right? And let’s not forget about the monopoly theory, right? Trade for green homes for one red hotel. So, so I want everybody who’s on this call today to show up in three years and asked me, Hey, how’d that work out for you when the market crashes or does whatever it does three years, This talking to guy who’s dominated our last like three family monopoly games. He’s vicious does not care about bankrupting, his wife’s or myseven-year-old or your son does not care about bankrupting. His seven year old. There’s nothing said about luck. There’s nothing to say about skill. And having gotten my butt handed to me multiple times, I’ve learned a thing about a thing or two.

So Before we jump into the Q and a, just to sum up, so the three things you need to look at is one. You need to run your projections. There are a bunch of calculators online. You can run them any which way you like. You need to have those projections ready to go. So you’ve got your big picture and you need to take that to your CPA so that you can have a discussion around that. And don’t forget your CapEx, right? You guys seen This, don’t forget the capex know your numbers, and that way you can have the best, most beneficial conversation with your financial person.

So, first one, your numbers. Number two, you need to ask yourself the question, what am I going to do with this cash? If I sell this home. And part two of that question is, will this give me more or less leverage than if I retain this home as a rental and continue to bank the appreciation, making money while asleep. And then the third question Is you need to look at your final costs. Once you’ve answered that you need to go to your listing agent, your real estate agent, you need to get the summary of all the costs you’re looking at. So you can compare apples to apples, and then you need to get, if the reason you’re selling is because you’re ready to tap out and you’re done being a landlord. Look at the cost of property management. Look at those two. So you can compare the cost between the two. And again, ask yourself the same question, which option gives me more leverage. Yeah, exactly. So, all right. We just jump into some questions, right? So Marilyn Childs and Maryland long-term client. So how do you factor in potential damage to the property that you might have to repair after the tenant moves out?

This would go into, back to that cap ex costs that we’re talking about, but if there’s damage to the property, you also have a security deposit. So there might be some normal wear and tear that you’re looking at. But the security deposit, if it’s excessive damage will take up S w w w we’ll help you cure some of that damage. So some of that’s going to be CapEx.Some, a lot of it’s going to be security deposit. Yeah. And to be clear. So this question comes up a lot in the landlord forums, where in online people are, landlords are often complaining. My tenants did all this damage. It’s so unfair. They’ve run away. And I’m going to go ahead and paying that back in your court.

If your tenants are damaging your home, where did you mess up? How did you let this tenant who was going to damage your asset to a degree that you can’t recoup your, your investment or recoup that loss? How did you let those people in there? Because nine out of 10 times, it comes down to screening. If you have top level screening,

if you are bringing in the quality of applicants that we’re doing in our portfolio, or that were coaching and teaching people to do with the landlord code course, then you shouldn’t have this problem. And if you do, they’re well qualified individuals who have a credit score to protect who will make good on their debts nine times out of 10. And this won’t even be a question, it’ll be a question of the capital expenses, right? The preventative maintenance that you’re budgeting for, but it won’t be a question of how do I get this money back from these tenants. So it shouldn’t influence your investment decisions. I Want to say one thing though about Maryland’s probably having been an it she’s probably probably gets like the award for the best Peloton room.

And I’ve ever seen just above, above the, above the world, beautiful valley shyness. You can see San Francisco is awesome. All right. So any more questions out there? You know, we’re actually at the car or whatever today, just a reminder, we’re doing the summer series. We talked about that before. So that’s happening. We’re going to be doing a major announcement next week.

So we’re going to outline the people that we’re going to have join us during the summer series. We’re here every single Thursday at 11:00 AM for the rental rescue show. I’m Christopher Barrow. This is Darcy Alka Sparrow. We thank you for having being here today. If you found value out of anything that we talked about, let us know we’re sending out some Starbucks gift cards. You can get yourself a latte or a little medium coffee with two shots for that price of that, that card is awesome. And we’dlove to hear back from you if there’s any value. If you want to share this with a friend, do that in the meantime, we’ll see you next week at 11:00 AM. Stay safe and stay healthy. Take care.