Author Topic: Anyone cash out most if not all of their real estate?  (Read 8522 times)

Bearded Man

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Anyone cash out most if not all of their real estate?
« on: July 25, 2015, 08:27:10 PM »
Not sure whether to post this in the general forum or here, I suspect here will be quite biased, but I suppose it can be moved. I figured if I posted in the general discussion forum it would just get moved here.

In any case, living in a mega quake zone, not to mention the maintenance involved, the risks of tenants trashing the houses, insurance companies not paying up due to trying to weasel out of paying like they usually do, the exposure to law suits since people could get hurt on your property, etc. Not to mention the transaction fees you pay when you buy or sell. For example, I owe 25K in realtor commissions if I sell my house after one year of living in it, and about 7K in excise taxes. It seems when you own real estate everyone and their mother has their hands out to cash in from you.

I'm considering only keeping two of my current houses that are not in deed restricted neighborhoods and selling the one in a deed restricted neighborhood when it's worth it and putting that money in index funds. On top of this, I'd buy a cheap house to live in and keep putting money in index funds after that.

I'd still be FI from the rental income from two houses, with low expenses in a paid off or low mortgage house. But I'd have less exposure to the risks of real estate, and less of the headaches as well, and be diversified.

Hamster

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Re: Anyone cash out most if not all of their real estate?
« Reply #1 on: July 25, 2015, 08:56:06 PM »
We sold our 4 rental units (2 duplexes) over the past couple of years. One duplex was bought with the plan of a slow flip, and it was a lot of work, but was very profitable.

The other duplex was one we bought and lived in for a couple of years. The returns on it were decent, but it was hitting 20 years old and we were looking at a lot of upcoming expenses that would take a few years to break even on - roof, siding, driveway etc. Also  tenants were getting to be a hassle, and made me worry about legal issues and liability. We sold it for a little less than we paid for it, but did pretty well on cash flow over the years we owned it. On the bright side, putting money in that duplex saved us from the last stock market crash. On the down side it also meant a lot of our money missed the subsequent market rebound.

The biggest unhappy moment was having to pay the IRS to recapture all the depreciation we'd deducted over 8+ years. We still sometimes wonder if we shouldn't have kept it and passed it to our kids to avoid the depr recapture, but it is nice to have one less thing to worry about. I have no regrets, and we still think about doing some more flipping in the future, but for now I am happy not being a landlord.

former player

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Re: Anyone cash out most if not all of their real estate?
« Reply #2 on: July 26, 2015, 03:05:30 AM »
Someone on the forums posted on the decluttering thread that they had sold their rental.  It was part of what prompted me to put mine on the market.  I will feel a lot freer without it.

forummm

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Re: Anyone cash out most if not all of their real estate?
« Reply #3 on: July 26, 2015, 07:09:58 AM »
I tried to cash in on the foreclosure crisis by buying a cheap foreclosure and being a landlord. It wasn't for me. So I just sold it. Broke even, except for the thousand hours of time I put in. I feel better about not having it. I'm not a natural landlord. I'd rather work at a decent job and invest in stocks. YMMV.

Cassie

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Re: Anyone cash out most if not all of their real estate?
« Reply #4 on: July 30, 2015, 05:24:05 PM »
WE sold all our rentals & just kept our primary home. Too much hassle.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #5 on: August 12, 2015, 12:13:32 PM »
I must say I have not had any bad experiences with tenants to date, I pick them carefully. The only issue I am finding is tracking down a licensed contractor for some "repair/remodel" work.

Other than that, I LOVE the profits, even after expenses. I would need 360-400K to mimic the profits I make with 75K invested in only 2 rental houses. This doesn't even count appreciation.

It does tie me down, and the thought of selling and paying all that recapture back doesn't sit well.

Then there is the threat of natural disasters. At this point I'm diversifying into index funds. I will likely keep the rentals.

acroy

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Re: Anyone cash out most if not all of their real estate?
« Reply #6 on: August 12, 2015, 12:26:48 PM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Thinkum

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Re: Anyone cash out most if not all of their real estate?
« Reply #7 on: August 15, 2015, 07:56:33 PM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Same here. It seems whenever I run the numbers, it's not really that much better than a good REIT when factoring in the liability and work that goes into it. However, for others, it's a great way to make profits.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #8 on: November 12, 2015, 08:01:05 AM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Same here. It seems whenever I run the numbers, it's not really that much better than a good REIT when factoring in the liability and work that goes into it. However, for others, it's a great way to make profits.

At this point, one of my rentals is basically equivalent to a REIT fund such as VNQ, except I spend more time and have more risk. It does provide value as a paid off place to live as a fall back position, but nothing to write home about. Not terrible, just not perfect is all.

