Selling Our Home With Lots of Equity to Invest in Cash Flowing

[Steven Hayes]

Hello BP Group, 

My wife and I are thinking we are going to put our home up for sale soon. We will have nearly 1 million in equity left over to invest. Our goal is to not have to work full time at our 9 to 5's. Looking for recommendations on how to generate the most amount of cash flow with this amount of cash we should have available. We have some SFH now, but looking at purchasing a large apartment complex. Seems like the route to go. Any input would be great.

[Arn Cenedella]

@Steven Hayes

A few comments and items to consider.

1. Not all decisions are solely financial.
There are non-financial benefits to owning a home.

If you sell your house, where will you live? Do you buy another residence? Do you rent?

The cost of your housing should be considered as part of the entire financial analysis.

2. Only $500,000 of gain from sale of residence is tax free. Be sure you understand tax implications of sale. Do you end up with $1M cash after paying any taxes due? $1M might buy you $3M to $4M of real estate. What is price per door in your area?

3. If you leave your W2s, be sure to consider the cost of health insurance - that might cost the two of you $20,000 a year.

4. In this market, one might reasonably assume a 6% cash on cash return from a MF deal.

$1M brings $60,000 a year.

I believe a couple probably needs $120,000 a year income to live a nice upper middle income lifestyle. And this number may not include the cost of health insurance and assume little or no housing or auto cost.

Do you other rentals produce the other $60,00 you will need?

No one can answer this question for you. I am just providing items you should consider and I may have missed a few.  Good luck with your transition.