liquidating rental proper
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liquidating rental proper (by 6x6 [TN]) Sep 19, 2022 8:25 PM
       liquidating rental proper (by Hoosier [IN]) Sep 20, 2022 12:09 PM
       liquidating rental proper (by 6x6 [TN]) Sep 20, 2022 6:04 PM
       liquidating rental proper (by Dodge [PA]) Sep 20, 2022 6:44 PM

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liquidating rental proper (by 6x6 [TN]) Posted on: Sep 19, 2022 8:25 PM

On another post, Hoosier said,

"Liquidating a rental portfolio is no simple task, and you should anticipate this or at least provide funds for people to do it for them."

I am curious as to why that is?

Thank you for your time

liquidating rental proper (by Hoosier [IN]) Posted on: Sep 20, 2022 12:09 PM

Let's say you have 5 properties and you decide to liquidate the entire portfolio.

What steps must you take?

1) Give notice to all tenants. You probably don't want to do all 5 at the same time, as you'll be overwhelmed with work all at once. So let's say you spread them out by a month each.

2) You notify tenant #1 via certified mail (requires drafing a letter and taking it to the post office) that they must be out in xx days. They will probably have questions, not want to move, or even maybe require eviction. This will take time to manage.

3) About 30-45 days later, tenant #1 moves out. At the same time you are submitting a certified letter to tenant #2 to move out. You again have to do the same with certified mail etc. You go to the vacant house of tenant #1 and change the locks. You have to call all three utilities to have them transferred into your companies name...this takes 30 minutes or so. You enter the house and have to do a full inspection of the house and document any damages. Lo and behold, the tenant has left some personal belongings in the house. By state law, you may be required to store these for 30 days...isn't that wonderful!

4) As you are dealing with storing the items, you are inspecting the house and find 8 things that need repaired before you can list the house properly. Drywall repairs, a leaky faucet, stains on the carpet, are calling contractors to fix all these items and arranging for them to do the work. But how do they get in the house? Ah, you must put a lockbox on the door for them...another step but easy.

5) Finally you get all the contractors lined up to do the work, and the utilities are turned back on in your name. You walk outside and notice the grass is getting you have to contact a grass cutting service...that takes 15 minutes.

6) For the next few weeks, you have to go to the house to make sure the work is progressing as planned and that there are no more issues that arise. Just about the time that house is ready, tenant #2 has refused to move out...they say they can't find a new you have to go to the courthouse to start the eviction process...oh joy!

7) By now you're writing the certified letter to tenant #3 to get them out. Tenant #2 wants to talk, as they want to pay you one more month's rent and stay there...but you say answering a few emails it becomes tense.

8) You have to call the realtor to do a walk-through on house #1 in order to list it for sale in the MLS. There are forms you must fill out, such as the disclosure statement, lead based paint, agency agreements, and so on. The realtor wants to put their own lockbox on the house so their agents can get agree.

9) House #1 goes on the market and you start receiving emails of the showings that are upcoming. You want to make sure the house is comfortable for the prospects, so you go over to turn the AC down and make sure it's all spiffy and swept. Maybe you should ask your agent to do this in the future?

10) Six days later you get an offer, so you have to read the entire offer and make sure it's reasonable before responding. What kind of financing are they going for? If it's VA or FHA, you'll have to make sure there is no peeling paint anywhere on the house or any broken glass...things that will automatically NIX an FHA/VA loan. What about the other they say this is contingent on selling their current house? Do they say there is max interest rate they are willing to take from the bank and if it's above that rate they can cancel the purchase? Is the house in a flood zone? After looking it all over, you agree to the terms and accept the offer!

11) Six days later you get a call from your agent. Evidently the buyer of house #1 had an inspection, and it turned up some defects they want fixed. You'll spend some time sorting that out and deciding whether to fix etc.

12) Now house #2 issue is heating up, court dates are set, and you have to make copies of the lease and some communications to give to the attorney for the court filings. Ugh.

13) By now you're into arranging for house #4 certified mail, and the other houses are in various stages of needs.

14) 40 days later house #1 finally closes and you get the funds...yay! You take the closing docs home and file them for tax purposes, and spend some time documenting everything

15) By now you have to send the security deposit settlement form to tenant #1, so that takes time to prepare, and you have to write them a check.

This cycle will continue until all 5 houses are sold and the money is in the bank...which likely will take about a year. Even then, you'll be dealing with taxation documents with your CPA.

Now some people might say just sell all 5 at once. That's fine, you can certainly do that...but then you're going to be like a cat in a room full of rocking chairs trying to figure out which house needs what attention at this time, and you'll be dealing with 5 sets of tenant issues...not much easier if you ask me. The pain will be 5x worse, but at least it will be over in 3 months or so.

Does that help?

liquidating rental proper (by 6x6 [TN]) Posted on: Sep 20, 2022 6:04 PM

Thank you Hoosier. I understand now.

liquidating rental proper (by Dodge [PA]) Posted on: Sep 20, 2022 6:44 PM

Great detailed explanation! Thank you!

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