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #9 on: November 12, 2015, 11:09:03 AM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Same here. It seems whenever I run the numbers, it's not really that much better than a good REIT when factoring in the liability and work that goes into it. However, for others, it's a great way to make profits.

At this point, one of my rentals is basically equivalent to a REIT fund such as VNQ, except I spend more time and have more risk. It does provide value as a paid off place to live as a fall back position, but nothing to write home about. Not terrible, just not perfect is all.

Is that based on net equity?  Or gross? 

Cause that would seem to be a good time to cash out, if that's the case, and your after tax proceeds, invested in something else, will give you an equivalent return for less work and less risk.
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undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #10 on: November 12, 2015, 11:24:56 AM »
I must say I have not had any bad experiences with tenants to date, I pick them carefully. The only issue I am finding is tracking down a licensed contractor for some "repair/remodel" work.

I've had bad experiences myself. Since I already hate dealing with anyone, contractors can be a literal nightmare. But you and I aren't alone, it's pretty much a universal issue. Finding a contractor that does a consistently great job, shows up, and communicates well is a miracle. I think why most contractors get burnt out is they can't find consistent work and the work they do find gets nitpicked by a homeowner/investor or they want to negotiate the rates too much. If you find someone good, pay them what they ask and don't question their work (be reasonable).

In general, dealing with contractors and everything else is the reason why rental property will always return higher than the stock market (so long as you buy smart).

Why does it tie you down? Why can't you just keep the two rentals you have (that you pretty much can't lose money on at this point) and be happy? Even with a management company, I'm sure you're still coming out better than being in stocks.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #11 on: November 12, 2015, 05:38:48 PM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Same here. It seems whenever I run the numbers, it's not really that much better than a good REIT when factoring in the liability and work that goes into it. However, for others, it's a great way to make profits.

At this point, one of my rentals is basically equivalent to a REIT fund such as VNQ, except I spend more time and have more risk. It does provide value as a paid off place to live as a fall back position, but nothing to write home about. Not terrible, just not perfect is all.

Is that based on net equity?  Or gross? 

Cause that would seem to be a good time to cash out, if that's the case, and your after tax proceeds, invested in something else, will give you an equivalent return for less work and less risk.

Net, not counting property appreciation of course (that would be speculation). I've considered it, but I keep the house for strategic reasons right now. It has utility value. I can live in it mortgage and rent free if I ever fall on hard times and need to drastically reduce my expenses. It is within commuting distance to good jobs, walkable, bike able, and close to transit. One thought I've had is to 10-31 exchange it to tap the equity and buy three similar houses in the area with leverage. which would increase my profits actually. I would then keep cash I have on hand so I can pay any of them off instantly if I ever needed to, so I could go live there for almost free.

The other thought is to sell it and buy another house in the same area, also paid in full like the house is now. The house now is on a slightly busy street. Not terrible, and fine at night, but still irks me a bit living there. I learned to deal with it using fans and white noise generators for the 2.5 years I lived there before, so I could do it again, but I wouldn't consider it a place I'd want to live long term. That said, I would rather live there than most apartments. It's still a house with 3 bedrooms, my own driveway and yard...

That said, I have another house that with little money into it, I can live in for $500 a month after principle pay down and tax benefits are factored in. This is a huge house close to Seattle. No road noise issues, just a couple ghetto/undesirable/obnoxious neighbors.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #12 on: November 12, 2015, 05:42:38 PM »
I must say I have not had any bad experiences with tenants to date, I pick them carefully. The only issue I am finding is tracking down a licensed contractor for some "repair/remodel" work.

I've had bad experiences myself. Since I already hate dealing with anyone, contractors can be a literal nightmare. But you and I aren't alone, it's pretty much a universal issue. Finding a contractor that does a consistently great job, shows up, and communicates well is a miracle. I think why most contractors get burnt out is they can't find consistent work and the work they do find gets nitpicked by a homeowner/investor or they want to negotiate the rates too much. If you find someone good, pay them what they ask and don't question their work (be reasonable).

In general, dealing with contractors and everything else is the reason why rental property will always return higher than the stock market (so long as you buy smart).

Why does it tie you down? Why can't you just keep the two rentals you have (that you pretty much can't lose money on at this point) and be happy? Even with a management company, I'm sure you're still coming out better than being in stocks.

Nope. If I added a PM, I would hands down be better off putting it into a REIT index fund like VNQ. Yeah, tenants haven't been too bad so far, but dealing with contractors is awful. I'm at the point where I will just have to eat the costs to have the work professionally done, even if it is via Home Depot Services for carpet install, etc.

I will say the guy I hired to change my doors saved me 35% off Home Depot Prices for installing a new door/frame, but it wasn't worth the hassle dealing with an obvious alcoholic who couldn't even keep track of his phone...

