Join Early Retirement Today
View Poll Results: Real Estate as an investment other than your home?
REITS baby! instant ability to liquidate, no toilet clogs. 49 28.00%
Vacation home that appreciates. 34 19.43%
DST or Opportunity Zone investor. 7 4.00%
Commercial/NNN investor. 14 8.00%
Bed and Breakfast/airbnb/VRBO owner. 10 5.71%
Live on the same lot as my rental. 4 2.29%
Own and rent out single family home(s). 57 32.57%
Own and rent out apartments. 28 16.00%
Own property as appreciating land or farmland. 13 7.43%
https://www.youtube.com/watch?v=WCOzqP9Dt9E 6 3.43%
No "investment" RE - just my home 37 21.14%
Multiple Choice Poll. Voters: 175. You may not vote on this poll

Reply
 
Thread Tools Search this Thread Display Modes
Old 07-20-2020, 12:14 AM   #41
Recycles dryer sheets
 
Join Date: Jan 2013
Posts: 173
70% of HHNW is in various forms of real estate (both acquired and inherited):

1. A large number of farms and ranches leased to tenants with good appreciation potential.
2. A small "ranchette" which I've been trying to unload for years.
3. Several industrial/commercial properties.
4. A building site with great ocean view.
5. A condo/second home.

Long-term goal is to liquidate 2, 3, 4 and 5 to make our estate/life simpler to manage (and to pass down to heirs).

Also looking to purchase a nice vacation/retirement home at some point in Hawaii, something beachfront or with full-on ocean view, but DW and I cannot come to an agreement on whether to rent it out. DW wants to maximize ROI by renting it out, but I hate the thought of renting out a home to strangers for income that we don't need.

Lucky Dude
luckydude is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-20-2020, 08:43 AM   #42
Thinks s/he gets paid by the post
SumDay's Avatar
 
Join Date: Aug 2012
Posts: 1,801
I hold two promissory notes on residential real estate. Does that count?
__________________
FIRE Class of 2018 @ 61

Old men and women sit in the shade of trees they planted long ago
SumDay is offline   Reply With Quote
Old 07-20-2020, 09:57 AM   #43
Thinks s/he gets paid by the post
 
Join Date: Aug 2013
Location: North
Posts: 2,891
Late 2 the party. Was born into it. DF has 'rentals' spent many hours flipping after tenants lease ends, service calls etc. Closed on 6 plex in 2006 during downturn. Learned lots since then. I now feel like my $ is better in Stocks, only because rest of family is heavy into RE. My returns have been better short-term, but the long term if you outlive your note by like 70 years, that's 840 mortgage payments someone else makes. Scale that by a few properties and it's a great way to cement stability into a family generational wealth transfer. Provided the next generation understands RE.

It's not easy, it takes experience, but it can be done. Now I help with millions of RE portfolio, all self-managed by the 'family office'.
__________________
AA (Stock/Bond/Cash ): 97.5/0/2.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
kgtest is offline   Reply With Quote
Soon to be early retired
Old 07-20-2020, 01:35 PM   #44
Recycles dryer sheets
 
Join Date: May 2019
Posts: 64
Soon to be early retired

I"m getting there - it could happen between now and 12 months.

I've had (2) condos for rental purposes and utilize a property manager. I'm not handy, I have little knowledge about how to fix things....and property manager does EVERYTHING. If I do early -retire it's because I'm sick and tired of employees, customers, the whole nine yard and I want minimal interaction with people - professionally so real estate appeals to me. For 7 years with (2) units - I've had ZERO troubles. My rule to property manager is "TAKE CARE OF IT ASAP" if there's a tenant complaint. Dn't chintz, don't wait, just do it and I'm happy to take a little lower return in exchange for easy living.

As I retire, I forsee 60% of my nest-egg being in stocks.

Close to 40% in real estate.

Prices are high - so I think my residential real estate TRUE returns would be around 3.5-3.75% per year and I could consider this the "bond" section of my 60-40. I also like that it's a non-paper asset - and hallmark of diversification.

I like the depreciation too in that YES, it'll be recaptured and taxed but for now I can ZERO my income on the real estate side. That makes my dividend income taxed at 0% because I won't make the income threshold and also --- qualifies me for an ACA subsidy. Also, I *suspect* in 4-6 years, there will be some sort of goodies for "low income" people like me vis a vis kid's college expenses.

