[Ahmed]

I have a rental property that is fully paid off. Purchased it for 350k 2 years ago, updated it for 75k.

I can sell now for 520k This property nets me 1900/ month and it is minimal work as it’s a long term rental and all mechanicals are new etc.

But I’m really second guessing keeping it.

I’m 52 and retired so cash flow is what I currently need rather than leveraging and building.

I have 400k in brokerage, Roth, 401k.

I have 4 other properties (2m in equity) that yield me 6k/ mo.

I could sell this property, pay off the mortgage on another property (6.5% interest rate) and be back to netting 8k in rentals per month and have 150k left to put in s and p.

My monthly expenses including taxes are 7k/ mo
Sell the property or keep it?

Thank you!!

[Brian]

$2million in equity in rentals? I’d sell them all and retire.

[Farris]

I’d sell them, you can buy a $5M asset with close to 50% down, cash flow way better, tax benefits are huge – I pay 0 taxes on a $4,000,000 + income because I buy real estate, and then you are paying down that asset too.

Your current CoC returns are not good

[Sarah]

I just sold a rental. Make sure you do the math on state and federal taxes along with depreciation recapture.

Not that you shouldn’t sell because of taxes, just you might not pocket as much as you think

[Adam]

You should exchange them into a bigger property

[Arun]

Your return is around 4% on 500k investment, I would probably sell but do calculate the capital gains.

You would have to give back any depreciation you wrote off.

Talk to your accountant and then see if that works out.

[Stan]

This is a tough one. I like the idea of selling if only to diversify ($2m vs $400k).

But would want to DCA into the market.

But, how much longer is the mortgage?

[Brandy]

Just to clarify, you have 4 properties that profit you $6k/mo and 1 property, the property in question, that profits you $1900/month, for a total lf $7900 profit and your expenses are $7k/month?

But if you sold the property in question, you’d pay of 1 of the 4 and your monthly profit would go up to $8k.

So that means you are paying close to $3k/mo in P&I on the one you’d pay off (you are losing $1900 in profit from the sold property plus gaining $1k in profit overall, which means $2900 in P&I)?

Some thoughts –
Remember cost of sale and taxes in your calculation. Have your CPA run specific calculations on what the taxes would be if you sold.

I fi d it hard to sell because costs are so high and I’m not ready for that “loss” yet.

Why sell this one to pay off another?

Why not sell the one you want to pay off?

Just curious if one is dramatically better over another, had more big ticket items on the horizon, etc.

Is $900/month left over after expenses not covering your fun stuff?

Are you feeling restricted/bored/anxious and that extra $1k a month would dramatically impact your quality of life?

You have $4k amongst brokerage/401k/Roth. How is that split, ie how much of that is not accessible without penalty for how many years.

I’m just wondering if there’s a way to keep all properties and use the $400k to pay off debt to increase your cash flow?

That would be a sure thing and at retired at 52, I’d be looking at sure things more than increasing money at risk since your sure things covers your expenses with potentially a nice bit left over to enjoy life.

I know everyone says don’t time the market, and you’re still young, but risk when retired is still risk.

Can you afford a lost decade in the market if you’re netting $8k/month?

or if rental rates decrease/vacancies increase due to recession and your net decreases back to $7900 or less?

Would you emotionally be able to ride out the decline and would you be able to not withdraw during that time in order to recover?

If so, might not be that big of a risk then and creating an $8k monthly cash flow and throwing abother $150k in the market right now might be wise.

Also, without knowing debt and rates and payoff dates on the other 4 properties, hard to help see of there’s a better way to accomplish the same cash flow/payoff debt more quickly than just selling this 1 particular property.

But mayne there’s another way besides using the $400k or selling?

All of these thoughts and questions are food for thought for you AND coming from someone that understands real estate more than other investments, so take them with a grain of salt!

[DeShea]

If it’s not a problem. Why sell?
I would go back to work. You have too much time on your hands to think

[Farhan]

That 350k property is giving you pretty good return. I would not sell. It could be worth lot more and rents would go up more in upcoming yrs.
You could do something about those 2m properties.

Is that 6k / month net?

Doesn’t seem that high.

You could review your expenses – perhaps cut on few things for now.

Your investments will be worth much more in next few yrs

[Mindi]

I’d keep it. You’ll have a lot of capital gains tax to pay if you sell. And it’s a headache-free source of monthly income which you said is what you want.

[Mike]

There are systems that can accelerate your payoff to your current mortgage.

They typically pay off 30 year mortgages in 5-7 years.
If you used one of those,

In a few years you would be making double what you are now (depending how much your current mortgage is)

[Author]

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