Podcast 282: I Sold My First Rental Property

I share my overall experience from selling my first rental property. I also share about my thought process for selling and why I decided it was the right decision moving forward…

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Show Transcription:

Eric Worral: (00:00)
Hey everybody. Welcome back to another episode of RentPrep for Landlords. This is episode number 282 I’m going to be talking about selling my first rental property and just kind of recapping that experience as that just went through last Friday. So we’re going to get to that right after this.

Voice Over: (00:20)
Welcome to the RentPrep for Landlords podcast and now your host, Steven White, and Eric Worral.

Eric Worral: (00:27)
So I am in a weird limbo spaced as a recording this episode because I sold my first rental property on Friday, as I mentioned in the opening. And today as I’m recording, this is Tuesday, so gone through the weekend, Monday, Tuesday. And the strange thing about it is I’ve yet to actually get the proceeds from the sale. I still have the mortgage in my bank account, but I no longer had the keys or ownership of the property. So I guess that’s a new thing for anybody who maybe has never sold a property before, such as myself.

Eric Worral: (01:00)
But I, if you followed some of the previous episodes, I have a rental property at double a two-unit that I’ve owned since, Oh goodness. Probably 2009. And the property I lived in for a while. Most of those years moved out, kind of house hacked, I guess you could say. And that I lived in the AV rental property that I owned, rented out one apartment, moved out, got a house and then as I’ve started kind of working through and growing my family and becoming a father and now a second one on the way you know, your, your priorities, values and all those things kind of shift as you know, your life changes. And I kind of had this moment in the spring where the rental property, I think it was a, I had a sub-pump failure where there was some water in the basement.

Eric Worral: (01:50)
Nothing crazy. But I had to go over there and just kinda throw out a few things and take care of stuff from them. And next weekend it was something stupid too. And then the following weekend, or maybe like a few weeks later, it was one of those things where like the dryers networking but really like it was unplugged or something like that. Right. And it had these back to back to back kind of things that I was working on just on this one property. And for me it’s, you know, about a 20-minute drive, their 20-minute drive back. I handle all of it myself and I’m just thinking to myself, I’m like, this isn’t what I want to be doing. I want to be spending time with my family. I want to make sure that, you know, I’m not constantly thinking about this property and you know continually just thinking about the what-ifs of owning the property and kind of started getting down this path of thinking about selling it.

Eric Worral: (02:41)
But I wasn’t sure. So what I decided to do was when the tenants moved out in the lower unit at the end of May, I said, you know what, I’m Mona strip this thing down. Actually, it might’ve been the end of April. Now I’m thinking about it. I think I started working in may on it and I just completely gutted the kitchen. Redid that and then got the property up to snuff for renting. And as I was going through the tenant applicants, I was getting, I kept getting this tug at my heartstrings a little bit. That’s like, you know what, if you did want to sell now it’d be the time you’ve got a fresh mint apartment downstairs. You never know, you know, the normal wear and tear that happens when you have tenants in. And then there’s a possibility you get the wrong tenant in and it’s worse.

Eric Worral: (03:21)
And I was just kinda weighing my options back and forth and a really tough decision to be honest. I’m sure a lot of our listeners have thought about this before, should I sell, should I sell? Kind of going back and forth in your own mind. So I started kind of doing a little more soul searching and trying to figure out what’s important to me. And one of the things that I’ve come to realize about myself era, the things that I value very highly are control. My time and just freedom and flexibility. And now if you own enough rental properties, you can get those things through Reynolds, right? You can a hit in economies of scale where it makes sense, where you can have a property manager you have all the time and control because you have income coming in passively, somebody else’s managing it.

Eric Worral: (04:08)
And you’ve kind of hit this point. But for me, I don’t feel like the property manager was the right route based on the numbers that I was crunching. And for me also a, right now it’s really about control and being able to reduce my liabilities in some ways as a, and when I say liabilities, I don’t mean just mean like getting a new roof or a furnace breaking. What I meant is you know, I’m spending a weekend, you know, a nice Saturday afternoon with my family and then all the sudden gotta be like, Hey, I got to go there. You know, someone’s toilet’s not working and that kind of thing. So I really broke it down that way and just thought about what was most important to me. And that’s why I made the decision to list a rental property, a listing. It was interesting.

