This article was written by Angel Flores, an Advisor with SVN | TJF Investments
With the current sellers market conditions in DFW, it is extremely tempting for many property owners to cash in and sell their single family homes and use that capital gain to purchase other assets. As other investors enter the market, buying a portfolio makes sense rather than having to build one. Institutional investors are also buying portfolios and buy them based on their evaluation of cash flow like buying any other business. SVN/TJF Investments has been successful in selling many portfolios for investors and even sold a portfolio of 53 homes in Dallas for higher than the individual homes appraised values based on market comparables.
Common Objections to Selling as a Portfolio; Why not sell the homes individually, you could get much higher value for each property?
Friction Costs: Preparing a home for sale in the retail market requires the home to be vacant and ready for a new home owner. That would mean, the investor would have to remove the tenant, repair the house, paint, replace carpet, flooring, etc. Then the investor has to wait for the house to be marketed and close (approximately 90 days). That’s 3 months with no cash flow! The investor is still responsible for taxes, insurance, and mortgage costs during this time. This friction cost has been estimated to cost as high as 13-18% of the market value of the home.
1031 Echange: You could try to 1031 exchange each home you own but managing that many transactions probably kill you. If you exit as a portfolio, it is much easier to exchange. Think about how much this can save you in Capital Gains taxes and depreciation recapture.
Discounts: Closing costs and brokerage fees are reduced when sold as a portfolio because of the volume.
Good Product for Sale: SVN/TJF is a pioneer in marketing and selling Single Family Rental portfolios.
Angel is a multifamily and SFR portfolio broker for SVN/TJF Investments in Dallas and an investor that owns multifamily and residential property in DFW.
Angel Flores | Advisor
SVN | TJF Investments
972-232-2325
[email protected]
We have 19 single family rental houses in the Chandler, AZ. market. They are mostly 1980″s built with varying degree of upgrades. My first preference would be to sell all 19 in one transaction (occupied), for which I would be prepared to offer a reasonable discount from broker’s evaluation, which puts the 19 houses sold individually at $4.6 million. I would also consider selling them in clusters of at least 4 houses(occupied or vacant as leases come due). I see from your on-line informaton that you are a DFW operator. Would you knoe someone that is reputable that could have an interest in my SFRHs in the Phoenix market?
Thanks.