Fouad write: If the plan is to buy sell and cash flow real estate while holding, but you appreciate 500k in less than a year…do you sell?
Welcome to the real investing show with Tim Herriage each day, we’ll provide real investing for everyday investors. Tim is a nationally recognized real estate investing expert podcast, host and public speaker. He built his businesses from the ground up and is here to help you do the same. Here is your host Tim Herriage.
Welcome back to the real investing show. I’m Tim Herriage today. Fouad if the plan is to buy, sell, and cash flow real estate while holding, but you appreciate 500 K in less than a year, do you sell <laugh>? Oh, me, you know, food. I, I say that everything is always for sale. Uh, but you know, if you go listen to the uncontested investing podcast, that I’m a host of episode two, featured a gentleman by the name of Eddie speed. And Eddie is one of my great mentors in my business. And in the money minute, he talked about transactional thinking versus wealth thinking, and he broke it down like this. He said, every now and then you should look at your income and figure out which is growing faster, your re your, your earned income or your net worth. And if your transactional income, your earned income is growing faster than your net worth, then you’re growing in the wrong direction, I think is what he said.
So I hate to be, I’d say theoretical in my answer, but to sell one house every now and then that went up and, and put half a million bucks in your pocket. No, I don’t have a problem with that. Some of the largest institutional buyers out there called through their portfolio from time to time take chips off the table. I don’t think there’s anything wrong with that, but let’s say you had 15, 20 houses and you sold half of ’em and you made, you know, let’s just call it 5 million bucks. You can pay taxes on that. And now ultimately you have three and a half million and what are you gonna do with it? Because you’re not gonna buy the same asset that you had. And you’re not gonna just sit there. I would imagine, and put it into a savings account. But if you do recoup that capital and you know, so my Jennifer and I you’ll hear me say this a lot.
I am a fan of debt. When I got started in this business 21 years ago, I was not 21 years ago. Oh, I would’ve loved me. Some Dave Ramsey, uh, 21 years ago, I was all about, get the house paid off, get the house paid off own. ’em free and clear. But when you look at taxes and real estate benefits, right, you benefit from the cash flow. You benefit what you can’t have. If you sell the property, you benefit from the appreciation which you can’t keep getting. If you capture it completely, you benefit through the, uh, the tax advantages and you benefit through scale because this is one of those few businesses where after enough time of even just putting the cash flow away, you can save up enough money for another down payment. And this is a business where the compounding effect of delay gratification is massive.
So I know you, I know who you are. I say, you and your wife stick to cash flow. But when you have a property that is not meeting your performance targets, I feel like that’s the one you sell. I know, I know where you buy. I know what you’re looking at. These properties in your portfolios go up in value that they may go down a little in value. It just is what it is. But I would say if you’ve got one that is meeting your in your performer, your investment thesis, keep it. If you’ve got one that, you know, for some reason, I don’t know, location seasonality, that’s not cash flowing the way you want it. I say, call that one out and then put the capital back to work. Unless you need to take some chips off the table to take care of your family, which there’s nothing wrong with the greatest institutions in the world that manage money for other people.
They have to take tips off the table. They have to charge fees for their time so that they can pay to have the most talented people in the world. So I don’t know. I’m not one of those. I, I never say never. And I never say always, uh, even though I just said never, uh <laugh> I try not to say never. And I try not to say always, because I believe broad generalities and painting things with a broad brush kind of lead you astray. So I, I hope that helped, uh, thank you for taking the time to write in. If you’re listening out there, hot to lunch, Ihavelunchmoney.com to submit any questions. I really, really appreciate your time. I’ll see you tomorrow. Have a great day.
Thank you for hanging out with us today on real investing. If you have questions, comments, or feedback, please visit. I havelunchmoney.com. Tim. Can’t wait to hear from you. We’re always grateful for your reviews. And if you enjoy this episode, please subscribe and share it with your friends. Remember the business is the vehicle, not the dream. See you. Next time. The proceeding program is provided for general education purposes only and does not constitute legal tax, financial investment or other professional advice. No information contained in this program should be construed as financial investment or legal advice from any individual author, a post or guest. You should always consult a financial advisor before investing.
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