Should I Sell or Pivot? (Rookie Reply)

Ashley:
What if the project you spent five months bleeding into is now worth less than the credit card debt that you actually racked up trying to finish it and you have to decide today whether you are going to sell it or keep it.

Tony:
Or maybe you finally agree to partner with someone who can fund the deal that you can’t buy yourself, but now you’re wondering if a handshake fifty fifty is going to cost you your friendship and your first paycheck.

Ashley:
And once the keys are in your hand and the wire is sent, what do you actually do in those first 30 days before a single tenant walks through the door?

Tony:
Today we’re answering three questions from the BiggerPockets forums that hit exactly where Ricky’s hold the most pressure right.

Ashley:
This is The Real Estate Rookie Podcast. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson. And with that, let’s get into today’s first question. So our first question comes from the BiggerPockets forms and it says, “I have a property that I have remodeled that is ready to hit the market. Unfortunately, after crunching the numbers, I will not be making any profit if I actually sell it. In this market and with interest rates rising, does it make sense to hold onto this property and rent it out instead of selling and walking away with no profit? For the experts out there, what would you suggest? Should I refinance and rent it out? The hard money loan balance is about $400,000 and a possible rent in the area is 3,000 to 3,500 or should I just sell it and recoup my investment without any profits? Comments would be greatly appreciated. Well, first, I don’t think this person is a loan, that as the market has shifted.
There’s been more folks who probably lost money on flips. I’ve got to flip right now. I actually asked for just one under contract in the past week on that flip that I’ve been trying to sell.

Ashley:
And remind me, how long was that flip over a year, right? You’re trying to sell it?

Tony:
It was over a year that we had it on the market. Yeah. We’re recording this in May of 2026 and we listed that property right at the end of 2024. So it was like December, I think, or November maybe of 2024 that we listed the property. It was up for a year. I took it off the market and I relisted it about a month ago and now we got some traction, but it’s, I don’t know, I think 30 grand under asking. So we listed at 399, we’re under contract at 370. So I guess I’ll give my just quick story on that because I feel like it’s similar to this because I went through the same mental exercise on this deal. It’s like, okay, well, what do we do? And the basic math was I looked at, okay, do we turn this into a short term rental because the opportunities were there or do I cut my losses and sell it at a loss?
And what I looked at, the property actually could do from a revenue perspective, could do decently well. It’s in a market where the competition isn’t incredibly strong and I’m pretty confident we could go out there and do well. But when I compared the cost of what we would have to spend to both refinance out of my private money note and then also fully furnish the property, it was a much bigger number than if we just sold at a loss. So that was the method I looked at. It’s like, okay, how much am I going to spend to get into this deal? And then if we just sold, what would that look like? And for me, it financially made more sense to go the route of selling and because I was working with private money lenders as opposed to hard money lenders.
The lender who was in the last lien position, he’s investing or he gave me the funds through a retirement account so he doesn’t need the funds today anyway and he was fine refinancing that shortfall into a longer note as well. Even though we’re losing money on this deal, I don’t have to write a big check at closing. We’re just kind of spreading that loss out. I think it was like a 36 month note or something like that. So he’s getting a slightly higher interest rate. He’s still getting a return on his capital without having to redeploy it. And I’m saving myself from having to write a big check at closing. So that was the math that I went through is like, okay, what’s the total cost for refinancing and keeping? What kind of return do I think I’ll get there? What’s the total cost for me if I just sell this at a loss and what makes the most sense?
So that was my thought process on that specific deal.

