VDI Insight: Should I Cash Out On My Rental Property?

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-Tim Murphy

Today, I want to talk about landlords cashing out on their rental properties.

Is it a good time?

That's really the big question.

Everybody's asking if a rental property is now the top of the market for me to get my cash, and basically, look in the mirror and be like, 'Yeah, I won'.

And in some cases, this means people who bought the property in 2008, 2009, 2010, or 2011, are doubling the value.

And I think it's a tricky question because obviously taking the profit and moving on is never really a bad thing.

I own property myself, I have several single family rental properties, and a few of them I bought in the downturn.

I've thought about this and I've debated this in my head.

Why don't I sell these properties and take the profit and the money that I had into these properties, and just be done being a landlord.

And I'll tell you this, the reason that I think twice about taking profit is because I'm a big believer in real estate, and if inflation comes into play, I believe that real estate is going to be the better investment to have, because it's an asset.

And it's a "scarce asset" because they're not going to just miraculously make more land.

So you can take your profit, because appreciation, and property values are through the roof.

But number two, on the other side of the coin, there's a lack of inventory for single family home rentals.

Now, I know in my market of Minneapolis, there's a ton of multifamily going up new construction everywhere. And that's fantastic. But not everybody wants to live in an apartment building, even if it has the best amenities man can buy.

There's a lot of families because they have kids, because they have pets, because they have they need storage, because they want to have a yard because they want a little bit more privacy, desire a single family home.

So they're looking for a single family home rental. Well, just like homes are appreciating in value, rent is going up quick.

What if I could increase my cash flow?

If you're going to grab your cash now and not invest in cash flow, my word of advice to you is to move that money into another asset. One way, shape or form don't sit on the cash.

When you make cash on the sale of a piece of real estate, you just throw it in your bank account. Now you're actually losing money fractionally on an incremental basis daily.

You're losing money because that cash is worth less and less and less every single day.

Whereas if it's sitting in a piece of real estate, an asset, it's going up in value every single day. So what are you going to do with that cash once you get it out?

The real conversation I want to have here is what to do with that cash when you take it out and reap your reward.

Are you going to invest that cash in Bitcoin? In some cryptocurrency? Are you going to invest that cash in another single family rental property? Are you going to put that in commercial real estate?

Now, I've thought about that, and I will sell my single family rental properties and reap that reward, but I will only do so when I have another asset that gives me cash flow.

But until that day comes, I'm going to sit on my asset, I'm going to rent it out, I'm going to expand my cash flow on a regular basis. And I am going to allow that asset, because I do believe inflation in one way shape or form is going to hit, and we'll see how hard it is, to grow.

And if inflation hits I will look back and laugh and say I'm so glad I didn't sell because I thought we were at the top of the market.

Ao yes, you can cash out and spend it, and you can spend it on some really fun things.

And if that's what you choose to do, well, that's life on your terms.

But if you're an investor like me, you don't spend equity. You spend cash flow.