Eric Worral: (04:54)
I decided to go with an agent, a friend of my family. He actually was our agent for when we bought our house. Though he did a great job. So figured why not use him for selling? Thought he did a great job as well. His name is Matthew Clofane. If you are in the Buffalo New York area or looking for property in the Buffalo New York area, I’d be happy to connect you with him. But we posted the property actually a little bit higher than I thought. Well, then I definitely would’ve put it, if I was selling it myself I probably would’ve put it at like two 50, two 60. And he’s like, you know what, we’ll put this at two 69 nine. We’ll see what happens. A property actually sold for $100 more than what we listed it at. And the interesting thing is we went through the buyer had what’s called a NACA loan.

Eric Worral: (05:38)
I’ve got gotta look that up to even know what that stands for again. But basically a NACA loan is a government-sponsored program and it allows first time home buyers to get a property who maybe wouldn’t have been able to get a traditional loan through a bank. So it says NACA’s primary goal is to build strong healthy neighborhoods in urban and rural areas nationwide through affordable homeownership. And like the loan percentages are really crazy low too. They don’t have to put down a first-time deposit or anything like that. So it’s pretty interesting in that way. But from what my realtor told me is he’s dealt with about 10 of these and he says about eight of them have been fine and two of them just went off the rails to the last moment.

Eric Worral: (06:21)
So there is some volatility to these. And he said that what happened in one instance was the person purchasing the property right before purchase went out and like went to like Raymour and Flanigan and bought a bunch of furniture. And what just by buying that furniture on their credit it ding their credit enough that for whatever reason they couldn’t actually close on the property. I don’t recall what he said the other issue was, but they are a little more volatile cause it’s not like, you know, when purchasing a property, cash is king. And in this example, you know, the person doesn’t have to put down any money. So yeah, it’s not as strong of a loan in that way. And also a thing to consider if you have a NACA boom or a NACA buyer is the appraisal of the property, right? The traditional bank is not going to give you a loan.

Eric Worral: (07:09)
If they appraise property at a hundred and you’re trying to buy it at 200,000 and you’re putting $20,000 down, 10%, right? Cause they’re going to say, Hey, that’s $180,000 loan we’re giving you for a property that we think is $100,000. Well, the disadvantage with a knack alone where somebody isn’t pointing money down is that appraisal value then needs to be $200,000 on a $200,000 property because they’re not putting any money down. So the bank the person is needing a loan for all 200,000 of it. So that’s kinda something I hadn’t really considered before without going through this process as well. And I’m sure all of this if you’re a realtor or you’ve done 30, you know, rental sales, this is all, you know, obvious to you. But for a first-timer like myself all stuff that I was learning as well the process itself, I ended up having to replace some handrails replaced to some pomp get a deep freezer out of the basement, but all in all, not there.

Eric Worral: (08:11)
Too bad. I had to fix a cracked window as well. I will say going through the process, pretty nervous just thinking about it like what-ifs, what if this deal falls through? I think the market’s starting to cool, all those kinds of things. I probably have a tendency to worry too much, which is partially why I don’t think necessarily right now in my life that owning real estate is the right play for me. I think if you’re somebody who is anxious or worries a little bit more, which isn’t like the coolest thing to admit, but you know, I am who I am and I’m working at it kind of thing. But having all these unknowns, right? Like what’s going on with the tenant? Like, are there any issues with the property? Are there any issues that they aren’t reporting with the property that can create larger issues?

Eric Worral: (08:53)
Those kinds of things that a lot of landlords worry about. If you’re somebody who’s a highly anxious person, I think the toll of owning rental properties is higher than somebody who is not. Same way as if like, you’re a highly anxious person owning a business versus being an employee of the business. You may be being the employees a better fit for you, you know? But I’m learning all these things as I’m kind of just growing and, you know, learning things on the fly. Right? And to me, that’s exciting. And that’s part of the fun of it though, is you learn more about yourself as you get older. You learn your conditions change. Maybe, you know, you have kids or you buy a house or you move or you get a new job or whatever your situation may be and you kind of have these end goals in sight.

