Author Topic: Confirm: Better to hold or sell?  (Read 559 times)

MNBen

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Confirm: Better to hold or sell?
« on: March 27, 2018, 12:54:04 PM »
I own three rental properties, and all three are townhomes in associations.  Two are in the same association, and one is in another.  Also, to help protect my investments (and apparently because I'm a glutton for punishment) I'm on the Board of both associations.
  • Prop #1: Purchased in 2008 - Currently about $45,000 equity (Value vs. mortgage).  Also about $31,000 depreciation.  I self-manage and clear about $550/month ($6,600 annually) in rent minus expenses.  Never occupied.
  • Prop #2: Purchased in 2009 - Currently about $80,000 equity (Value vs. mortgage).  Also about $20,000 depreciation.  I self-manage and clear about $550/month ($6,600 annually) in rent minus expenses.  Never occupied.
  • Prop #3: Purchased in 2000 - Primary Residence 2000 - 2012.  Rented 2012 - 2017.  Will be living in 2018-2020 to capture the 2 of 5 prorated capital gains exclusion.  Oh we also have about $20,000 depreciation.
Next month we close on a 4th property (our primary residence) and we have already moved into Property #3 with one child.  In June 2019, that child graduates high school and we'll assume for this discussion we're empty nesters because they move away for college.

Our plan then is to FIRE at that point (June 2019).  With a partial year of income, and fully funding 401k, we might be able to stay in the 12% tax bracket, but at worse fall into the 22% bracket.   However, we fell into the 28% federal tax bracket for 2018.

Oh, in retirement we will plan to 'occupy' property #3 another year (until 2020) but very likely with some winter travel, etc.

Both of us have medical conditions from the past that very well would fall under pre-existing, should ACA disappear pre-existing conditions become an issue again in the future, therefore health insurance is our biggest variable at this point.   So our strategy is to attempt to qualify for subsidies based on our income as long as ACA and subsidies exist.

As long as we hold Property 1 and 2, we won't have to worry about that rental income impacting our ability to qualify for a subsidy.  But my question is when it comes time to sell, that income could very well disqualify us. 

So it appears our options are:
  • Plan to hold property 1 & 2 for the foreseeable future and sell (when we'll be in a lower tax bracket)
  • Sell them both in the very near future (even though we'll be in a higher tax bracket)

Thoughts on what we should do?  What am I forgetting to consider?

My gut reaction is that in retirement, I'll want to stop self-management which will also eat into the profits so with that reduced profit, and the needs to qualify for subsidies, it's probably better to plan to sell them before Dec 2019 even if it means paying a bit more taxes, so that 2020 can be the first year we qualify for subsidies.

MNBen

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Re: Confirm: Better to hold or sell?
« Reply #1 on: March 30, 2018, 11:47:50 AM »
Only bumping because would really like some advice or second set of eyes...

Basically, we're going to live in Property #3 and own rental properties #1 and #2 across town in the same association.  We're looking at FIRE in 2019 and starting 2020 to use subsidies and ACA for healthcare.

Just wondering if we should look into selling these properties before 2020 (even though it'll be a higher tax rate) or just hold them into 2020 and beyond, enjoy the income the generate, and sell if/when it makes sense?

Thanks.

waltworks

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Re: Confirm: Better to hold or sell?
« Reply #2 on: March 30, 2018, 12:58:29 PM »
I would sell them all. Sounds like they're ok properties, but self-managing is work and they're not *that* spectacular. Just ditch 'em and enjoy your life.

-W