The Best Time To “Cash Out” Is…

July 27 Blog

“When should I ‘cash out’ and sell my properties?”
I hear this question a lot and it blows my mind how many investors are stuck in this profit-losing mindset.
In the video below I tell a story about the first time someone asked me that and how I explained to him why holding income-generating properties is the better way to go.
Looking at it closely, I know most people value net worth more than income. They want to see how much they own, how much that number goes up, how much they are “worth”.
Personally, net worth is only a means to produce income for me – and here is why:

After this past year of learning how to invest in real estate, why would you ever “cash-out” when you know the advantages and high ROI you get from investing properly.
If you want to continue your journey with us, please consider enrolling in our Learn to Earn with Real Estate program.
Get it touch with for more information.
Check out a transcript of this video below:
And I remember talking to a guy years ago, probably 15 years ago, and he was a real estate investor. And he owned a few properties and his goal was to continue to accumulate properties. And Hey, we talked, he’s Michael, I got X amount of properties, I don’t know, four or five properties. But one thing I can’t figure out Michael is when do I cash out?
And I said, what do you mean? He’s I’m going to buy all these properties over my career. At what point do I cash out? What point do I sell everything? I said why would you want to do that? He said, that’s why I’m doing this to have all this money to sell everything and get all this money. So I said, okay let’s talk about this.
Let’s go down this road. And by the way, so many people have this conception of real estate that you’re building everything to just sell everything one day. I said, okay, let’s say you build a portfolio and you’ve got 3 million of equity, okay? You built 3 million of value of net worth of equity in your portfolio.
Now you can keep that portfolio. And if you do what we teach you, you have income producing assets, rental properties, private lending, and private equity deals. Or you could sell that and you get a big check for 3 million. What’s going to happen to your check? Government’s going to want their taxes.
So you’re going to pay taxes on that 3 million because you’ve just sold all of your properties. Remember, as long as you hold on to your properties, you don’t have to pay the disposition tax. You only pay tax on the income you make which is fine. We got to pay income tax. But as soon as you sell everything, now you’ve got to pay tax on that 3 million.
So your 3 million might go down to 1. 2, 2. 2 million. It might pay $800,000 in taxes, depending on your tax rate and all those things. So now your 3 million is overnight from one decision turned down to just over 2 million. Now you have over 2 million bucks. What are you going to do with it? 2. 2 million.
You’re probably going to spend maybe squander three or 400, 000 of it, bringing you to 1.8, 1.9 million. And that’s okay. You worked hard. You deserve to spend your money. Have a little bit of fun, but now you’re left with 1. 8 million. So what are you gonna do with this 1. 8 million? And he says I’m going to I’m going to have to do something with it.
I’m going to invest it. I’m like, okay where are you going to, I said, you can leave it in the bank or you can invest. He says, I’m going to invest it. I said where are you going to invest it by now you’ve been doing this for 20 years. 10 years. Are you going to invest in real estate or somewhere else?
He said probably invested in real estate. I said, okay, stop right there. This is your plan. Let’s go over your plan. You’re going to acquire this portfolio to cash out one day to take the money and then to invest it right back in real estate, but lose almost half of it in taxes and in spending.
He said, I never thought of it that way. He said, so what is the plan? I said, the plan isn’t to cash out. The plan is to own income producing properties. And you can own those forever and you could die with those and you could pass those on in your estate. That is part of what you’re creating is this lifestyle of passive income.
And you can only do that if you keep your passive income properties. As soon as you sell your properties, you lose all of the value, all the benefit that the properties bring you, which is: passive income. And so he said, I never thought of it that way. So my goal is to build a portfolio and keep .It. Yes. I said, perfect.
It’s exactly what you need to do. And so this really highlights the difference between income and net worth. Income and net worth. So most people value net worth more than income. They want to see how much they’re worth, how much that number goes up. How much they own, but for me, I’ll tell you, for me, net worth for me is only a means to produce income.
So the reason I have net worth is to produce income. The net worth is useless. So what you own a million dollar home and it’s paid for and you have a million dollars of net worth. Does that buy you anything when you get to the store? No, it doesn’t unless it produces income or of course you leverage or borrow against it, which is an option.
But wouldn’t it be better if you didn’t have to leverage in it your assets produced income. So what if you own all of these assets that they’re not producing income, then they’re not giving you the lifestyle you want. And so this is where I got to start educating people around the difference between the income and the net worth.

Posted in ,

Michael Sarracini

Michael Sarracini is an expert on creating lifestyle freedom through entrepreneurship and real estate investing. He’s an award-winning entrepreneur, speaker, author and TV celebrity. Michael is the co-founder and CEO of Keyspire

Recent Blogs

Attract Higher Paying Tenants by Being Pet Friendly!

By Kelly Mendonca | July 13, 2023

Optimizing an investment property is all about maximizing your income and minimizing your workload and expenses, such as tenant turnover.…

The 7-Step JV Process

By Michael Sarracini | June 29, 2023

“It’s better to own 10% of 100 properties than 100% of 1 property.”   No matter how wealthy and successful…

Income Vs Net Worth

By Kelly Mendonca | June 26, 2023

In today’s world, two of the most important financial metrics are income and net worth. Understanding the distinction between the…

Principal Recapture Explained

By Kelly Mendonca | June 19, 2023

Principal recapture is a financial concept used to describe the sum of all the principal payments on your mortgage for…