Mid Life Crisis

[RetireeRobert]

Quote:

Originally Posted by InsertCleverHandle .......I also realize these are very first world problems, which adds some guilt and internal monologue to toughen up and just keep going because I’m fortunate to be where I am.

Why not scratch the itch imlicit in your closing statement of your post? How about exploring some charitable, humanitarian, make the world a better place activities? You might find some significant fulfillment and meaning for a new phase of your life, now that financial survival is not the necessary drive in your life.

[Sand101]

Quote:

Originally Posted by InsertCleverHandle Real Estate rentals-$1.42M, produce a net of ~5K a month not included in our current income above.

This is a pretty poor return on invested capital here. RE prices are sky high right now; selling some of this should be looked into.

[InsertCleverHandle]

@Sand101. That's all true. We've been fortunate that the price appreciation has been 3x to 4x in the last ~8 years, but the rents are up ~60%. I've never liked that about cap rate metric, price appreciation reduces cap rate... We've also had to hand off the management to a third party because we moved out of the area. Taxes have gone up do to price appreciation, and we've been a little conservative on rent increases the last 18 months due to Covid. They are all small homes in trendy/up and coming neighborhoods, so have more room to run in my opinion. If we sell we would then have to pay cap gains on the sale and do something with the money... No great place I've found to do a 1031 exchange and dropping a big chunk of the money in the market doesn't feel great right now either. Cash flow is a good hedge no matter what the market stock market does.

[Sand101]

Quote:

Originally Posted by InsertCleverHandle @Sand101. That's all true. We've been fortunate that the price appreciation has been 3x to 4x in the last ~8 years, but the rents are up ~60%. I've never liked that about cap rate metric, price appreciation reduces cap rate... We've also had to hand off the management to a third party because we moved out of the area. Taxes have gone up do to price appreciation, and we've been a little conservative on rent increases the last 18 months due to Covid. They are all small homes in trendy/up and coming neighborhoods, so have more room to run in my opinion. If we sell we would then have to pay cap gains on the sale and do something with the money... No great place I've found to do a 1031 exchange and dropping a big chunk of the money in the market doesn't feel great right now either. Cash flow is a good hedge no matter what the market stock market does.

A 3x increase in price is a great reason for a low cap rate! I guess the biggest question is do you want a part time job once you're done with the full time job? Even with a management company it takes significant effort (as I'm sure you know) to keep those rentals going.

We had a beach rental that had about doubled in price over the last 5 years. After Sally, the upkeep (salt eats everything) and the constant effort of managing the managers we rang the register this spring. No regrets (other than the tax bill!). Our cap rate was very similar to yours after the 22% of the management agency was taken out.

We demurred at the thought of a 1031 exchange - simplify, simplify, simplify.