SwordGuy

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Re: Anyone cash out most if not all of their real estate?
« Reply #13 on: November 12, 2015, 07:21:07 PM »
Finding a contractor that does a consistently great job, shows up, and communicates well is a miracle. I think why most contractors get burnt out is they can't find consistent work and the work they do find gets nitpicked by a homeowner/investor or they want to negotiate the rates too much. If you find someone good, pay them what they ask and don't question their work (be reasonable).

I've got a great roofer, a great plumber, ditto on electrician, ditto on handyman, ditto on arborist.   Good yardman and outside painter.  Working on finding a great hvac person but we've had such limited need for those services that we haven't found one yet.

Only problem we had was that our original electrician + handyman wasn't that great at the more complicated electrical work.   He was fine on the basic stuff, though.

We contacted folks who had done work on our house that we were happy with.  We asked our realtor for references.  And our friends.  And the people we met at the real estate investor's association meetings.   That's too many great finds for it to be a miracle and I certainly can't claim to have some super power at finding these folks.

I do treat them all well.  We pay promptly or, on rare occasions, we negotiate not to ahead of time.  (Example, 2 trees fell on our house.  Insurance would cover one of them.  We were tapped on ready cash at the moment.  We negotiated for the 2nd tree to be removed 4 months later when we would have cash to pay for it.  But we gave them permission to do the work earlier if they had time in their schedule earlier.  They did it the same day and we payed the same day they billed us in October.)

We treat them with respect and we don't niggle about unimportant stuff.  We try to be very easy to do business with and, when we are happy with their work, we do our best to bring them more business (and let them know we did so).

tj

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Re: Anyone cash out most if not all of their real estate?
« Reply #14 on: November 12, 2015, 07:51:32 PM »
I sold my only rental in August. Paid some taxes and immediately put the rest into equities.


undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #15 on: November 12, 2015, 10:14:26 PM »
Nope. If I added a PM, I would hands down be better off putting it into a REIT index fund like VNQ.

Really? An extra $60-80/mo in expenses is going to bring your returns down that much? If you're operating on that thin of a margin then I agree it would be better to eliminate the headache.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #16 on: November 12, 2015, 11:01:57 PM »
$60 a month for a pm? Where do you own property, Detroit?

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #17 on: November 13, 2015, 01:53:28 AM »
I've been tempted with opportunities to get into real estate over the years... but have stuck with REIT's for RE exposure. Glad I have. Not much to maintain :)

Same here. It seems whenever I run the numbers, it's not really that much better than a good REIT when factoring in the liability and work that goes into it. However, for others, it's a great way to make profits.

At this point, one of my rentals is basically equivalent to a REIT fund such as VNQ, except I spend more time and have more risk. It does provide value as a paid off place to live as a fall back position, but nothing to write home about. Not terrible, just not perfect is all.

Is that based on net equity?  Or gross? 

Cause that would seem to be a good time to cash out, if that's the case, and your after tax proceeds, invested in something else, will give you an equivalent return for less work and less risk.

Net, not counting property appreciation of course (that would be speculation). I've considered it, but I keep the house for strategic reasons right now. It has utility value. I can live in it mortgage and rent free if I ever fall on hard times and need to drastically reduce my expenses

Uh huh.  And if you had the money from it, you could use that to get a place if you fall on hard times (or have the money prevent you from falling on hard times).

Keeping an underperforming asset for that utility is almost always a poor decision.

Nope. If I added a PM, I would hands down be better off putting it into a REIT index fund like VNQ.

Really? An extra $60-80/mo in expenses is going to bring your returns down that much? If you're operating on that thin of a margin then I agree it would be better to eliminate the headache.

This is what I was thinking (only with "10%" instead of the absolute dollar amount).

If you aren't including a PM cost (even if you DIY to save that cost), you should be.  You're essentially doing that work for free, so that part of your "rental income" is a return on labor (your labor), not return on investment.

If someone said "here, buy this investment that returns less than a passive REIT/ETF, but if you do extra unpaid work, you can boost the return to be equal to that passive one" I sure as hell wouldn't say "Sign me up!"
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patrickza

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Re: Anyone cash out most if not all of their real estate?
« Reply #18 on: November 13, 2015, 02:41:45 AM »
I've sold both my apartment rentals, and my own home. As I said in one of my blog posts, it is the last house I'll ever own!: http://investorchallenge.co.za/the-last-house-ill-ever-own/

My reasons were purely financial. In South Africa we're lucky to get 7-8% back in rental profits. The hassle of getting rid of a bad tennant is enormous. People here take over entire buildings without paying. There was little to no capital appreciation either, and in the last case, I lost value in real terms.

