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Old 07-15-2020, 10:20 AM   #21
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OP - You wife is smarter than you think.

She has realized if you sell the rentals at age 63 or higher, you will likely have a huge profit and income level.

Besides the normal tax you are expecting from it, you will also possibly incur the NITT tax of an extra 3%, and the Medicare extra payment which will last a year and could more than double the cost. (IRMAA)
The only year I have hit the AMT was the year we sold our rental.
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Old 07-15-2020, 10:24 AM   #22
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.... Besides the normal tax you are expecting from it, you will also possibly incur the NITT tax of an extra 3%, and the Medicare extra payment which will last a year and could more than double the cost. (IRMAA)
Not a factor... OP is only 54.... but definitely a factor to consider if on or near Medicare but usually the IRMAA premium isn't significant in the whole scheme of things.
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Old 07-15-2020, 11:16 AM   #23
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Following closely. I have exactly the same problem as the OP. My returns are very high and I have none of my money invested in more than 40 properties (refinanced and took all my money out and some). I am now retired and want to travel extensively but canít since we do nearly all our maintenance (or hire people to work directly at a much lower rate than contractors). A management company is out of the question because the repair costs will be grossly inflated and not done to our standards and they will not get quality tenants plus these are mostly low income tenants requiring more intense management. Weíve decided to sell off nearly all over the next 5 years and take the tax bite. Freedom is way more important.
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Old 07-15-2020, 11:39 AM   #24
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Not a factor... OP is only 54.... but definitely a factor to consider if on or near Medicare but usually the IRMAA premium isn't significant in the whole scheme of things.
Which is why OP's wife is smart, she does not want to hold onto these so long that they sell at age 63+ and get the IRMAA fee.
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Old 07-15-2020, 11:40 AM   #25
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Hotwired, I have had several rentals over the years and have one left. It is in Reno and we live in Virginia so had to get a property manager when we bought it. After 13 years of property manager Iím happy with the results. $1,600 month income after regular expenses Of management fee and HOA. This year we start paying property taxes and insurance without escrow (about $250/month). So net of about $1,350. To me it is one more retirement check each month. It can work with a manager, just have to be willing to step back a little bit. We inspect every year and visit tenants to make sure all is still looking good.
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Old 07-15-2020, 11:43 AM   #26
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Do you like taking care of the rentals? If no, then sell. Does selling them give you enough to retire? If yes, then sell. The only reasons to keep rentals is if you enjoy managing them or you need the higher return to live your life.
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Old 07-15-2020, 11:51 AM   #27
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I have a significant piece of real estate in my NW. It is a farm, including a house & outbuildings. I'm in the process of selling the house & outbuilding portion. I will keep the farmland since it returns about 4% annually and is very low maintenance. The house & buildings are a money pit. One downside to real estate that I see is that it can create a head ache in an estate. I have see many, many families torn apart when there is real estate in a will. One heir wants to sell, one wants to buy and one wants to hold onto it, this makes it is hard to impossible to please everyone. Do you want to leave this real estate investment to your heirs?
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Old 07-15-2020, 11:53 AM   #28
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Freedom is way more important.

That right there is the key. OP even said that the rentals limit travel and ability to leave town. OP already made good money on them, it's OK to take the profits and get out. Sell now with a hot seller's market, invest the money and take the extra income to travel or buy nice things. Enjoy the time freedom.
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Old 07-15-2020, 01:08 PM   #29
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I put in about 2 hours of yard work a month and collect $4850 in rent. The yard work gives me exercise and vitamin D. When I'm too old to deal with it I'll hire a gardener.

One duplex is valued at a third of my NW. I didn't set out for that to be the case, property values have soared is the reason.
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Old 07-15-2020, 02:09 PM   #30
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Which is why OP's wife is smart, she does not want to hold onto these so long that they sell at age 63+ and get the IRMAA fee.
I'm guessing that is not her reason... or even part of her reasoning.
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Old 07-15-2020, 02:10 PM   #31
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I put in about 2 hours of yard work a month and collect $4850 in rent. The yard work gives me exercise and vitamin D. When I'm too old to deal with it I'll hire a gardener.

One duplex is valued at a third of my NW. I didn't set out for that to be the case, property values have soared is the reason.

Sign me up I'll take that deal
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Old 07-15-2020, 02:12 PM   #32
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I put in about 2 hours of yard work a month and collect $4850 in rent. The yard work gives me exercise and vitamin D. When I'm too old to deal with it I'll hire a gardener.

One duplex is valued at a third of my NW. I didn't set out for that to be the case, property values have soared is the reason.
It might be that having 1/3 of your NW tied up in a property is part of it too.... a bigger part than the 2 hours of year work.
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Old 07-15-2020, 08:19 PM   #33
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I have been in the rental business for 21 years, starting out as a side gig, then for ~6 years as a retired 62 year old. My rentals take up no more than 2 hours a week doing yard work and a occasional repair. We gross about $4800/month, no mortgages on 3 units, but are partially financed through our own home mortgage, to get a lower rate. We tend to have nice properties and keep them maintained; resulting in long term tenants. We have tenants for 20, 16, 15, 7, and 5 years. Never had a call for a stuffed commode at 3 AM.

