Looking for a financial analyst to help with tradeoff analysis

[Ken D.]

TL;DR: Looking for a financial analyst/planner to help me with quantitative tradeoff analysis to help me decide whether I should sell (some subset of) my 5 rental properties so I can afford to purchase a single family home and stop "throwing away" ~4K/month on rent. I've worked with a couple financial planners in the past and neither seemed to be capable of doing more thorough analysis than I was given ~20 hours of work in Excel, so I'm looking for someone who can demonstrate to me quantitatively that their analysis is correct given whatever assumptions their modeling takes into account.

Background:

I currently own 5 properties, 14 units in Minneapolis/St. Paul, MN metro area. Total value is $1.5-2M. After subtracting loan balance and sellers fees, net for selling all would be $350K-850K (There is obviously a lot of uncertainty here, high value is based on a recent pitch from a realtor who specializes in investment property; low-range is based on skepticism of that). I currently live in one of the most expensive parts of the country, the "Bay Area" or Silicon Valley. I plan to be here for the next 20+ years. I need my kids to be in a good school district. I currently spend $4300/month on rent for a pretty decent place (3Br/2.5Ba, ~1600SQFT). The house I'm renting is valued at $1.2M. Rent has been going up ~10%/year for the last 5+ years but some commentary says it's finally hitting a peak. Home values have gone up similarly enormous amounts. California has a wacky law where assessed value for property taxes can only increase at a very limited rate (~1%) so most people are locked into property tax rates much lower than their current home values, so this favors purchasing rather than waiting.

$4300/month is at the high-end of affordability for me, so seems like the only way I'll be able to purchase a home of the quality/location I want is to liquidate (at least some portion of) my real estate portfolio. In general my investment properties are in an early stage where the total equity (ie. + cash flow) appreciation each year is >10% (ie. better than could be expected from the stock market), so selling seems like a bad idea. OTOH, "throwing away" ~48K/year of post-tax income on rental for the next 20 years also seems like a terrible idea. Thus, I need someone competent to do a thorough financial analysis to help me understand where the swing points are in the tradeoff where one option would make more sense vs. the other one.

Something along the lines of:

https://www.nytimes.com/interactive/2014/upshot/bu...

but which also incorporated my current investment property holdings. And, I would need someone who could do the necessary background research to find reasonable estimate ranges for what property and rent appreciations are for both Minneapolis/St.Paul areas and Silicon Valley; and _ideally_ do the analysis across a range of values for each of the inputs. 

I'm uncertain whether such an analyst exists and whether it's worth spending whatever it would cost to have this analysis done. As I said, I can go pretty far with some massively complex spreadsheets but I'm still fundamentally uncertain of the soundness of some of my analysis, and within the context of Excel it's pretty hard to do across a range of inputs. OTOH, it would be very disappointing to spend $5K only to have someone provide me with an analysis that still doesn't do much better (or as good) as what I can do on my own if/when I'm able to find the time.

Thanks,

-Ken

[John Woodrich]

I think a lot of this will depend on your (and expert) expectations of current property values and the current cash flow you are receiving from your rentals.  

We would be able to work through an analysis for this but it would largely rely on assumptions of property values (CA and MN) and projected market expectations.  In MN right now the multi-housing market is pretty tight which is good for sellers but to get solid sales prices we would have to rely on local realtors or appraisers in the area.  Same goes for California...  So many of the variables in your analysis would be people and their opinions on value and where the market is going.

As you mention, after tax cost is a concern as your rentals may be generating taxable income however your rent is not tax deductible.  With the current tax proposals, if you purchased a property with a large loan the interest may not all be deductible however renting is one of the worst things you can do from a tax perspective.

Given the information you have posted and past experience I suspect that your best bet would be to structure a 1031 exchange on your property with the greatest appreciation, exchange it for a property that you want to live in, and move in after a period of time.  If you follow all the rules you will avoid any gain on the property you sold, remain invested in productive real estate, and receive the whatever tax benefits remain in owning a house after any tax reform is completed.

This would entail many assumptions and an after tax cash flow analysis but I think the best and worse case scenarios would give you some comfort in making a decision.  I would have to disclaim that we would have to hire outsiders, anyone who claims to wear all hats is just looking for your money.