Eric Worral: (09:38)
But as you have those goals and site, you also start learning things about yourself. For me, this year I’ve learned that I have some anxiety that you know, is above average. And it’s a weird thing to admit because I’ve always kind of considered myself a cool, calm and collected person. But really there’s a good amount of anxiety running the show up there. Learned that from actually talking to a professional and sitting down with somebody. If you’ve never done that and you’ve thought about it, I’d highly suggest it. You know, it’s not some sort of admission that you are defective. It’s really just admitting like, Hey, I might have some things going on. I want to talk to a mental health counselor or something like that. I know kinda going off the rails a little bit, but talking to that person, realizing these things about myself, I’m starting to kind of curate and craft my life to the style that I want it to be.

Eric Worral: (10:28)
That great for my family allows me to be the best person that I can be. And selling the rental property, I realize it’s actually a great move right now. And just from a financial standpoint, being able to use those proceeds basically when I planning on doing with a good amount of them is rolling them into college savings programs and then just kind of put it into the market more so. And kind of making it more of a passive investment through retirement accounts where it can grow tax-free, but you know, to each their own kind of thing. For me being able to see, you know, my kids have their college retirement plans grow and be able to fund them heavily early on and be able to already have that done. Like I’m the type of person that wants to pay my mortgage off today.

Eric Worral: (11:13)
Some people don’t care. They’re like, yeah, I can, I get a 60 year mortgage. I be cool with that. Me, I want to pay it off as quick as possible. It is a internal battle not to pay it off cause I know that’s not the best use of the money. By being able to take care of a future responsibilities as quickly as possible is something that I really enjoy it. Again, it’s kind of taking control really of your life. Kind of a going a little bit long on this episode, but just giving you guys an update. I might not hear to my voice, but I am super excited and incredibly pumped about selling the property. I feel like I’ve got a good price for it. I feel like the person who bought it got a great property they got, they inherited great tenants. So that was awesome.

Eric Worral: (11:51)
Another reason to screen your tenants to do a good job with that is if you go for the sale, I mean they’re friends of mine, but they are tremendous people and being able to have them show the property several times and their apartment was mint every time. I mean my realtor even commented on and he’s like, I can’t believe how amazing their apartment looks like. That is not normal. He’s like I do these, they don’t typically look like this. So another benefit that you know, I didn’t really think about when I was placing them. Cause I hadn’t thought about selling it. But that’s a great feature of having great tenants as well. But really just assessing what your values are, what makes sense to you. Does it make sense to sell? Does it make sense to hold? Does it make sense to invest in more rental properties?

Eric Worral: (12:35)
There’s really no right or wrong answer. I know sometimes if you get into a certain group, you know whether it might be a Reddit, a subReddit, even our own Facebook group and a, you know, you get around people who all think the exact same way that you, you do and you’re at a real estate investing seminar. Everyone’s going to tell you the best thing that you can do is to buy rental properties, buy real estate, invest in real estate. And then if you go across the hall to the, I don’t know, stock trader seminar, they’re going to tell you the best thing that you can do is buy and sell stocks. And then if you go across the other hall and you go to the farmers’ seminar, they’re going to say invest in cattle. You know, it’s all just what they call echo chambers.

Eric Worral: (13:18)
Right? And when I tried to do with this podcast as not just be an echo chamber where we’re just kind of pushing one lifestyle, one goal, one resource, a, think about things outside of that and all the different things that you could be thinking about for your life. What’s the best fit, what are your values, what do you really want out of life and what’s going to help you get there. So when I did that with myself, that’s why I sold the rental property because I’m looking to transition a little bit, a kind of a create simplicity in my life limit the amount of distractions and things that can pull me away from the things that I want to be doing and really focus on, meet my family and growing our life together in different ways. So with that, I’ll leave you guys this week. I just want to say thank you to the people who have emailed me. I’ve gotten several emails from people thinking about different things to consider with the property and what you can and can’t do. And that’s been cool to get those emails from you guys. And always appreciate that. So until next week, guys, have a great week and take care.