My grandmother now lives on 5 houses, but she bought them well before the boom.

The other damaging aspect, is our government is not running the place well, so things may fall apart. It takes forever to sell a house, but I can cash in my ETFs fast if I need to.

MsRichLife

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Re: Anyone cash out most if not all of their real estate?
« Reply #19 on: November 13, 2015, 02:50:16 AM »
We've been selling our rentals down since 2010. In addition to our home, we still have 2 rentals remaining which are reasonably low maintenance and yielding ~3.5% net.

Our main reason for selling is that we'd had quite good capital growth over the years (250-300%) and the yields had not kept up. We recognised that selling the rentals, getting out of debt and diversifying into higher yielding shares was the way to go in preparation for FIRE. Now the portfolio is a lot more balanced and I don't feel quite so reliant on the Aussie housing market continuing it's boom.

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #20 on: November 13, 2015, 03:14:51 AM »
We've been selling our rentals down since 2010. In addition to our home, we still have 2 rentals remaining which are reasonably low maintenance and yielding ~3.5% net.

Our main reason for selling is that we'd had quite good capital growth over the years (250-300%) and the yields had not kept up. We recognised that selling the rentals, getting out of debt and diversifying into higher yielding shares was the way to go in preparation for FIRE. Now the portfolio is a lot more balanced and I don't feel quite so reliant on the Aussie housing market continuing it's boom.

Smart.

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undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #21 on: November 13, 2015, 05:25:18 AM »
If you aren't including a PM cost (even if you DIY to save that cost), you should be.  You're essentially doing that work for free, so that part of your "rental income" is a return on labor (your labor), not return on investment.

If someone said "here, buy this investment that returns less than a passive REIT/ETF, but if you do extra unpaid work, you can boost the return to be equal to that passive one" I sure as hell wouldn't say "Sign me up!"

Exactly. I would never buy a property that I didn't factor in margins of error and a PM. I would always want the option of having a completely passive investment (or nearly). If, after factoring those extra variables in, the property didn't net me at least 10-15%, I'm out.

Quote from: Bearded Man
$60 a month for a pm? Where do you own property, Detroit?

For some reason I thought you said your properties rented for around $600 mo. Now I'm remembering you're in Seattle and that's probably net. Even if a PM cost you $150/mo, I still bet your numbers come out in favor of keeping the rentals. Again, if not, you should sell and find properties that cash flow better.

I simply think real estate is too powerful for everyone not to utilize it in some capacity, especially if you aren't free from work already. Even if you have to start by renting out a room, you should be. There's simply no other investment with the same amount of risk that yields the same amount of return even when factoring in the extra work. If it feels like too much work, I say suck it up, the alternative is 4-6% net yield in the stock market.

Sure, if you have $2 million in cash, it doesn't really matter where you put your money, ~$100k/yr should be plenty for everyone here. But to quickly accelerate your path to quitting your job and doing what you want, real estate is the answer for 99% of people. With stocks, net worth matters. With real estate, cash flow matters. This site and MMM is too reliant on net worth. I could care less what my net worth is as long as I'm able to cash flow my monthly needs.

So yeah, I can definitely see why some would choose to cash out and put it in some other more passive investment (though, again, if you buy properly then it should be pretty close to passive) down the road, but I plan to always have some form of RE.

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #22 on: November 13, 2015, 08:36:22 AM »
If you aren't including a PM cost (even if you DIY to save that cost), you should be.  You're essentially doing that work for free, so that part of your "rental income" is a return on labor (your labor), not return on investment.

If someone said "here, buy this investment that returns less than a passive REIT/ETF, but if you do extra unpaid work, you can boost the return to be equal to that passive one" I sure as hell wouldn't say "Sign me up!"

Exactly. I would never buy a property that I didn't factor in margins of error and a PM. I would always want the option of having a completely passive investment (or nearly). If, after factoring those extra variables in, the property didn't net me at least 10-15%, I'm out.

Rentals in many places won't come close to that.  Seattle seems unlikely to, for example.
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SwordGuy

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Re: Anyone cash out most if not all of their real estate?
« Reply #23 on: November 13, 2015, 09:06:23 AM »
Rentals in many places won't come close to that.  Seattle seems unlikely to, for example.

Isn't that why you bought property in in other towns besides where you live?

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #24 on: November 13, 2015, 09:13:22 AM »
Rentals in many places won't come close to that.  Seattle seems unlikely to, for example.

Isn't that why you bought property in in other towns besides where you live?

Yup.  It's worth looking in your local market, but if the numbers don't make sense there, trying to force real estate as an asset is suboptimal for your financial status. Either don't get rentals, and invest in other asset classes, or look into different markets.
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Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #25 on: November 13, 2015, 12:14:13 PM »
If you aren't including a PM cost (even if you DIY to save that cost), you should be.  You're essentially doing that work for free, so that part of your "rental income" is a return on labor (your labor), not return on investment.

