As a landlord since 2005, I’m constantly faced with the dilemma of selling a rental property or renting it out whenever my tenants move out. The older and wealthier I’ve gotten, the more I prefer to sell rather than rent out.

Being a landlord can sometimes create some very unpleasant experiences. Whether it’s getting paid late, experiencing damage, having to fix something, or resolving some type of misunderstanding, being a landlord is not for everyone. You need to be very disciplined and have good patience.

After I reached my limit of managing three rental properties, I stopped buying. Instead, I started investing my cash flow in private real estate funds that invest across the Sunbelt. This way, I could diversify my real estate holdings, and more importantly, earn more 100% passive income. Being a dad is a full-time job.

Once again, I’m faced with the dilemma of whether to rent out my investment property or sell it. But this time, we are in a unusually high inflation environment. If you’re facing the same dilemma, I will walk through the pros and cons like I do with other dilemmas in my book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. There are three chapters on real estate.

Every dilemma I face is viewed with a 70/30 decision-making framework. After analyzing the situation, my goal is to make the right decision at least 70% of the time with 70% confidence or greater. At the same time, I recognize that about 30% of the time, I will make a suboptimal choice and need to learn from it. I also accept there will always be some level of uncertainty.

Some say renting is like throwing your money away. If that’s the case, what about the people who spend six figures a year on rent? Is that like setting your net worth on fire?

I don’t think renting is throwing money away at all. You get shelter for the rent you pay. Renting is also necessary for many people in transition, i.e. those who don’t know for sure where they want to live or work. Further, if you are worried about the housing market, then renting could save you a lot of money or at least provide you more peace of mind.

If we ever move to Hawaii, we will likely first rent a fully-furnished place for 6-12 months. We’d like to try before we buy to make sure we really want to be in Hawaii for years. Further, we also want to ensure we really like the neighborhood as well.

Renting is also a simpler way to live. There is less responsibility, which feels freeing. For any homeowner who has gone through a big remodel or experienced a major maintenance issue, I’m sure renting at the time would have been highly preferable.

Tappable equity is the amount of home equity available for homeowners to withdraw via a cash-out refinance or a second mortgage. It is typically calculated as total home equity minus 20 percent of home value. The 20 percent figure is used as a collateral cushion to protect the lender. 

Tappable equity is a new term that I’ve been hearing more often nowadays given the robustness of the current housing market. Most homeowners like to guess how much their homes are valued. They look at online pricing estimates and get all pumped about what a neighborhood home sold for.

Despite the excitement generated by changing home prices, it’s really the home equity that counts the most.

Home equity is equal to the current estimated value of a house minus the mortgage. For more precision, you could calculate home equity by also subtracting the estimated selling costs, including commissions, taxes, and fees from the market value of your home.

One of the great benefits of being an investor is that you can sometimes make more from your investments than from your day job. After several years of doing so, you might even start wondering what’s the point of working so much!

According to Zillow, home value appreciation in 2021 was higher than median wages in 25 of 38 major metropolitan areas. In 11 areas, home price appreciation was greater than $100,000.

With millions of homeowners making more from their houses than from their salaries during the pandemic, maybe we’ll avert a recession after all.

As a buyer, you love bad real estate agents because you can take advantage of them to get better pricing. As a seller, you obviously want a good real estate agent so you can maximize your profits.

According to the National Association Of Realtors, there are supposedly around 1.5 million real estate agents today. However, there are way less than 1.5 million homes for sale in America. As a result, competition to make money as a real estate agent is fierce. The top producers consistently get the lion’s share of the transactions.

Let me be clear. Most real estate agents are not bad. Further, using the word “bad” is just a catchall term to include “inexperienced,” “disorganized,” “out-of-town,” or “aloof.”

Identifying bad real estate agents will help other buyers and sellers in the long run.

Although COVID has been bad for many of us in so many ways, the pandemic did one good thing. The pandemic helped protect American homebuyers from a resurgence in foreign real estate investors. In a big way, the pandemic has throttled the demand from foreign real estate investors to buy American homes.

Before the pandemic hit, 2020 was shaping up to be another solid year. There were growing talks that capital restrictions out of China would ease. Foreigners wanted U.S. assets, and they wanted them bad, partially thanks to a tremendous current account surplus.

Currently, mainland Chinese residents can convert up to US$50,000 per year on foreign currencies for travel, overseas study or work, but not for buying overseas property, securities or life insurance policies.

But before 2018, Chinese foreign buyers were buying United States property in droves. It was easier for citizens to pull resources to buy U.S. property. Then, the Chinese government started cracking down.

Once lockdowns and travel restrictions were in place in the United States and many foreign countries, it became very difficult for foreigners to transact. As a result, COVID gave U.S. buyers the opportunity to buy up our own real estate with less competition.

With the start of the Ukrainian Russian war, the demand by foreigners to buy American real estate has now increased even further. International capital is looking for a safe haven.

If you were to ask me to describe the ideal environment for real estate investors and new real estate buyers, right now could be it. After two years of a white-hot real estate market, finally, real estate investors are seeing better deals.

Please know that I’m completely biased for real estate. Roughly half of my net worth and passive investment income comes from real estate. In addition, there’s no asset I appreciate more than our primary residence because it shelters my family. And nothing is more important than family.

For those of you who are bearish on real estate, I welcome your point of view!