The mort. interest and deprec. deductions are now sort of run out in your current property. I would get a line of credit (or appreciation rollover) on your current property and go for the gusto once again. Put as little down as possible this time and get a 30 year (not shorter) mortgage and pay it off early if you can not find ANOTHER GOOD DEAL. Hopefully in small multi units where the cap rate is better and management is consolidated in one location.
Thank You Dave for pointing out on a earlier post that depreciation eats up most of your appreciation (capital gains wise) sometimes (long term holds), this clouds what would normal be a straight forward plan… of rolling over your capital gains (always)…
Posted by Terrie Hayes on March 12, 2000 at 06:33:55:
I started investing in 1989 and have held the properties,
my question is the current market is hot and the properties
have appreciated (one example below) should I sell now or
still hold for retirement income.
Waterfront Condo purchased 1995
Purchase Price $90,000
15 year mortgage $923/m
Rent $900/m
current sales price $145,000
I also started in the 80’s and was faced with similar questions. I was offered prices on two properties that I couldn’t refuse, and did 1031 tax exchanges on both of them two years ago. And that started the ball rolling, and it hasn’t stopped yet ! I am now selling out of, or exchanging out of many of my equity rich properties and have increased my net worth A BUNCH. Of couse, equity isn’t cash, and therein lies the rub. I had 10 properties two years ago (some commercial) and had a positive cash flow of 2k per month after repairs, vacancies, my house payment, etc. Now only 2 years later, I have 25, with a cash flow of over 6k per month.
It’s a LOT of WORK. And if you’re not up to it, sit on what you have, because it’s a whole lot easier. I would have been more than happy to have sit and just retired on my rentals. Now that I’m running full steam again, am I sorry??? hmm… I am more invigorated than I’ve been in a long time. I feel I am more in control of my life and my destiny. I am busier than I have ever been. I can’t read the paper like a normal person anymore. I can’t take a ride in my car, like a normal person anymore. I eaveslisten to conversations when I am at the beauty shop ! hehehe am I sorry??? NO !
I am arriving at the point where it is almost more fun to help a family acquire their first home, than think about retirement. We are in a unique position to change people’s lives, and that is where my enjoyment rests.
If you sell, and acquire a replacement property, there most certainly will be rehab. And that is where you need your energy. Whether you do some yourself, or hire it all out. It takes an incredible amount of energy to keep all the balls in the air. That is the question you must ask yourself. Are you ready, or can you handle the fixing it will take. Because, in my market, there are no deals without rehab. Your market may be different.
From what you are saying on this property is that because of the 15 year note it is a negative cash flow. You are also saying that there is about 50K in DEAD equity that is making you no return. If you were debt free you could look at it differently. If not sell and pay off debt or reinvest in something that will. Appreciation is very regionalized and only you know your area. You do want to sell before that appreciation slows down or stops. Will $2 a gallon gas stop people from going to resort areas? Will 9% interest rates stop people from buying? Holding rental property for retirement income, to me, should be low maintenance, high occupancy, positive cash flow investments. With 50K in cash there are those that say they could do 10 subject to deals that would give a thousand a month positive cash flow and a $100k return in a few years.
The bottom of the interst rates cycle has passed for now but rates may still be better than yours if you leverage into other properties. Consider 1031 exchanges to avoid taxes now. If you did an installment sale could you not get 400 or 500 a month cash flow. If you refi the rates are 9%+ for 80% cashouts. There would still be 20% equity stranded. Lenders are still generous on whom they will lend to. When will that revert and go back to the early 90’s when you had to have a 700 FICO and have 20% down.