If someone said "here, buy this investment that returns less than a passive REIT/ETF, but if you do extra unpaid work, you can boost the return to be equal to that passive one" I sure as hell wouldn't say "Sign me up!"

Exactly. I would never buy a property that I didn't factor in margins of error and a PM. I would always want the option of having a completely passive investment (or nearly). If, after factoring those extra variables in, the property didn't net me at least 10-15%, I'm out.

Quote from: Bearded Man
$60 a month for a pm? Where do you own property, Detroit?

For some reason I thought you said your properties rented for around $600 mo. Now I'm remembering you're in Seattle and that's probably net. Even if a PM cost you $150/mo, I still bet your numbers come out in favor of keeping the rentals. Again, if not, you should sell and find properties that cash flow better.

I simply think real estate is too powerful for everyone not to utilize it in some capacity, especially if you aren't free from work already. Even if you have to start by renting out a room, you should be. There's simply no other investment with the same amount of risk that yields the same amount of return even when factoring in the extra work. If it feels like too much work, I say suck it up, the alternative is 4-6% net yield in the stock market.

Sure, if you have $2 million in cash, it doesn't really matter where you put your money, ~$100k/yr should be plenty for everyone here. But to quickly accelerate your path to quitting your job and doing what you want, real estate is the answer for 99% of people. With stocks, net worth matters. With real estate, cash flow matters. This site and MMM is too reliant on net worth. I could care less what my net worth is as long as I'm able to cash flow my monthly needs.

So yeah, I can definitely see why some would choose to cash out and put it in some other more passive investment (though, again, if you buy properly then it should be pretty close to passive) down the road, but I plan to always have some form of RE.

My net per month is well above that. I agree with you on the NW vs cashflow, but I'd rather have my money compound in index funds and be living off a 1% withdrawal rate on 10 million then taking on all the risk and headaches of millions in real estate. If I want FI now, yes, RE is better, but in the long run, if you let your money compound in an index, eventually you can slowly sell off some real estate and switch, while having lived on the rental income initially.

If I actually factor in the time I spend on the house when turning the place, dealing with taxes and book keeping, it would be better to put it in a REIT. I'll take a hit on transaction costs (one thing I really hate about real estate. I can sell 10 million dollars of stock for $10, but for a house of a few thousand dollars, everyone and their mother has their hand out and it costs me tens of thousands and is damn near forced upon you like a toll if you want to sell in a timely manner).

Do you own rental property? Where at in relation to your location?

I think RE is a good thing to have in your portfolio for diversification, but I feel like it ties me down. I wouldn't feel comfortable traveling the world like ARS. If I sold everything and rented, I could see myself traveling the US in an RV, having a good time.

There is one thing that I will reiterate. The only thing that keeps me from selling it and putting it in a REIT is the utility value. I can't live in a REIT for $200 a month (taxes, insurance, some minor upkeep because I'm easy on my stuff). I can't grow food and raise chickens in the back yard, rent out a room, and use the clothes line to dry my clothes.

A colleague of mine made an interesting comment to me some time ago when he found out it's paid off. "You can always use that as a fall back position". I stopped and thought, that's actually a great idea. I keep my tenants on a MTM lease so I could always move back in easily. Between the paid off house and my gf's income, I wouldn't be too worried at all. It's not my favorite location but I was fine living there, and could do it again for a few years if I fell on hard times. I just view it as a safety net.

Now, I could just 10-31 it with 10-15K added to the pot and about that in transaction costs and get another paid off house that is in the same area but more desirable, not on a busy street. Keep it as a rental, but use it as a fall back if I ever need it. For that, I think it is always nice to have a paid off house. I'm glad I bought a house first, in cash, before I speculated in the stock market again.

I mean, even if you work at 7-11, with a paid off house, you are still doing better than most people and have it relatively made.
« Last Edit: November 13, 2015, 01:28:29 PM by Bearded Man »

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #26 on: November 13, 2015, 12:18:06 PM »
I think RE is a good thing to have in your portfolio for diversification, but I feel like it ties me down. I wouldn't feel comfortable traveling the world like ARS. If I sold everything and rented, I could see myself traveling the US in an RV, having a good time.

You can get past that mindset. 

My properties with a property manager give me no issues, and even the half dozen that I'm still managing myself haven't been an issue at all in the 2.5 months I've been gone.

Had an HVAC issue the other day.  Tenant texted me, I texted my guy, he texted the amount later, I sent him a check through my banks bill pay.  Total time spent: 3-5 minutes.

