#178: Why I’m Selling All My Single-Family Rentals

 

So, hey, guys, welcome back to Accelerated Investor. Hey, Josh here. And today, just wanted to flip on the recording and talked a little bit about why I’m selling all of my single-family rentals, everything that I’ve got that’s really under twenty-five units. And if you look at what’s going on in 2020, there’s really kind of four reasons. Number one is we have just to focus on bigger deals. We’re focused really exclusively on buying larger apartments. Number two, the MLS is really tight. Number three, we’re getting top dollar for a lot of our rental properties. And number four, the foreclosures are coming. OK, so those are the four reasons. Let me talk a little bit about these in a little bit greater detail. 

So the reason why I’m selling all of my single family rentals right now is that one of the biggest reasons is with covid starting in 2020 and now going into June, July of 2021, President Trump and now President Biden have signed and then extended the foreclosure moratoriums. So we can’t process foreclosures. If you go and look at any of the foreclosure websites or any of the auction websites, the foreclosure inventory is down like eighty five percent. So if there were a hundred foreclosures being processed now there’s only 15 in my area in Cuyahoga County in particular, where Cleveland is, that there used to be about four to five hundred ongoing foreclosures in the foreclosure docket and then on the auction docket every single week, every single month. Now, there’s barely 30 or 40 that are actually going through. Originally, the foreclosure moratoriums were supposed to impact just the government backed Fannie Mae, Freddie Mac, HUD, FHA loans. 

And now the judges, the attorneys, the everybody who’s handling that kind of cases has basically put a pause to all foreclosure activity. And so foreclosures are down. The activity is down about 90 percent. So what’s happened because of that is it’s pushing up. It’s building this massive amount of inventory that is going to hit the market in twenty, twenty-two when the foreclosure moratoriums are finally stopped and they’re no longer extended, which I anticipate will be the end of this year. All of that backlog of foreclosures are going to have to be processed. Once those foreclosures are processed, those foreclosures are eventually going to hit the market. And when they hit the market, they’re going to flood the market with inventory. 

Now, I’m not expecting there to be the same amount of foreclosures in 2022 as there were in 2008, ’09,’ 10. It’s going to be about half as many foreclosures. So there’s not going to be the total wave of foreclosures that we saw during the Great Recession. However, there are still going to be much higher than average number of foreclosures. The more foreclosures, the more people without a home, the more people that are going to be losing their home. The more foreclosures that are on the market, the more inventory there is, the more inventory there is. Prices will actually stagnate or even go down. So that’s the number one reason why we’re selling all of our single-family rentals are one to four units, but really anything smaller than 20 units. I got a 16 unit that we’re selling, a five unit that we’re selling, a bunch of duplexes, a quad, a bunch of single families. We’re listing at all because I anticipate in twenty, twenty-two they’re going to be a lot more inventory. There’s going to be a lot more foreclosures that hit the market and prices won’t continue to go up because there’s going to be a lot more inventory to pick from. 

OK, so that’s the number one reason now because of those foreclosure moratoriums, because really very few people are selling their homes right now, the MLS. This is the second reason MLS inventory is very tight right now. Very small. In a lot of MLS is a lot of markets, a lot of MS’s. There’s actually only 30 days, maybe forty-five to sixty days of inventory. Meaning if you look at last month, let’s say there were three hundred sales of properties. Well if you look at right now, there may be only three hundred active listings in the MLS. That means there’s one month, 30 days of supply when there’s more demand than supply. Prices are going to go up. So what’s happening is properties that I bought last year, five years ago, 10 years ago, I’m now listing on the MLS and they’re selling for over market value. There’s no inventory. So buyers, if you’re a buyer, whether you’re an investor or a retail buyer, husband and wife, kids, you’re going to move into your home. The MLS is so tight, there’s no inventory. You have very little to pick from. You’re also fighting with other buyers who want to buy that inventory. 

So you have to make a full price offer or an over asking price offer in order to get your offer approved. It doesn’t matter what price market you’re in. I got a buddy of mine that just bought a five hundred-thousand-dollar home. He paid over asking price a couple of houses in my neighborhood, listed and sold for twenty-five thirty forty thousand dollars over asking price. OK, my partner Tyler, his girlfriend just listed a property in Lakewood, Ohio for two hundred thousand, ended up selling it for 240. She’s a realtor. She sold it for 240, all cash, 20 percent over the lowest price. We just listed a property for one eighty-nine nine. Sold it for one ninety-four. OK, we listed another property for one ninety-nine, sold it for one twenty-five. 

And so we’re just the fact that the MLS is tight, there’s no inventory is allowing us reason number three to sell properties for top dollar over asking price in just a few days. I made a Facebook post instead of one of my Facebook groups, by the way, if you’re not one of our members of the Accelerated Investor Facebook group you should be joining, it’s absolutely free. Just a great community, very engaged. Lots of questions, comments. Go to Facebook and just search accelerated investor just like this podcast and join the group. It’s free. I made a post that said, hey, I’m listing this property on Rowley Avenue. It’s a duplex for one eighty ninenine. I listed it on a Friday. I said, I bet it sells by Monday. While the bad news is it didn’t sell by Monday, but by Wednesday we were in multiple offers and I accepted an offer on Friday, a week later for one ninety for the asking price was one eighty-nine nine. That’s the third reason we’re selling them for top dollar. 

