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Old 10-05-2022, 02:02 PM   #21
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^ Thank you for the insight.

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Old 10-05-2022, 02:43 PM   #22
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Quote:
Originally Posted by Mr. Tightwad View Post
But did he pay cash for the full price of each place he bought? If he did, your comparison is correct. If he put down a small down payment on each, the comparison changes.

For example, I bought one place in '96 for 193K. But I only put down about $6200. The place is worth 1.2M to 1.4M now.

Comparing 193K vs being in the market, will result in a far different outcome than comparing 6,200.
Well, I was making assumptions since there are lots of variables that were left out. And also noting there is NOTHING wrong with what OP did and how he made money in RE. Lots of folks do very well w/ RE and I have zero issues with that.
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Old 10-05-2022, 09:42 PM   #23
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Wow...housing market is hot here (midwest).

...

Overall I'm very happy with how this has worked out, DW is happy that we're "simplifying" our lives, and by about March of next year we should be completely clear of the business.
Congrats! Good to hear that the rental RE game worked out for you!
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Old 10-05-2022, 09:48 PM   #24
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Next summer I hope to begin working with family members to begin shutting down the family biz, a process that will play out over many years. Some of them aren't going to be pleased because they receive nice income while not doing any work. I'm saving your post to show them at the proper time. Every little bit of persuasion helps!
As a fellow board member also trying to unwind his interests from the family RE business, I wish you the very best of luck. Hopefully you'll have more success than me!

It'll take a lot of effort to convince people who are enjoying the gravy train to give it all up. Hopefully you'll have a structure in place to override their objections and force through your plans.
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Old 10-06-2022, 09:46 AM   #25
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I sold both of my rental condos in January. They made me a decent return but the state and local governments kept passing more and more land lord oppressive laws so I decided to bail and sell them. Plus I managed them myself and wanted to free up my time to travel. Turned out to be a great decision. Even after the taxes/depreciation I will have to pay, I'm coming out nicely. Best decision ever.
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Well done!
Old 10-06-2022, 10:03 AM   #26
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Well done!

How old are you Dave? We are in a similar situation but my wife doesn't want to sell since the income is so good, in a market like this I wouldn't mind getting rid of them but that income is our bridge to 65+.

I manage the properties myself but I don't do the repairs. Much like you we paid cash even though financially it may have been "smarter" to finance them and invest the rest.
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Old 10-06-2022, 01:41 PM   #27
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Originally Posted by Super Trooper View Post
How old are you Dave? We are in a similar situation but my wife doesn't want to sell since the income is so good, in a market like this I wouldn't mind getting rid of them but that income is our bridge to 65+.

I manage the properties myself but I don't do the repairs. Much like you we paid cash even though financially it may have been "smarter" to finance them and invest the rest.
Not Dave, but back in 2009 we were planning to bail out of our rentals - I would be 60 and we had hit a goal of a door for every year at 57. Unfortunately real estate fell on its face, so we just kept taking the rent. Now 72, and while we've unloaded most of the places, we still have a triplex and 16 unit. Also have plenty of resources to get us through to any reasonable checkout time even if we spent twice what our normal burn rate is. She who has half likes the income as well, and the security of a known asset - rental property. So we keep owning them and taking the money and banking the excess. 72. Time passes.
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Old 10-06-2022, 03:56 PM   #28
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Selling my rental at jersey shore after 33 years.
Depreacation recaprture is a killer
Cap gian tax a killer,since NJ wants the same as the feds. So paying double.
Not happy.
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Old 10-06-2022, 04:19 PM   #29
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Selling my rental at jersey shore after 33 years.
Depreacation recaprture is a killer
Cap gian tax a killer,since NJ wants the same as the feds. So paying double.
Not happy.
Oldmike
Did you consider carrying the paper and paying capital gains on the principle received as you receive it? Agree that it hurts to pay the recapture, especially when you bought back in '87, as we did with a 9-plex. But having the interest payment on a big chunk of principal and being able to see your property vs. having shares of Netflix or something is sort of good.
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Old 10-06-2022, 04:35 PM   #30
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Did you consider carrying the paper and paying capital gains on the principle received as you receive it? Agree that it hurts to pay the recapture, especially when you bought back in '87, as we did with a 9-plex. But having the interest payment on a big chunk of principal and being able to see your property vs. having shares of Netflix or something is sort of good.
No. Reason I am selling. Big time gut surgery last year. Can't maintain anymore,no interest in carrying the paper. Want to be done.
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Old 10-06-2022, 06:28 PM   #31
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Fair call. Sell, pay the bast*rds, move on. Best to you for a quick easy sale.
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Old 10-07-2022, 12:17 AM   #32
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How old are you Dave? We are in a similar situation but my wife doesn't want to sell since the income is so good, in a market like this I wouldn't mind getting rid of them but that income is our bridge to 65+.