As tenants move out, I'll turn them over to a PM (to get them back to rent ready, and rented out), but for now, while they're occupied, no point in paying a PM for the very simple things that come up.

And for the ones that already have a PM, it's just a matter of checking the statement once/mo.

Not sure why being in the U.S. would matter for any of that.  You can do it!  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #27 on: November 13, 2015, 01:30:05 PM »
I think RE is a good thing to have in your portfolio for diversification, but I feel like it ties me down. I wouldn't feel comfortable traveling the world like ARS. If I sold everything and rented, I could see myself traveling the US in an RV, having a good time.

You can get past that mindset. 

My properties with a property manager give me no issues, and even the half dozen that I'm still managing myself haven't been an issue at all in the 2.5 months I've been gone.

Had an HVAC issue the other day.  Tenant texted me, I texted my guy, he texted the amount later, I sent him a check through my banks bill pay.  Total time spent: 3-5 minutes.

As tenants move out, I'll turn them over to a PM (to get them back to rent ready, and rented out), but for now, while they're occupied, no point in paying a PM for the very simple things that come up.

And for the ones that already have a PM, it's just a matter of checking the statement once/mo.

Not sure why being in the U.S. would matter for any of that.  You can do it!  :)

How long do you keep the PM after the unit is filled? How long before the vacancy period do you get a PM? I'm surprised they don't have a minimum duration or hefty cancellation fee in there.

undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #28 on: November 13, 2015, 01:54:52 PM »
I think RE is a good thing to have in your portfolio for diversification, but I feel like it ties me down. I wouldn't feel comfortable traveling the world like ARS. If I sold everything and rented, I could see myself traveling the US in an RV, having a good time.

You can get past that mindset. 

My properties with a property manager give me no issues, and even the half dozen that I'm still managing myself haven't been an issue at all in the 2.5 months I've been gone.

Had an HVAC issue the other day.  Tenant texted me, I texted my guy, he texted the amount later, I sent him a check through my banks bill pay.  Total time spent: 3-5 minutes.

As tenants move out, I'll turn them over to a PM (to get them back to rent ready, and rented out), but for now, while they're occupied, no point in paying a PM for the very simple things that come up.

And for the ones that already have a PM, it's just a matter of checking the statement once/mo.

Not sure why being in the U.S. would matter for any of that.  You can do it!  :)

How long do you keep the PM after the unit is filled? How long before the vacancy period do you get a PM? I'm surprised they don't have a minimum duration or hefty cancellation fee in there.

Most PMs offer just tenant placement service for a flat fee. I would probably be paying for that, depending on the amount of turnovers/headache you see even if I was half a mile from my properties.

BM, I think you're largest problem is your process. For autonomy, you need to require 1 yr leases, which is pretty much standard everywhere. Is having a choice of 3 places to live really all that important? You can always rent something cheap yourself if you move off and ever decide to come back, no reason to kick a tenant out just because you need a place to stay.

Quote from: Bearded Man
My net per month is well above that. I agree with you on the NW vs cashflow, but I'd rather have my money compound in index funds and be living off a 1% withdrawal rate on 10 million then taking on all the risk and headaches of millions in real estate. If I want FI now, yes, RE is better, but in the long run, if you let your money compound in an index, eventually you can slowly sell off some real estate and switch, while having lived on the rental income initially.

If I actually factor in the time I spend on the house when turning the place, dealing with taxes and book keeping, it would be better to put it in a REIT. I'll take a hit on transaction costs (one thing I really hate about real estate. I can sell 10 million dollars of stock for $10, but for a house of a few thousand dollars, everyone and their mother has their hand out and it costs me tens of thousands and is damn near forced upon you like a toll if you want to sell in a timely manner).

Do you own rental property? Where at in relation to your location?

Money can still compound in real estate as long as you're reinvesting your profits. Nothing will ever come close to the ease of indexing, but like I said, I think everyone should have at least one good cash-flowing rental. It's like a good, reliable dividend paying stock, except the returns are better and there's more control. I'm like you in that my goal is not to own 10+ properties. I want to end up with around 5 good units. That should be plenty to live on as long as I focus on finding deals.

As far as drawing 1% from $10M, sure, but then you're losing ~$200k/yr to inflation with that kind of return. I'm all about capital preservation as well. I don't know that stocks will always go up - but I know people will always need a place to live and that there's a limited supply of housing.

I currently have one unit, right next door. So yes, it's easier for me to manage, but I won't always be living here either and don't plan on it.
« Last Edit: November 13, 2015, 02:11:17 PM by undercover »

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #29 on: November 13, 2015, 01:56:59 PM »
The PM will be permanent once I roll the property over to them.

