Why We Sold Our Rentals in Jacksonville Florida

.... and You May Want To Too

In March 2022, Brittany and I looked at each other and said: it's time to sell our rental properties. 

We had just heard that the Federal Reserve was going to start raising interest rates, and we knew that higher interest rates historically lead to lower asset prices in the future. 

Our market in particular, Jacksonville, Florida, had experienced one of the greatest housing appreciation periods in history (+61% from 2020 to 2024), due to the COVID/relocation bump.

We felt we had hit blackjack for a few years in a row with our investments and that our luck would eventually run out.

We wanted to lock in those gains and redeploy the capital elsewhere. 

We also felt that the fall occurs right after the big run-up. 

So, we set out to set our equity free and diversify away from an asset class (single family rentals) that was no longer penciling out on paper. 

For us, the math wasn't mathin' anymore. 

And what freaked us out was that we saw other friends and colleagues (who were experienced operators) continue to add more properties to their portfolios (and launch funds to buy even more properties) -- even when the numbers didn't make sense anymore.

We watched, while staying curious, yet scratching our heads as folks also jumped head first into Airbnbs (even in 2022 and 2023), an active business (basically running a mini hotel), but the math - generally - wasn't adding up for them to be lucrative investments.

It was turning into pure speculation.

Meanwhile, inventory data was showing rapid increases in supply coupled with rising interest rates.

It made us question ourselves and our decision to sell our rentals, but we needed to trust the most recent market data, trust our personal math calculations and decide for ourselves.

Using the data we had collected, we even encouraged our agents to start evaluating their own rental properties for a potential cash out. We made several calls with our agents to show the numbers, what we were doing, and why. 

So instead of adding more rentals, we went against the positive sentiment of those around us, and with the math and data — we started selling.

They sold fast and it felt good. 

With each sale came with a sigh of relief.

Until you sell, your property's equity is literally made up in your mind (backed by past comps, of course).

Your property is only worth what someone else pays for it, not what you think it's worth.

So when your equity turns into cash, a little rush occurs!

Not As Passive As I Thought

After having three kids in the last five years, the allure of owning rental properties lessened. It wasn't as passive as I had convinced myself.

Yes, it was relatively minimal time spent, but ultimately, there were headaches that would not only take my time, but most of the cash flow. Handling tenants and repairs, along with not being able to avoid the rising cost of insurance and taxes was not how I pictured my version of financial freedom. 

After sitting down and running the numbers, we found that our return on equity on our rental portfolio was a measly 3%. 

So we sold, and sold, and sold --- cashed out and began putting the money in other investments (primarily private lending, which is also active, but I enjoy it) that returns 12-18%.

It was the best decision for us and we are happy we did. 

Today, we still have a few rentals to sell, and we are hurrying to do so ahead of the election cycle and seasonality that we experience after school starts in August. It's possible we see sales slow by another 20-30% going into the end of the year due solely to the factors mentioned above. 

Market Changes

We are moving fast and pricing aggressively as we are seeing approximately 1,000 active listings being added to inventory nearly every month in Northeast Florida, a trend we expect to continue going into 2025.

Also, active inventory has doubled year-over-year from 2023 from approximately 4,600 active listings to 9,200+ and rising every week. Supply and demand tells us that at a certain point prices will stop going up and start going down.

The data tells us that we are moving quickly from a sellers market and into a buyers market.

About 25% of properties locally are doing a price improvement every week, they're sitting for longer, and seeing fewer showings.

To me, the first indicator of a changing market is the level of inventory, and secondly, the number of showings on the active inventory.

Those are the current and leading indicators.

Inventory is up and showings are down. 

Now keep in mind, real estate is hyper local. Some neighborhoods can still be very hot, while the rest are cold. I am speaking in generalities -- but there are exceptions. 

So, here's what I see happening next. 

Sellers list their properties against five or six other similar properties.

The one that sells next is the one with the most motivated Seller who sells their property for $30,000-50,000 lower than the last comparable sale.

Then, that closed sale becomes the next comparable sale for homes in that area.

Even if the next Seller after that sale wants to sell their house for more, the bank may not finance it at that higher price due to the new comparable, and lower, sale. 

This is how we end up in a down cycle, which I am currently observing we are headed into. 

Now, I'm not advocating for you to sell your rental.

You have a different life and goals. But I do think it's at least time to revisit your return on equity vs return on investment, and explore if your rental is really going to help you reach your long-term financial and life goals.

In some circumstances, it makes sense to hold onto the rental due to its location, low interest rate, low number of future projected repairs, and high rent amounts.

Maybe your return on equity is still really good.

Most of my properties were in Class A areas, but even with the low interest rates, did not make sense to keep from a return on equity standpoint. 

Do the math and look for yourself.

Make a hypothesis of where you think the market is going next.

You may be surprised after making time to review, and decide to sell now.

What are your thoughts? Are you seeing similar trends in your area?

JB jon@movewithmomentum.com

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