I manage the properties myself but I don't do the repairs. Much like you we paid cash even though financially it may have been "smarter" to finance them and invest the rest.
60

If property values would not have skyrocketed, and if my knees were in better shape such that I could still work on the properties (having a partial meniscectomy next Wednesday), I probably would have kept the properties about 3 more years.

You say the income is good, but is it so much better than taking that same amount of money and investing it in something else? Maybe dividend paying stocks or muni bonds from your state or a diversified portfolio?

IMO it's never "smarter" to finance the properties, but you'll find plenty of people on this forum that disagree with me. As Warren Buffet said, "You never know who's swimming nude until the tide goes out."

Financing rentals usually results in a rate higher than your primary residence unless you get the seller to finance it. So your "spread" is your return less the rate you're paying.

There are many people who have been very successful using OPM, so there is evidence on both sides. Debt is not my cup of tea other than very low interest car loans where I can arbitrage on a near-guaranteed investment that pays more than the loan costs.
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Old 10-07-2022, 12:19 AM   #33
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Originally Posted by Super Trooper View Post
How old are you Dave? We are in a similar situation but my wife doesn't want to sell since the income is so good, in a market like this I wouldn't mind getting rid of them but that income is our bridge to 65+.

I manage the properties myself but I don't do the repairs. Much like you we paid cash even though financially it may have been "smarter" to finance them and invest the rest.
Another thing to discuss with your DW...how will she feel if you pass away and leave her managing a bunch of properties while she's planning your funeral and grieving? Unwinding a rental business is no easy task.
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Old 10-07-2022, 09:04 AM   #34
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Not Dave, but back in 2009 we were planning to bail out of our rentals - I would be 60 and we had hit a goal of a door for every year at 57. Unfortunately real estate fell on its face, so we just kept taking the rent. Now 72, and while we've unloaded most of the places, we still have a triplex and 16 unit. Also have plenty of resources to get us through to any reasonable checkout time even if we spent twice what our normal burn rate is. She who has half likes the income as well, and the security of a known asset - rental property. So we keep owning them and taking the money and banking the excess. 72. Time passes.
A door at every year at 57 that's impressive, I'm not sure if it's a dream or a nightmare

Have you been managing and doing the repairs yourself?
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Old 10-07-2022, 09:19 AM   #35
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Originally Posted by Finance Dave View Post
60

If property values would not have skyrocketed, and if my knees were in better shape such that I could still work on the properties (having a partial meniscectomy next Wednesday), I probably would have kept the properties about 3 more years.

You say the income is good, but is it so much better than taking that same amount of money and investing it in something else? Maybe dividend paying stocks or muni bonds from your state or a diversified portfolio?

IMO it's never "smarter" to finance the properties, but you'll find plenty of people on this forum that disagree with me. As Warren Buffet said, "You never know who's swimming nude until the tide goes out."

Financing rentals usually results in a rate higher than your primary residence unless you get the seller to finance it. So your "spread" is your return less the rate you're paying.

There are many people who have been very successful using OPM, so there is evidence on both sides. Debt is not my cup of tea other than very low interest car loans where I can arbitrage on a near-guaranteed investment that pays more than the loan costs.
Any reason why you were thinking to sell at 63 and not hang on to them and let a handyman do all the work?

If we knew how the market would be over the last 10 years it would have been wise to buy and finance more homes but I didn't have that crystal ball. We bought a lot of our properties +/- 10 years when prices were low, if we would have financed them we could have bought 3-4 times as many and if we unloaded them today we would be set.

In all likelyhood if my thought-process was to unload during a better market I would have sold them when they were up 10-20% We are in it for the cashflow and our plan was to go slow and steady and not have much risk and leave plenty on the table, it looks like we had the same strategy.
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Old 10-07-2022, 09:31 AM   #36
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Another thing to discuss with your DW...how will she feel if you pass away and leave her managing a bunch of properties while she's planning your funeral and grieving? Unwinding a rental business is no easy task.
We've talked about that a number of times it's a concern to her but she doesn't want to have anything to do with it she doesn't even want to know where all the files are... I may just have to email her everything once a year.

My other thought is I have a brother in the business, I may just email him everything and let him take care of it.

Why do you say that? Is it because when you sell you prepare the home differently than when you rent it? It seems like you went the path of least resistance selling it to investors and leaving a bit on the table.
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Old 10-07-2022, 09:44 AM   #37
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great job.
The house looks really nice.
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Old 10-07-2022, 03:09 PM   #38
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Any reason why you were thinking to sell at 63 and not hang on to them and let a handyman do all the work?

If we knew how the market would be over the last 10 years it would have been wise to buy and finance more homes but I didn't have that crystal ball. We bought a lot of our properties +/- 10 years when prices were low, if we would have financed them we could have bought 3-4 times as many and if we unloaded them today we would be set.