Metro DC, Metro Raleigh, Metro Austin, Metro Atlanta. With proper homework - these are the areas I'm interested in. Nothing is risk-free but ALL forecasts show population growth coming - -- AND much of it educated professionals. Young educated people with noodles of debt sure love stainless steel appliances and backsplashes - lol and my 2 units in Metro DC are rented FAST. Also....where the professionals are - there is also a lower economic echelon living there to service the professionals be it landscapers, nannies, house cleaners, etc Again - more demand for $200k-$250k units for rental and even purchase.

I continue to be interested in NET-LEASED properties. To entities like Popeye's, Wendy's, etc. Seems like easy mailbox money but this pandemic has shown me that even chains that have been around "forever" can have problems. I'm still looking at these - but not as hard as before. I'd rather have 40% of my nest-egg spread between 8 residences.... versus 1 commercial property.

Exceptions are. McDonalds and Chick Fil A. I classy those STILL as easy mailbox money but they also. only pay 3.8-4.4%. Also - those are ground leases hence no depreciation.

If I had my druthers..... the RE portion of my portfolio will be let's say around $1.7 million. My dream breakdown:

$1mm - commercial net leased @4.75% cap rate, and ability to depreciate.

3 condos @200-250k a piece that earn 3.5% and ability to depreciate.

My percentages are realistic. Trouble is that the mainstream net-leased businesses seem to be going for $1.5mm+++.

But - they are out there. Goal will be to learn the neighborhood, spend quality time wherever that maybe, watch and learn the business model for a potential net-lease deal when the time comes.
MichealKnight is offline   Reply With Quote
Old 07-20-2020, 02:36 PM   #45
Thinks s/he gets paid by the post
 
Join Date: Jan 2013
Posts: 2,703
As someone that used to spend a lot of time looking at those net leased properties, particularly chain retail, drug, and restaurant properties, I have to laugh. When companies like K-Mart and Circuit City first showed signs of weakness, suddenly their store properties showed up as high quality absolute net investments on LoopNet. Can't remember specifically who did this, but raising capital through sale leasebacks was a common strategy. You could kind of predict the failure 12 to 18 months later... The name brand drug stores were similar, although it was usually a property owner selling. The property would sell, and the location would close within a year or two. All of a sudden, you had an empty building with the retailer paying the minimum base rent instead of a percentage of gross sales. Nothing like a vacant building you don't control that may or may not get subleased to a less than desirable tenant.

I will take the management hassle of dealing with smaller tenants, particularly NOT retail tenants, over those breathtakingly low cap rates for so-called credit tenants and their mailbox money.
Another Reader is offline   Reply With Quote
Old 07-20-2020, 03:27 PM   #46
Full time employment: Posting here.
BeachOrCity's Avatar
 
Join Date: Jun 2016
Posts: 819
Quote:
Originally Posted by Another Reader View Post
As someone that used to spend a lot of time looking at those net leased properties, particularly chain retail, drug, and restaurant properties, I have to laugh. When companies like K-Mart and Circuit City first showed signs of weakness, suddenly their store properties showed up as high quality absolute net investments on LoopNet. Can't remember specifically who did this, but raising capital through sale leasebacks was a common strategy. You could kind of predict the failure 12 to 18 months later... The name brand drug stores were similar, although it was usually a property owner selling. The property would sell, and the location would close within a year or two. All of a sudden, you had an empty building with the retailer paying the minimum base rent instead of a percentage of gross sales. Nothing like a vacant building you don't control that may or may not get subleased to a less than desirable tenant.

I will take the management hassle of dealing with smaller tenants, particularly NOT retail tenants, over those breathtakingly low cap rates for so-called credit tenants and their mailbox money.
+1

I think there is huge risk w/ single tenant NNN properties.

I am also not a fan of taking 4.75% CAP rate for something this illiquid. A return to the historical CAP rates would KILL this type of investment.

I am a DC metro person, but I live in the city center. Once accounting for vacancy, maintenance, and property management none have had CAP rates over the Cost of Capital in recent years.