Ashley:
So I think it has to do a lot with what you are, first of all, the numbers. What did the numbers look like in each scenario? So how much money would you actually be losing if you sell the property and how much money would you be losing a month if you rent it out? Or maybe you’d actually be making money. So you need to find out how you could refinance it, what your mortgage would be and kind of break down the numbers from there. That’s the first step you have to do is run the numbers in each scenario and say they’re both a loss. So with that loss, are you able to maintain that loss and pay that difference that you owe for the mortgage every single month or for the expenses and then wait it out and maybe in a couple years be able to sell the property or do you have cash savings that you could go ahead and dump into the property, maybe you’re taking a lower mortgage on the property.
So I think really running the numbers, then also kind of looking at what you are comfortable with doing. Do you even want to be a landlord? Do you want to have tenants in place? So I think you have a lot of questions to look at for the numbers and then just for yourself personally too is what you actually want to deal with. Maybe you would rather take the loss and sell it because you don’t want to be a landlord and you don’t want to have tenants in the property. Coming up, what happens when your partner brings 100% of the money and you bring 100% of the work? Is fifty fifty actually fair or are you about to give away your first paycheck? We’ll break it down right after this quick word from our show sponsors. Okay. Welcome back. So today’s question it says, “Hey guys, I’m getting close to closing on a deal with an equity partner.
This will be my first partnership so I have no frame of reference. What’s the best way to split our equity if he’s providing the down payment and I’m managing the asset on my own? I want to be fair to both of us. Thanks for your time.” Okay. I think there’s one piece of this question that is missing that is not being considered. You have one person bringing the capital for a down payment and then you have somebody that’s going to be doing the SWAT equity and managing the asset. But what about the leverage? What about the mortgage? Whose name is the debt going into? Are you both going to be on the debt? Is just the person providing the capital going to be on the debt? Because that is some, I guess I don’t know how to phrase this. What’s the word I’m looking for, Tony, where it’s not like it’s something you’re providing to the deal is the person who’s signing on the debt who has the good credit, the good debt to income and is taking the risk of the debt on this property too.
So for example, say Tony provides the down payment, Tony’s also going and getting the debt in his name and I’m going to manage the property.
I have less skin in the game, I would say. As in if I decide this property is not working out, I don’t want any more of it. I walk away, I didn’t lose any capital, I don’t risk the mortgage payments not being paid. If they don’t get paid, “Well, it’s not my name on the debt. I just lost the time that I was managing the property.” So I do think that’s a third element that really needs to be considered in this as to whose name is going on the debt also.

Tony:
Yeah, it’s a great point, Ash. And I think once you have that solidified, the fifty fifty, I think it is a fair structure for a lot of deals because even for the person who’s carrying the debt and is bringing the capital, the extent of their work is really done once the property closes and really all they had to do was obviously that there’s some pain in qualifying for the loan and doing all that stuff, but for the most part their work was signing some documents. But for you as a person who’s going to continue managing this property, your work will persist for however long you own that property. So if you own it for five years, 10 years, 30 years, you are the person who’s signing up to agree to manage that deal. So there’s a lot of work that goes into that. So honestly, I think fifty fifty is pretty fair in that scenario.
I think one thing I will recommend is that, especially if you’re doing this on a first deal, I wouldn’t necessarily start an actual business with this person yet. Don’t stand up in an actual LLC together Just test the first deal with you guys separately each owning your ownership. You’ve got your entity that owns 50%, they’ve got their NC that owns 50% and use that as a way to kind of date. And then if you guys like that experience-

Ashley:
So a joint venture agreement.

Tony:
Exactly, right? It’s like a JV between your entity and theirs and then only if you guys enjoy that process, then maybe stand up and entity together. But I see some folks who are just like super trigger happy on like setting up all these additional LLCs and it sounds cool on paper, but it does I think add a certain layer of complexity. But on that note, Ash, I think whatever structure you and this other partner decide on, make sure you get it down in writing Ash and I co-authored a book for BiggerPockets called Real Estate Partnerships so you can read that book to get a better sense of what those agreements typically have inside of them. But I think the more clarity you can have on what the structure looks like and getting that memorialized in some way, the less chance there is for friction moving forward.
Just writing things down in general, I think helps a lot when you get into some of those situations. But I think in general guys, fifty fifty is a fine structure, but at the end of the day, there’s no right or wrong answer. It’s whatever you and that other person both feel is fair and there’s a million different ways you can skin the same cat. We always talk about Ash’s first deal where she like gave that person a sweetheart deal. It was like they got whatever, like equity percentage, but they also got paid back. It was a great deal for them. So there is no right or wrong answer. It’s just making sure you guys are both happy, you’re both protected and you’ve really thought through all the different scenarios and how you’ll handle those before they actually happen. All right. So we’re going to take a quick break before our last question, but while we’re gone, if you have not yet, be sure to subscribe to the Real Estate Rookie YouTube channel.
You can find us @realestaterookie. And if you want to be a guest on the podcast, head over to biggerpockets.com/guest and you might just be the next Ricky that we interview for the rest of the audience. We’ll be right back after this. All right guys, welcome back. Our final question comes from the BiggerPockets forms and it says, “I just closed on my first investment property.” Congratulations. On paper, the numbers worked. I walked through it with everyone I consider an advisor, but the moment I saw the wire amount on the closing statement, reality finally hit. Now I’m sitting here with the keys and I’m torn. Should I spend the first 30 days setting up systems, getting the LLC insurance and bookkeeping dial them before listing it or should I race to find a tenant so the property isn’t bleeding money? What do you wish you’d done in those first 30 days that you didn’t?
Well, first congratulations. Like I said, it’s always a great thing to, I think to have the property closed on, but some of these things I hope you would’ve gotten done before closing, like insurance. That’s typically something you want in place during your due diligence period during your closing period is when you’re setting up insurance. Yeah. If you don’t have proper insurance on the property, that would be the absolute first thing that I would go tackle is getting the right policy in place because even if the property’s vacant, you still want to make sure that it’s properly insured. So that’s the first thing that jumps out at me, Ash. I don’t know what your thoughts are on that piece.

