mid life property portfolio evaluation

[Mike Savage]

So after a recent call w our amazing accountant he said something that hit me hard. he said after 40 years w his clients he's observed that its easy to get into real estate investing and much harder to exit real estate investing. In our case i'm very concerned w high transaction costs if we sell. for our smallest property he did some quick calculations and came up with approx. $150k hit on a $550k sale price. Currently We own 3 doors. 2 SFH plus a condo all in Multnomah County. We have been debating selling or holding on to them for years. All 3 properties are cash flowing at a low single digit rate but have nice appreciation and 10 years left on loan. I manage all properties myself plus I'm HOA president at the 5 unit condo. Some situational pressures are a somewhat wobbly rental market due to economic conditions (Nike/Intel layoffs). we've had some vacancies in the past few years. that never happened in 20 years of renting. rent prices have not been keeping up with increase in property taxes which diminishes our cash flow. Tenant laws making it much more complicated to be a property owner in Multnomah county. I Would love to hear what others are thinking these days. Looking for an intelligent strategy for moving forward. Feeling a bit stuck.

[Greg Scott]

I would have said what your CPA said differently.  I would have said "Why would you ever want to exit real estate?"

Yes, when you exit real estate, you can face a big tax bill.  If your goal is to move from management-intensive real estate to laissez-faire real estate, there are plenty of ways to invest in real estate passively and avoid the large capital gains.

Your CPA should also have reminded you that if you die owning real estate, your heirs inherit the property at a stepped-up basis. Why do you think so many wealthy families own real estate?  It is a great estate planning tool.