In all likelyhood if my thought-process was to unload during a better market I would have sold them when they were up 10-20% We are in it for the cashflow and our plan was to go slow and steady and not have much risk and leave plenty on the table, it looks like we had the same strategy.
Yes! A few reasons: 1) Most handyman work I see is shoddy! Remember, I was a licensed home inspector for years, and inspected over 1,500 homes. I see the work people do. 2) I don't want to even have to manage the handyman...making calls, scheduling, etc. 3) That still would not accomplish my goal of my wife not wanting to unwind the business when I pass

You sure are right about the crystal ball...if we knew 10 years ago how hot this market would be, I would have borrowed every cent I could to buy more...but alas we never know...and I like to sleep at night not worrying about a cave-in of the market.
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Old 10-07-2022, 03:10 PM   #39
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Why do you say that? Is it because when you sell you prepare the home differently than when you rent it? It seems like you went the path of least resistance selling it to investors and leaving a bit on the table.
Let me see if I can find a post I made on another forum and copy/paste it here...
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Old 10-07-2022, 03:15 PM   #40
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Let me see if I can find a post I made on another forum and copy/paste it here...
I wrote this on a different forum...may not totally apply here. I've been working on liquidating ours for the past year...about 80% done.


******************************
Let's say you have 5 properties and you decide to liquidate the entire portfolio.

What steps must you take?

1) Give notice to all tenants. You probably don't want to do all 5 at the same time, as you'll be overwhelmed with work all at once. So let's say you spread them out by a month each.

2) You notify tenant #1 via certified mail (requires drafing a letter and taking it to the post office) that they must be out in xx days. They will probably have questions, not want to move, or even maybe require eviction. This will take time to manage.

3) About 30-45 days later, tenant #1 moves out. At the same time you are submitting a certified letter to tenant #2 to move out. You again have to do the same with certified mail etc. You go to the vacant house of tenant #1 and change the locks. You have to call all three utilities to have them transferred into your companies name...this takes 30 minutes or so. You enter the house and have to do a full inspection of the house and document any damages. Lo and behold, the tenant has left some personal belongings in the house. By state law, you may be required to store these for 30 days...isn't that wonderful!

4) As you are dealing with storing the items, you are inspecting the house and find 8 things that need repaired before you can list the house properly. Drywall repairs, a leaky faucet, stains on the carpet, etc...you are calling contractors to fix all these items and arranging for them to do the work. But how do they get in the house? Ah, you must put a lockbox on the door for them...another step but easy.

5) Finally you get all the contractors lined up to do the work, and the utilities are turned back on in your name. You walk outside and notice the grass is getting long...now you have to contact a grass cutting service...that takes 15 minutes.

6) For the next few weeks, you have to go to the house to make sure the work is progressing as planned and that there are no more issues that arise. Just about the time that house is ready, tenant #2 has refused to move out...they say they can't find a new place...so you have to go to the courthouse to start the eviction process...oh joy!

7) By now you're writing the certified letter to tenant #3 to get them out. Tenant #2 wants to talk, as they want to pay you one more month's rent and stay there...but you say no...so answering a few emails it becomes tense.

8) You have to call the realtor to do a walk-through on house #1 in order to list it for sale in the MLS. There are forms you must fill out, such as the disclosure statement, lead based paint, agency agreements, and so on. The realtor wants to put their own lockbox on the house so their agents can get in...you agree.

9) House #1 goes on the market and you start receiving emails of the showings that are upcoming. You want to make sure the house is comfortable for the prospects, so you go over to turn the AC down and make sure it's all spiffy and swept. Maybe you should ask your agent to do this in the future?

10) Six days later you get an offer, so you have to read the entire offer and make sure it's reasonable before responding. What kind of financing are they going for? If it's VA or FHA, you'll have to make sure there is no peeling paint anywhere on the house or any broken glass...things that will automatically NIX an FHA/VA loan. What about the other terms...do they say this is contingent on selling their current house? Do they say there is max interest rate they are willing to take from the bank and if it's above that rate they can cancel the purchase? Is the house in a flood zone? After looking it all over, you agree to the terms and accept the offer!

11) Six days later you get a call from your agent. Evidently the buyer of house #1 had an inspection, and it turned up some defects they want fixed. You'll spend some time sorting that out and deciding whether to fix etc.

12) Now house #2 issue is heating up, court dates are set, and you have to make copies of the lease and some communications to give to the attorney for the court filings. Ugh.

13) By now you're into arranging for house #4 certified mail, and the other houses are in various stages of needs.

14) 40 days later house #1 finally closes and you get the funds...yay! You take the closing docs home and file them for tax purposes, and spend some time documenting everything

15) By now you have to send the security deposit settlement form to tenant #1, so that takes time to prepare, and you have to write them a check.

This cycle will continue until all 5 houses are sold and the money is in the bank...which likely will take about a year. Even then, you'll be dealing with taxation documents with your CPA.

Now some people might say just sell all 5 at once. That's fine, you can certainly do that...but then you're going to be like a cat in a room full of rocking chairs trying to figure out which house needs what attention at this time, and you'll be dealing with 5 sets of tenant issues...not much easier if you ask me. The pain will be 5x worse, but at least it will be over in 3 months or so.
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