Ashley:
Yeah. So I’m going to go even further back before you even close on the property, like just making sure that you’ve switched all the utilities in your name. And then when you have actually closed, confirm that you have account numbers, what your account numbers are. I keep a utility sheet for each of my properties and when I switch the utilities into my name, I’m putting the provider, their contact information, anywhere I log in, what the login is, my account number, maybe where the meter is located for the utility service, any information like that so I can always easily access it. So I think for me, one of the biggest things is going through your property and documenting your property because if you own that property for 10 years, like I have a property, I’ve had the same tenant in there for 10 years that I’ve owned this property.
I have not been in that unit since I walked to the property 11 years ago before I actually closed on it. I could not tell you where the HVAC is. I could not tell you where the electrical panel is. I could not tell you what type of flooring is in that unit. Now any property that I’ve bought within the last several years, I can look up all of that stuff because I’ve documented it and I make myself a sheet and it’s just my unit information sheet. So every time I close on a property, I’m going through and writing down as much information about it. I’ve actually put it at biggerpockets.com/resources and you can download it there for free, but just I’m documenting my property and things that I may need to know in the future. If I send a handyman out to a property, I’m able to tell them exactly where the water shut off is.
Or if my tenant calls and says water is shooting all over, I’m telling them where the water shutoff is. So I think that is a really big thing that a lot of people miss and don’t do and then they kind of scramble when it comes time to actually need that information. Or just like you said, setting up the insurance, Tony, that should be done before closing on the property. But if you are scrambling to do that, the insurance is going to have questions about the property that you should have some of that information for such as when was the roof last updated? What type of roofing is on there? Is it metal? Is it shingles? Things like

Tony:
That. I think going back to the core part of this question though is what should they do first? Setting up all those things or going after their tenants. I think there’s probably a reality where you can do both, right? There’s Pareto’s principle, like the 80 / 20 rule, 80% of your results come for 20% of your actions. And I think you’ve got to find that 20% that’s going to move the needle 80% for you in this situation and getting your tenants in place is probably one of those things that’s going to move the needle. We don’t want you sitting on this property for weeks and months without generating any revenue, but we also want to make sure that you have threat insurance in place and things like that. So I would tackle both of those things simultaneously. So yeah, go set up your listening and distribute it whatever platform you want to go to, like go find your tenants, Facebook, marketplace, whatever tools are out there, but go start listing the unit.
And then while you’re waiting for folks to come in, you can go work on, “Okay, let me put the lease together. Let me go sit down with a real estate attorney for my market to put the lease together or go grab one of the bigger pocket state specific leases and use that as a starting point. Yeah, double down to make sure that your entity structure is set up correctly, set up your business bank account.” But you’ve really got to, I think, be doing both of those things simultaneously. I don’t think it’s in either this or that it’s both.

Ashley:
Well, thank you guys so much for joining us today on this episode of Rookie Reply. I’m Ashley, he’s Tony, and we’ll see you guys on the next episode.