Determining Return on Rental Property

[Offgrid Organic Farmer]

During my career, I owned four different apartment complexes. Each in a different state/nation. In total, I may have spent $20k out of my own pocket in buying these properties.

How much Net Worth I gained as rental income paid down the mortgages, was substantial.

[pb4uski]

But alas, it wasn't all so great, was it?

http://www.early-retirement.org/foru...ml#post2039026

[Offgrid Organic Farmer]

Quote:

Originally Posted by pb4uski But alas, it wasn't all so great, was it?

I walked away with a large chunk of cash in my pocket, and I never paid taxes on that profit.

I saw one bump in the road.

Overall that was not bad.

[pb4uski]

Quote:

Originally Posted by Offgrid Organic Farmer I walked away with a large chunk of cash in my pocket, and I never paid taxes on that profit. ..

If you had a "large chunk of cash in my pocket" as you claim how come you wrote that "our savings was gone"?

What profit was it that you never paid taxes on?

If the property sucked your savings dry and the bank foreclosed and took the property it is hard to see how you profited.

[Offgrid Organic Farmer]

I have explained this a few times before. Not sure why you want to dig about so much.

Between 1990 and 2002, we sold some of our properties and used the profits buy down the mortgage on our last remaining property.

In 2005 we refinanced our last remaining apartments and used that cash to buy our farm [I paid cash, no mortgage]. That cash was all the profits that we had made from all our complexes.

In 2008 we lost all of our tenants due to the Recession and the lay-offs in that city. And we began servicing the mortgage using our savings.

In 2009 we ran out of savings.

Do you want to hear it again, maybe in a different language next time?

[Offgrid Organic Farmer]

Quote:

Originally Posted by pb4uski ... If the property sucked your savings dry and the bank foreclosed and took the property it is hard to see how you profited.

Over a period of 15 years, I bought four different rental real estate properties. Each time I spent somewhere between $5k and $8k to close on each property. Eventually, I sold three of them and consolidated the equity into the fourth property. Then I extracted that equity as cash, and I used that cash to buy our farm, with no mortgage.

Four investments of 5-8k, over 15 years, turned into $300k tax-free.

The bank foreclosed on that fourth property, a rental real estate.

I kept the farm [my fifth property] and I have no mortgage.

[pb4uski]

Ah .. flakey math. I got it.

[ncbill]

Quote:

Originally Posted by pb4uski Ah .. flakey math. I got it.

Just using the protections of bankruptcy law to keep the personal home...we'd all do the same.

[BeachOrCity]

I invested in and purchased a lot of short sales and REO's during the GFC. The number of properties out there where the previous owner "Cash Out Re-FI 'ed" and subsequently walked away amazed me. Depending on the state the banks could not go after this money. In some states they could, but didn't do so.

Corporate America has always behaved like this, so I guess alot of folks never felt any personal obligation to pay back their debt. I couldn't imagine doing that to anyone....even a nameless mega-corp.

[pb4uski]

Quote:

Originally Posted by pb4uski Ah .. flakey math. I got it.

Quote:

Originally Posted by ncbill Just using the protections of bankruptcy law to keep the personal home...we'd all do the same.

I wasn't referring to his keeping the farm.

According to OGF, if you put $20k down on some rental properties and use the rental income to pay the mortgage and later sell those unemcumbered properties for $320k you have $300k of tax-free income.

Now that is truly off-grid math.

[ncbill]

Quote:

Originally Posted by pb4uski I wasn't referring to his keeping the farm. According to OGF, if you put $20k down on some rental properties and use the rental income to pay the mortgage and later sell those unemcumbered properties for $320k you have $300k of tax-free income. Now that is truly off-grid math.

Wouldn't moving into the rental property to turn it into a personal residence for a couple of years do that for a couple?

[pb4uski]

Do what? Allow them to keep the rental? I don't think so.

Keep in mind, they didn't declare bankruptcy, it is just they had a rental property and couldn't make the mortgage payments so it went into foreclosure... the bank repossessed the rental. It isn't clear from what he wrote but it sounds like the bank also tried to recover from them the excess of the loan balance over the value of the property as of when they repossessed it (it must have been a recourse loan).