There are leasing agents and such you can use to get a property rented, so it's feasible to continue without, but I have no desire to continue managing our properties.  It's just not worth turning it over to a PM now, and paying 10%, when there's literally 5 minutes of work per property every few months.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #30 on: November 13, 2015, 02:02:47 PM »
The PM thing can go either way. I know at least two people who's PM's were robbing them. A PM has very little to lose by allowing crappy tenants, picking expensive contractors, while you foot the bill. I don't think it will be all roses and kittens in the long run.

I've heard a lot of the big real estate gurus (self appointed anyways) say they've tried the out of state thing and they think it's better to be close enough to check by vehicle once in a while. I prefer to screen tenants myself, both the background checks and the meet and greet.

But now that the values on my houses have gone up and the leverage is starting to wear off, they are not as attractive. I'd be more inclined to sell and put in a REIT if it weren't for the damn transaction costs. One of my houses alone, the one I live in now, has almost 40K in transaction costs between realtor fees, and excise tax. It just hurts more knowing that I'm taking a hit again on real estate if I sell. Yeah, the returns are dropping as the prices rise and rents rise only slightly (rents go up far less than the values in my area), but selling these things eats a sizeable portion of my net worth.

RE is good for getting wealthy real quick in a down market with not much money, but once the prices rise and the returns drop, it's expensive as heck to get out. The numbers above don't even take into account depreciation recapture.

I'll re-evaluate next spring. I'm considering moving back into my last house. The area and at least one neighbor are not the greatest, but for the size, location with good commute, transit access, with a huge house and yard, where I can homestead, all for $500 a month after tax benefits and principal pay down, with ideal setup for room mates as a backup plan, and only 12K of my own money invested in it, I am considering having to eat the bad neighbors/neighborhoods annoyances as a cost of doing business and other factors being great.

It's either this or buy another house, but with the transaction costs for cashing all of my real estate out rapidly approaching 100K if I do, it's just not something I take lightly.

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #31 on: November 13, 2015, 02:07:11 PM »
Looking at your return to compare to the alternatives should already account for transaction costs, depreciation recapture, etc.

You should look at return on net equity, in essence.

And I 100% agree, choosing a good PM is critical, and there are a LOT of bad ones out there.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #32 on: November 13, 2015, 02:13:33 PM »
I think RE is a good thing to have in your portfolio for diversification, but I feel like it ties me down. I wouldn't feel comfortable traveling the world like ARS. If I sold everything and rented, I could see myself traveling the US in an RV, having a good time.

You can get past that mindset. 

My properties with a property manager give me no issues, and even the half dozen that I'm still managing myself haven't been an issue at all in the 2.5 months I've been gone.

Had an HVAC issue the other day.  Tenant texted me, I texted my guy, he texted the amount later, I sent him a check through my banks bill pay.  Total time spent: 3-5 minutes.

As tenants move out, I'll turn them over to a PM (to get them back to rent ready, and rented out), but for now, while they're occupied, no point in paying a PM for the very simple things that come up.

And for the ones that already have a PM, it's just a matter of checking the statement once/mo.

Not sure why being in the U.S. would matter for any of that.  You can do it!  :)

How long do you keep the PM after the unit is filled? How long before the vacancy period do you get a PM? I'm surprised they don't have a minimum duration or hefty cancellation fee in there.

Most PMs offer just tenant placement service for a flat fee. I would probably be paying for that, depending on the amount of turnovers/headache you see even if I was half a mile from my properties.

BM, I think you're largest problem is your process. For autonomy, you need to require 1 yr leases, which is pretty much standard everywhere. Is having a choice of 3 places to live really all that important? You can always rent something cheap yourself if you move off and ever decide to come back, no reason to kick a tenant out just because you need a place to stay.

Quote from: Bearded Man
My net per month is well above that. I agree with you on the NW vs cashflow, but I'd rather have my money compound in index funds and be living off a 1% withdrawal rate on 10 million then taking on all the risk and headaches of millions in real estate. If I want FI now, yes, RE is better, but in the long run, if you let your money compound in an index, eventually you can slowly sell off some real estate and switch, while having lived on the rental income initially.

If I actually factor in the time I spend on the house when turning the place, dealing with taxes and book keeping, it would be better to put it in a REIT. I'll take a hit on transaction costs (one thing I really hate about real estate. I can sell 10 million dollars of stock for $10, but for a house of a few thousand dollars, everyone and their mother has their hand out and it costs me tens of thousands and is damn near forced upon you like a toll if you want to sell in a timely manner).

Do you own rental property? Where at in relation to your location?

Money can still compound in real estate as long as you're reinvesting your profits. Nothing will ever come close to the ease of indexing, but like I said, I think everyone should have at least one good cash-flowing rental. It's like a good, reliable dividend paying stock, except the returns are better. I'm like you in that my goal is not to own 10+ properties. I want to end up with around 5 good units. That should be plenty to live on as long as I focus on finding deals.