The only times I was able to find true cash flow positive in DC Urban was 2008-2011/2012 and in the 1990s - about 2000 / 2001

Right now a 1BR condo that rents for 2300 downtown would cost 400K. w/ 20% down thats 1400 / month + 300 condo fee + 300 prop taxes. Plus insurance, property management etc. Just doesn't make a whole lot of sense to me. After allowing for vacancy, unit turns etc.

I think other metro's have much more attractive CAP rates than DC.
BeachOrCity is offline   Reply With Quote
Old 07-21-2020, 11:57 AM   #47
Dryer sheet aficionado
 
Join Date: Jan 2020
Location: NJ
Posts: 32
After reading Rich Dad Poor Dad I started investing in real estate. Some have been a grand slam-vacation home at the beach, two industrial bldgs I rent to my company and a couple flipped houses. I've also struck out on a few. Today RE is 20% of my NW. When I retire I plan on selling the vacation home and one of the industrial bldgs and rolling them into an ocean front home via 1031 exchange. If I "rent" for 2 years it will save me $200k in cap gains tax, plus depreciation, plus the rental income. When I say "rent" I'm only looking to do 5 weeks each summer at a rate of $15k per week. After 2 years we would make it our main residence.
Jerseytunahunter is offline   Reply With Quote
Old 07-21-2020, 02:23 PM   #48
Full time employment: Posting here.
BeachOrCity's Avatar
 
Join Date: Jun 2016
Posts: 819
Quote:
Originally Posted by Jerseytunahunter View Post
After reading Rich Dad Poor Dad I started investing in real estate. Some have been a grand slam-vacation home at the beach, two industrial bldgs I rent to my company and a couple flipped houses. I've also struck out on a few. Today RE is 20% of my NW. When I retire I plan on selling the vacation home and one of the industrial bldgs and rolling them into an ocean front home via 1031 exchange. If I "rent" for 2 years it will save me $200k in cap gains tax, plus depreciation, plus the rental income. When I say "rent" I'm only looking to do 5 weeks each summer at a rate of $15k per week. After 2 years we would make it our main residence.
You can do this plan, but keep in mind you won't get the full 250/500K owner occupied exemption when you sell the new OF Manse. It will be prorated by years of ownership and use. Since you are 1031'ing it will start the time from when you originally acquired the 1st property. If you had 10 years total, 7 as rental and 3 as personal your gain is broken out and only 30% of it is applied to the capital gains exemption.

You won't have to pay Cap gains when you sell the rentals to buy the last property, but you will still in essence owe the tax on the gain when you sell the final property even if you have lived in it for several years.
BeachOrCity is offline   Reply With Quote
Old 07-21-2020, 02:41 PM   #49
Dryer sheet aficionado
 
Join Date: Jan 2020
Location: NJ
Posts: 32
Hi BorC. Our current vacation home was purchased in '96 and never rented nor depreciated. We use it every weekend. The industrial property was purchased in '90 and rented/depr since then. I was told that if we rented for at least 2 years and then made it our primary residence the cap gains tax due would go away. What is OF Manse?
Jerseytunahunter is offline   Reply With Quote
Old 07-21-2020, 02:45 PM   #50
Thinks s/he gets paid by the post
 
Join Date: Jul 2009
Posts: 1,025
Five SFH, all rented with zero C19 related issues. Use a rental agency even though all in the same area.

Make up about 20% of net worth, and about a third of annual income.
stephenson is offline   Reply With Quote
Old 07-21-2020, 02:48 PM   #51
Thinks s/he gets paid by the post
CaliKid's Avatar
 
Join Date: Apr 2016
Location: Cali
Posts: 1,140
Quote:
Originally Posted by Another Reader View Post
As someone that used to spend a lot of time looking at those net leased properties, particularly chain retail, drug, and restaurant properties, I have to laugh. When companies like K-Mart and Circuit City first showed signs of weakness, suddenly their store properties showed up as high quality absolute net investments on LoopNet. Can't remember specifically who did this, but raising capital through sale leasebacks was a common strategy. You could kind of predict the failure 12 to 18 months later... The name brand drug stores were similar, although it was usually a property owner selling. The property would sell, and the location would close within a year or two. All of a sudden, you had an empty building with the retailer paying the minimum base rent instead of a percentage of gross sales. Nothing like a vacant building you don't control that may or may not get subleased to a less than desirable tenant.