It's not a business for everyone, but I'm 6' 5", 230#, and was a supervisor/engineer in coal mines for 35 years. Perhaps I'm very self confident, and don't take crap, and have many single parents of various colors that like the fact that my wife and I provide clean, safe affordable housing. But they coin money, to say the least, and we have forgiven about $10,000 worth of rent away over the years, when $hit goes the wrong way sometimes for people. I do 100% of the maintenance myself and hire out the flooring, and roof work, I'll do the carpet unless I'm in a hurry.


At the present time I plan to keep my rentals til I croak. My DD and SIL live close by and will gradually bring them into the business, as they have seen how it is done and how we have benefited from it. They have expressed an interest in it, and perhaps I will pay them about the same as my yearly depreciation to be property managers, once my 27.5 years are up.

Until this year, we have traveled 6-8 times, our longest time away was 18 days. The rentals don't hold us back, our vegetable garden does. My wine making hobby requires me to be home when the grapes are being picked. We get our California grapes here in PA, less than 48 hours after being picked and that starts from late August to late October.

My 3 properties are in the same county, but not same town. They make up 20% of our NW, and have been very, very good to us. We have made money, it keeps me engaged with other people outside my social circle, gives me exercise for my mind and body. It has been a blessing to us to be able to provide this service to the communities they are located. Right now, I'm keeping mine forever.
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Old 07-16-2020, 12:19 AM   #34
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So back when I was in my late 50's we had been buying/fixing/renting apartments and small houses for 25 years or so. We'd hit a meaningless goal of having as many units as I had years - 54 - and I pretty much had it down. Did books and calling in the morning and then would do a very efficient loop to show/rent units and deal with problems and maintenance. Knew all the tenants well and was pretty pleased. Did think that my level of care had probably hit a sweet spot at 45 units, but sure couldn't argue with the income. All the places got paid off. We decided to sell 'em all, then thought maybe selling a place/year would be smarter. Sold two little houses on a big lot and then it was 2008.

Uh oh.

Spent a year selling another little house and decided that the rent coming in was way too good to give the places away. Kept stacking up cash as various crisis hit the financial and real estate markets. Bought a winter house. Kept getting older. Heart tried to quit but the Gal wouldn't let it. Sold a 5-plex and a few more houses. Gave a 7-unit to a guy who has been very helpful with the rentals for years now. Down to 36 units now but am 70 years old.

For me, 50 was peak ability and 60 was still plenty canny and physically able, but not for sustained day after day work. 70? I don't want to, my mind isn't as capable, and my physical ability is paltry - and we still have 36 units bringing in more than the 54 were.

We have some real estate agents offering plenty of money for the remaining places, but dealing with the hassle of sale is exhausting. Buying is a piece of cake; selling is a major psychic drain. There are people we care about whose income would be affected by us selling. Pass on the rentals at our deaths? Wonderful step-up in basis, but we would need to be landlords to the end (and yeah OP, dealing with a management company after steering your own boat has zero appeal). Right now I'm looking at selling another apartment group to the guy who got the 7-plex. We are looking at using a "Transfer on Death Deed", which means we can have a sales contract, carry the contract at an agreed upon interest, and then at the death of the final seller the property is transferred to the buyer. The escrow company owner is going to call me tomorrow with more information and in a week or two I'll run this by our tax person.

The thought is that we will have an effective bond in the contract we carry - pay taxes on the interest as it comes in and on the capital gains and depreciation recapture only as we receive principal. Buyer should get a smoking deal if his 30 year contract gets cut in half if we croak at 85 or so, and we, having sold the place, get monthly payments and remove that sense of responsibility. Sorta a roll-your-own pension or annuity.
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Old 07-16-2020, 05:19 AM   #35
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At the present time I plan to keep my rentals til I croak. My DD and SIL live close by and will gradually bring them into the business, as they have seen how it is done and how we have benefited from it.


It appears that you donít have the desire to travel internationally for extended period of time so this can work for you.
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Old 07-16-2020, 06:47 AM   #36
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It appears that you donít have the desire to travel internationally for extended period of time so this can work for you.
No more than 3 weeks, but we have traveled internationally. Like I stated, DD and her husband are close by for any emergency calls, but only used them twice for emergencies over 21 years. We have done 18 days, but that was enough. Not having a desire for extended overseas travel is not a major hurdle for us.
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Old 07-16-2020, 08:40 PM   #37
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It might be that having 1/3 of your NW tied up in a property is part of it too.... a bigger part than the 2 hours of year work.
2 hours a month of yard work.

But I don't understand what you meant.
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Old 07-17-2020, 07:17 AM   #38
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If you have a stable renters market in your area, I would rather keep it as a stable income and inflation protection in uncertain, business / financial wise, times.
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Old 07-17-2020, 07:44 AM   #39
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2 hours a month of yard work.

But I don't understand what you meant.
I guess my point was that the $4,850/month of rent that you collect is more related to having 1/3 of your net worth tied up in properties than the 2 hours a month of yard work that you do.... so your post suggesting that tradeoff was 2 hours of yard work a month for $4,850 of rent was a bit disingenuious.
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Old 07-17-2020, 07:46 AM   #40
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A question for you property owners who are hesitant to sell because of the capital gains tax hit and depreciation recapture.... are you similarly hesitant to sell other assets like stocks due to the capital gains tax hit? or is it just properties? Please elaborate on why and if different why it is different.
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