Rental sale

[calmloki]

We had listed a 5-plex we own - Early part of December an agent said he had someone who wanted it, cash sale. We'd have preferred time payments (at above CD rate interest), but agreed. One of my tenants got sick and queered an inspection, then the buyer went on vacation, then our agent did, then Christmas... on Friday the 27th the inspector showed up with buyer in tow. We heard he was looking into the feasibility of having the gas water heaters replaced with electric, wasn't sure they were legal, had roof concerns, would be getting estimates... Told my agent we wouldn't put a dime more into the place and that our $6000 negotiated price drop was it.

Didn't hear anything Monday and then about 9:30 on 12/31 we heard the buyer wanted to close. That day. We moved into effective mode and it happened, in no small part because of a senior title escrow officer we've worked with before who knows her stuff. Being 1100 miles away added a layer of difficulty, having a cash buyer and owning it free and clear was a big help.

So now I'm feeling the let down. Buying is fun and easy, selling is depressing. Called my tenants to apprise them of the new deal and got some nice strokes from them, but now we need to figure out what to do with the $$. This is according to plan, it was the furthest place from our Oregon home, it is good that the sale happened last year tax-wise, I don't want to be a landlord forever.... but turning a cash cow into meat is tough...

 

[Meadbh]

Congratulations! You achieved your objective. It can be difficult to exit rental property. I sense that you have developed an emotional attachment to this property. Don't worry, it will pass!

 

[SJ1_]

.. ... but turning a cash cow into meat is tough...

It might be tough, but it is a good problem to have!

good luck

 

[tryan]

.... but turning a cash cow into meat is tough...

Yeah, that's the discussion I have with DW everytime she says "When are you going to sell THAT one" .... Why slaughter the golden goose?

Then last night it's 20 below zero ... woke to 2 frozen pipes .... still working 1 now.

 

[RE2Boys]

, but now we need to figure out what to do with the $$.

Save $$ for the expected income tax hit!!

 

[calmloki]

Yeah, that's the discussion I have with DW everytime she says "When are you going to sell THAT one" .... Why slaughter the golden goose?

Then last night it's 20 below zero ... woke to 2 frozen pipes .... still working 1 now.

Yep. We had a little old rental house's rotten pipes freeze up bad in Oregon's December freeze - plumbers ended up doing a full re-plumb from the meter using a boring machine. No profit on that place for the coming year.

On the good side, we may have new plumbers. Called them two days before Christmas, they said they would be on site the day after, I gave the go-ahead, and they were done on Monday the 30th. Given the busy frozen pipe season, the holiday, the weekend, the locate and boring company sub - they did great. The bid was exactly what they charged.

 

[jetpack]

Crap, I gotta go check pipes at the rental place. Yeah, I want to sell mine. It's pretty stable tenant wise, but older place. Keeps me from more extended trips.

 

[JOHNNIE36]

calmloki, congrats on the sale. We've been landlords and have done well with our rentals, even the sales when we finally sold the last place. Lately I have been talking with my wife about buying another rental as something to replace a
large CD that matured. Then you got me thinking about the pitfalls such as repairs. It was good while younger and able to deal with stuff like that as I did a lot of it myself. Not in a position to do that anymore and that means just another person in the loop I have to put up with. Sorry, not up to dealing with it anymore. Thanks for the reminder. Happy New Year!

 

[tryan]

plumbers ended up doing a full re-plumb from the meter using a boring machine. No profit on that place for the coming year.

Sounds familiar ... in the good ol'days the city owned everything to the meter (and the meter). Then when raising taxes was unpopular they "sold" homeowners the water meters and declared any break/freeze on your property was your problem (and the pipes are 200+ yo!).

Wellll, my meter broke .... hasn't spun in 3+ years. So I get an "estimated" bill which is the smallest water bill I pay. Needles to say I don't see a problem.

Just tell me the rules to the game ... I'll play to win.

 

[38Chevy454]

I presume this was a long term rental and so you will have a tax calculation and amount due for any capital appreciation and the depreciated basis. Still a good problem to have.

I have had rentals in past and while it is good for tax purposes, it is not so good for hassles and repairs if you are out of town. Be happy no more worries about any repair costs and what that might do to your year's cashflow. I say figure out the tax due and put that money aside, then invest the rest into a fairly stable stock fund like a large cap. If you don't like the volatility, try one of the newer 3% range CD's.

 

[calmloki]

I presume this was a long term rental and so you will have a tax calculation and amount due for any capital appreciation and the depreciated basis. Still a good problem to have.

I have had rentals in past and while it is good for tax purposes, it is not so good for hassles and repairs if you are out of town. Be happy no more worries about any repair costs and what that might do to your year's cashflow. I say figure out the tax due and put that money aside, then invest the rest into a fairly stable stock fund like a large cap. If you don't like the volatility, try one of the newer 3% range CD's.

This was the only place we ever did a 1031 into - back in 2000 - so it's pretty much all depreciated out and the sale is pretty much 100% taxable profit. After the IRS and the state and the real estate agent and title/escrow are paid we'll be left with about 60% of the sale price to invest or spend. Going to be tough to make that 60% generate as much income as the 5plex did. We are making more than we spend anyway, so reducing the stress levels is the tradeoff.

It would be nice if I could convince myself that Mr. Market's long term history is a better indicator than my faith in my self as an income generator, but what can I say - I trust me more. Did buy a 3% cd to go with our collection of 4% CDs that end in 2015 and our 0.95% savings accounts, but we have too much in cash. Probably will loan on other property ventures - the market's performance last year doesn't tempt me for a buy-in this year.

 

[clifp]

Calmloki

I wonder what the equivalent of one more year is for those of us in the rental business.

As a newbie and small player I don't think it will be hard for for me to get out of the business in the next 10 to 20 years. However, for a Real Estate guy like you I could see how this would be hard.

This last 6 months has been the first period of time when there wasn't a hassle associated with owning RE and I can see how it is actually nice to get the rents deposit into your checking account, just like stock dividends but with better yield.

Yes you wouldn't be able to easily replace the income you got from the place. On the other hand even my worse performing stocks didn't require me to file police reports, insurance claims, and get strange requests from random people on Facebook thinking they had rented my property.

 

[SumDay]

Yes you wouldn't be able to easily replace the income you got from the place. On the other hand even my worse performing stocks didn't require me to file police reports, insurance claims, and get strange requests from random people on Facebook thinking they had rented my property.

+1000 OMG, I could write a book. Real estate investment is not for the faint of heart. I inherited it, so it's gravy, but it's truly a nightmare dealing with the humans (I use that term loosely) that live in the properties.