I will take the management hassle of dealing with smaller tenants, particularly NOT retail tenants, over those breathtakingly low cap rates for so-called credit tenants and their mailbox money.
I agree. I was looking at some of these a couple years ago when I had some play money to invest. It appears to me that stores like Dollar General and similar just build stores to sell and lease back. To me Amazon will eventually make them obsolete and you end up with a huge building in some small town somewhere. 7 or 8% on it's face but I think in reality would be significantly lower.
__________________
______________________
Hoping to get out around September 1, 2022... I hope, I hope, I hope. Until then off to work I go....
CaliKid is offline   Reply With Quote
Old 07-21-2020, 02:50 PM   #52
Full time employment: Posting here.
 
Join Date: May 2011
Location: Twin Cities
Posts: 519
Currently own 10 - 8 townhouses and 2 condos. No issues so far with payments. I've never had to do an eviction in 9 years of owning properties.

I did have a tenant move out of condo in June and am remodeling it to sell (tenant used me to buy a house so made $6k commission). My other condo will be vacant at the end of August and I plan to sell that one too. That gets rid of my 2 oldest units with the more challenging HOA's.

The 8 remaining units kicks off well over 1/2 the income we need in retirement. DW is retired and I'm semi-retired. Real estate keeps me working 5-10 hours per week.
Fishingmn is offline   Reply With Quote
Old 07-21-2020, 04:00 PM   #53
Recycles dryer sheets
 
Join Date: Mar 2006
Posts: 146
1 SFH, 1 Townhome, 2 condos and 1 beach vacation rental.

No issues with rental payments during COVID and only 1 eviction in 15 years.

The key is: LOCATION, LOCATION, LOCATION. Great equity on each property and let those tenants pay off the mortgages.
xmanz3 is offline   Reply With Quote
Old 07-21-2020, 05:06 PM   #54
Thinks s/he gets paid by the post
 
Join Date: Nov 2005
Posts: 1,382
Quote:
Poll Option: Own property as appreciating land or farmland.
• What if the property is declining in value?

• Lumping an investment in raw land and farmland (either cash-rented or crop-shared) in the same category is rather odd. These are two very different animals.

Roughly 1/3 of my gross income is from crop-shared American farmland. I like the asset diversification that farmland provides, and the biz is also an endless topic for discussion among family members. Greedy speculators tend to avoid farmland as an investment, which is nice. Sometimes boring is good!
socca is offline   Reply With Quote
Old 07-21-2020, 05:34 PM   #55
Full time employment: Posting here.
BeachOrCity's Avatar
 
Join Date: Jun 2016
Posts: 819
Quote:
Originally Posted by Jerseytunahunter View Post
Hi BorC. Our current vacation home was purchased in '96 and never rented nor depreciated. We use it every weekend. The industrial property was purchased in '90 and rented/depr since then. I was told that if we rented for at least 2 years and then made it our primary residence the cap gains tax due would go away. What is OF Manse?
OF = OceanFront
Manse = Mansion

Sorry for the sarcasm

So if you changed your domicile to your vacation home, you could get the exemption up to 250/500 after 2 years on that one.

You can still 1031 the industrial, there is an interesting wrinkle on that one. When calculating the proration years before 2007 count as personal use, not rental. But it was industrial not residential real estate. If you could do the proration across all the years and count 1990-2007 as personal then alot of it would qualify for the exemption.

I would tell you to talk to your tax person, but they fact that s/he said just two years and it all goes away gives me pause to suggest that. But given the length you owned it, the proration could work well in your favor.

Hope this helps. Oh, and the 2007 I mentioned above is really like 2008 / 2009.

See this article:
https://www.nolo.com/legal-encyclope...residence.html
BeachOrCity is offline   Reply With Quote
Old 07-21-2020, 05:46 PM   #56
Thinks s/he gets paid by the post
CaliKid's Avatar
 
Join Date: Apr 2016
Location: Cali
Posts: 1,140
Quote:
Originally Posted by Fishingmn View Post
Currently own 10 - 8 townhouses and 2 condos. No issues so far with payments. I've never had to do an eviction in 9 years of owning properties.