The fourth reason is, and this is something I really want you to think about is we’re just laser focused on doing bigger deals were laser focused on our multifamily apartments. We’re laser focused on buying inventory in the Greater Cleveland, Akron, Canton, Columbus, Northeast Ohio markets. And even though these rentals are profitable, even though we have some flip’s that we’re still doing, those are profitable. We just are laser focused on buying another nine hundred and fifty units of apartments. Now, you might say, well, Josh, why 950 units? The reason why is because that 950 units we make about an average of thirteen hundred and fifty dollars per year per unit. So that nine hundred fifty units represents one point two million dollars a year of net free spendable cash after expenses and debt service. It’s one hundred thousand a month of net free, spendable cash. So my goal right now is to buy another nine hundred fifty units of apartments. 

So these smaller single family rentals, five units, three units, two units, duplexes, even 16 units we’re selling. We have a twenty-five unit. That was a good deal that we passed on because we’re really focused on bigger deals. Also the fifth, the reason is buying and owning apartments takes it’s a it’s a it’s a team effort. It’s like playing volleyball. Like I coach club volleyball. I’ve got six girls on the court at any one time. You’ve got one girl that’s a server. You’ve got another girl that’s a libero in the back row. That’s a specialty playing defense. You’ve got one girl that’s an outside hitter. You’ve got another girl that’s a right-side hitter. You’ve got a girl that’s a middle. Everybody has a specialty very similar in commercial multifamily apartments. 

You have somebody who’s sort of an acquisition’s manager. You got somebody focused on maintenance. You’ve got somebody focused on capital improvements. You’ve got somebody focused on leasing. You’ve got a CFO or a bookkeeper focused on the books. You’ve got somebody focused on raising the capital. It’s about six people, same as a volleyball team. So two of my favorite things is to coach volleyball and own apartments. They’re very similar. And then it takes about six kind of teammates to execute and. By the way, if you’re on YouTube right now, you can see the sun shining through the side of my bang, the side of my office. The sun’s coming out glaring off the snow. 

But anyway, so to do these larger deals, we have to create systems. And we have a lot of systems, systems for all those things, system for leasing, system for acquisition, system for maintenance, system for capex, systems for raising capital systems, for reporting back to investors. And so these smaller single family deals are just kind of a distraction. They’re very profitable, but they’re kind of a distraction to for us to focus on these larger assets that are really it’s our legacy strategy. It’s our long-term wealth building strategy. It’s our Accelerated Investor strategy is to focus on apartments and multifamily properties. So there you have it, guys. That’s why right now. February twenty third, I’m recording this podcast, interview and YouTube video, that’s why we’re selling all of our single-family rentals. Let me give you a quick tip, I’ll give you one more thing. One of our favorite strategies is to buy duplexes, triplexes, and quads in up-and-coming regentrifying areas. Buy them, rehab them, cash flow and then sell them.

OK, because if we sell them after 12 months, we also pay only capital gains tax instead of ordinary income tax, and there’s a lot less competition over duplexes than over single-family properties. So take that little tip and go execute that in your market. All right. So that’s why I’m selling all my single-family rentals. I hope you enjoyed those five reasons why we’re selling them all. If you enjoyed this podcast, please leave me a rating in review. Please share this all over social media. And don’t forget to register for free on Facebook in our Accelerated Investor Facebook group. Accelerated Investor. Just search it. You can absolutely join for free. We have you tons of information on their Facebook lives, free content, strategy, videos, posts, lots of engagement. You’ll love it. 

Also, if you want some help with coaching and want some help building your portfolio, go to JoshCantwellCoaching.com and apply. And also we’re going to be running a contest soon that those people that leave us are reading in review are going to be entered to win free T-shirts. So go ahead and leave us a rating in a review. Hope you enjoyed this podcast and YouTube video and we’ll talk to you next time. Take care. 

There used to be 400-500 foreclosures on the docket in my state, but now there’s barely 20-30. The foreclosure inventory is down 85%, and the COVID relief plans have put a pause on all foreclosure activity. So it’s building this massive invisible inventory that you can’t see yet, but that I anticipate will hit in 2021.

There are 4 big reasons I’m selling all of my single-family rentals, including everything smaller than 25-units.

#1 I’m focusing on bigger deals.
#2 The MLS is really, really tight.
#3 We’re getting top dollars right now.
#4 The foreclosures are coming.

Because I anticipate that 2022 is going to have more inventory and lower prices, I’m clearing out my inventory and getting ready for that market while the prices are hot. When the foreclosures hit the market, it’s not going to be the same as the Great Recession, but it is definitely going to be a bigger inventory than normal. As inventory increases, prices are going to stagnate and go down.

As I scale up, it becomes less cost effective to manage smaller units. And this next year, I have big plans to add almost 1,000 more units to my portfolio. I’m clearing out my smaller properties so that I can add enough multifamily properties to make an additional $1.2 million a year in net free spendable cash.

Check out my Accelerated Investor Facebook group for more daily real estate tips and strategies, plus live videos and engaging posts. We’ll see you on the inside.

What’s Inside:

  • Why I’m laser focused on buying another 950-units in the next year.
  • Plugging larger deals into my systems make it incredibly easy for me to scale up.
  • My prediction for the 2021 real estate market, and how I’m preparing today for that.

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