As far as drawing 1% from $10M, sure, but then you're losing ~$200k/yr to inflation with that kind of return. I'm all about capital preservation as well. I don't know that stocks will always go up - but I know people will always need a place to live and that there's a limited supply of housing.

I currently have one unit, right next door. So yes, it's easier for me to manage, but I won't always be living here either and don't plan on it.


Ummm....OK. I used to have 1 year leases, until I learned from experienced landlords that I'm actually taking on all the risk. You can beat a drum about 1 year leases all you want, tough to collect from a tenant who has nothing to give or lose. Easier to get rid of a bad tenant on a MTM lease. Sorry, but your 1 rental doesn't really give you a leg up on me experience wise to be advising me on my "process". The most experienced landlords online blog about why a MTM is better.

Also, I'm not sure why you think 1% is the return on the stocks and that I would be losing 200K a year to inflation. The returns with dividends reinvested would be 12% over the long run, not 1%. The 1% was merely my SWR rate....not the investment returns. You're not really coming off as an expert investor that I should be taking advice from, sorry...




« Last Edit: November 13, 2015, 02:20:49 PM by Bearded Man »

arebelspy

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Re: Anyone cash out most if not all of their real estate?
« Reply #33 on: November 13, 2015, 02:19:54 PM »
Do you invest? I'll ask a third time, do you actually own rental property? You've not come out and actually said that you do, only implied it.

Read the second-to-last sentence of the post you quoted.

I'm not sure it's relevant (one can have knowledge without experience), but yes, they do own a rental property.

EDIT:
Looks like you edited that out for this:
Quote
Sorry, but your 1 rental doesn't really give you a leg up on me experience wise to be advising me on my "process".

It's a good thing sheer volume of personal experience isn't the only way to learn.  :)
« Last Edit: November 13, 2015, 02:21:27 PM by arebelspy »
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #34 on: November 13, 2015, 06:17:39 PM »
BM, if you can own one rental, you can own 100. I'm simply pointing out the obvious. You can choose to get defensive or whatever it is you're doing, but it doesn't change facts. (also not once was I really disagreeing with you, I'm just defending my favorite asset class with common sense)

I think my advice is sound. You can't expect anything passive if you're doing all the work yourself and choose to go M2M on your leases. That's obvious. Not sure one needs 100 rentals to state the obvious. I also think the headache that's come along with your rentals is mostly self-inflicted. You still see them as your "potential primary residences" when they should be viewed as assets that make you money. Again, obvious is obvious.

I did misread your point about $10m in index funds. I thought for some reason you meant you'd just sit it in a 1% savings account or something. At any rate, some people argue the more money you accumulate, the less you should focus on returns. I don't really agree with that. I think real estate is the perfect place to park $10m.

Bearded Man

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Re: Anyone cash out most if not all of their real estate?
« Reply #35 on: November 13, 2015, 07:17:21 PM »
Not defensive at all, just pointing out inconsistencies. And I am no expert stock investor, but even I know that stocks with dividend reinvested provide a nominal 12% return. If I thought I read "1% return" I'd do a double take or mention that the return seems low and ask why.

From your description, it sounds like you live in a duplex. That's great, good luck to you with that. And enjoy your stock investing journey as you gain knowledge about stocks and real estate.

Thanks again for your opinion. I'll take it into consideration.
« Last Edit: November 13, 2015, 07:19:01 PM by Bearded Man »

AlexK

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Re: Anyone cash out most if not all of their real estate?
« Reply #36 on: November 13, 2015, 07:25:58 PM »
I'm planning to sell rentals soon. The plan is to sell one per year until they are gone (I only have three). It's a tough call though. It is very nice to get monthly rent checks even when stocks are dropping.

Mine have appreciated so much that at least one is <5% yield so it doesn't seem wise to keep them.

RE did accelerate my FI, I don't regret using it, and I will likely buy more, but only if it's cheap!

undercover

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Re: Anyone cash out most if not all of their real estate?
« Reply #37 on: November 13, 2015, 07:51:18 PM »
Not defensive at all, just pointing out inconsistencies.

Not to beat a dead horse, but I fail to see any inconsistencies I made. You just drew an illogical conclusion saying that since I only own one unit, I must not know anything. Not that it matters, but I am about to close on my second, and I have enough cash to close on at least 2-3 more if I needed/wanted to. I am waiting for the right opportunity. I'm really picky because I don't ever plan on selling. As I said, I don't believe in owning more properties than I need to. I could have done that already.
« Last Edit: November 13, 2015, 08:45:04 PM by undercover »