I did have a tenant move out of condo in June and am remodeling it to sell (tenant used me to buy a house so made $6k commission). My other condo will be vacant at the end of August and I plan to sell that one too. That gets rid of my 2 oldest units with the more challenging HOA's.

The 8 remaining units kicks off well over 1/2 the income we need in retirement. DW is retired and I'm semi-retired. Real estate keeps me working 5-10 hours per week.
You mention a key issue " That gets rid of my 2 oldest units with the more challenging HOA's." I am selling a property when the current lease is up as it's a condo and the HOA board is a NIGHTMARE. Literally psychotic people who have a little bit of power for the first time in their lives. Really scary.
__________________
______________________
Hoping to get out around September 1, 2022... I hope, I hope, I hope. Until then off to work I go....
CaliKid is offline   Reply With Quote
Old 07-21-2020, 06:54 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 22,990
Quote:
Originally Posted by BeachOrCity View Post
Quote:
Originally Posted by Jerseytunahunter View Post
.... I was told that if we rented for at least 2 years and then made it our primary residence the cap gains tax due would go away. ...
.... I would tell you to talk to your tax person, but they fact that s/he said just two years and it all goes away gives me pause to suggest that. But given the length you owned it, the proration could work well in your favor. ...

See this article:
https://www.nolo.com/legal-encyclope...residence.html
Yes, I'd suggest anyone in this position dig a little deeper, and not simple accept what you think a pro told you (they may be right, but there may be a communication gap).

I've started looking into this for the family of an extended family member. The husband passed unexpectedly, and they have a rental property (that they lived in many years ago). There's been discussion of the widow selling the primary residence and moving back to the rental.

And as that NOLO article points out, cap gains are one thing, but depreciation recapture is another. This family has probably depreciated most/all of the original purchase price (I don't really know much of the details on depreciation, but I think that's ballpark). It appears the depreciation recapture (taxed at 25%!) is a major player, none of it is reduced by the time using it as a personal residence.

Bottom line, do your homework, there are a lot of ifs, ands and buts in there.

-ERD50
ERD50 is online now   Reply With Quote
Old 07-21-2020, 07:03 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
calmloki's Avatar
 
Join Date: Jan 2007
Location: Independence
Posts: 6,638
A nifty feature is that the IRS doesn't care if you took the depreciation while it was a rental or didn't - they recapture as if you did. period.
__________________
"Be kind whenever possible. It is always possible." Dalai Lama
calmloki is offline   Reply With Quote
Old 07-21-2020, 07:10 PM   #59
Recycles dryer sheets
 
Join Date: Sep 2018
Posts: 222
DH and I have a SFH rental (paid for) and tenants have not missed any rent payments. They are good tenants, meaning very few calls and only when it is important



Also own 20% of a commercial real estate property with 6 tenants, all rents paid. Best small biz is a Bike shop whose biz has almost doubled in this pandemic.



Partial owner of family vacation home but its more of a money pit !!
Octogirl is offline   Reply With Quote
Old 07-22-2020, 04:21 PM   #60
Recycles dryer sheets
 
Join Date: Dec 2007
Posts: 240
Quote:
Originally Posted by calmloki View Post
A nifty feature is that the IRS doesn't care if you took the depreciation while it was a rental or didn't - they recapture as if you did. period.
I didn't know this ^^^
I was thinking/guessing the IRS would allow me to subtract unused depreciation. Guess I was wrong.
ut2sua is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Real Estate Investors - paying my young kids, so they can fund a Roth Aiming_4_55 Other topics 33 07-23-2017 08:48 AM
Question for the Real Estate investors out there harley FIRE and Money 42 09-05-2011 05:19 PM
Real Estate Agent in Down Real Estate Market TromboneAl Other topics 4 06-09-2007 10:20 AM
Appraisal issue. Need some advise from real estate investors. xmanz3 Other topics 15 04-22-2007 06:32 PM
Real estate investors who have gone before: some thoughts please? calmloki FIRE and Money 33 02-01-2007 06:05 PM

» Quick Links

 
All times are GMT -6. The time now is 08:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.