Using Equity to Buy All Cash

[Mark Avery]

Hi all,  wondering you thoughts on a question I've run up against with a couple clients and have been pondering myself in our changing markets.  What are you thoughts on selling a larger valued multifamily property for a smaller one?  The equity in the larger would allow for an all cash purpose and in the end the smaller one would cash flow better.  My gut tells it's contraction instead of expansion but is that balanced but not carrying any debt service?  Interested in hearing you thoughts.

Have a great Sunday!

[Jeffrey H.]

My personal opinion is that the equity in one property is just as comparable as a less expensive paid property from net worth perspective.  The assumption is that there are multiple years of tax returns and income statements to show that it's being operated profitably and with a comfortable contingency.  Unless this is a large non-recourse deal then the owner(s) will be kissing the note anyway and the math will ultimately look the same.