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An Investor Analyzes: When is the Best Time to Sell Off Your Properties?By Dave Van Horn
When we first start out investing in real estate, certain factors, such as our location, our amount of capital, and our skill sets or areas of expertise, may dictate what and where we buy. Some investors I know started out flipping houses while using profits to invest in some buy and hold properties.
Over the years, my strategy was based off of what I was good at, since I had been a painting contractor and a real estate agent. I liked one to four family residential and modestly priced homes that were often in need of repairs or updating, and I liked areas on the fringe of going down in value that still cash flowed pretty well. These were blue-collar areas, where I'd fix and flip or fix and refinance before they declined.
I would cash flow better than most people that bought retail, but I had a better clientele for tenants than in the lower income wars zones. Some of these areas have continued to appreciate over time, but I'll never see the type of double digit appreciation my friends in California might see.
I don't usually see large swings in market value, whether up or down. Now, if I had bought in nicer areas, I might see more appreciation (notice that I said "might"), but I would most likely not cash flow at all, and I would be very lucky to just break even. This is probably why you'll see investors start to invest outside their areas.
Another strategy for buy and hold properties may be to pay them down or off altogether so as to ensure cash flow and repair money for later years. Some folks refinance into more properties on a continuous basis. Or maybe they utilize a similar strategy to mine and keep re-leveraging their real estate, putting the borrowed capital into hard money deals and notes.