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Updated over 7 years ago, 05/08/2017
300k+ in equity in 3 years, low cash flow should I 1031 out of CA
In 2013 I had some good timing. Purchased a four unit apartment building, built in 1980 with major tenant and management issues. It cost me around $360k all in but I used an FHA203k loan so my out of pocket was around 25k all said and done.
Three years later, the rents are good based on purchase price but not compared to what its worth. Gross rents just under $50k net would be around $30k if not for the mortgage. I'm netting around $100 a door a month all said and done. The property recently appraised for $700k but more realistically I believe its worth $650k. I owe $340k on the property.
By end of the month, the last unit will be renovated. They all match, are built well and are in perfect landlord setup. Easy to maintain, clean out etc for the next tenant. All units have will have good tenants, solid leases and its turn key. I keep looking at what its worth, what little it collects and I'm nervous about the California market.
My main goal in 2013 was to own real estate, I thought appreciation would be possible and to leverage loans to get equity without my money. Now I've done that I am craving cash flow and lots of it. So this place doesn't meet the model anymore. I'm not certain as this is a newer thought process but if the goal is cash flow this isn't the best place to do that.
Has anyone else cashed out of California? Where did you go? How did you decide? How big of a place did you buy? What class of property did you buy? With the equity I have my thought was to shoot for a million dollar property and use the equity to cover my down payment. I didn't visit the place for a year as a test to see if it was possible to manage remotely and it went well. I know I'd need feet on the ground wherever I went though.
Any input is greatly appreciated.
I am selling some of my sfh in CA and am 1031 exchanging into property out of state for cash flow. Markets that I like with population growth, diverse economy, landlord friendly are Indianapolis, Columbus OH, Cincinnati and Grand Rapids. I understand others caution and wise words around protecting equity that I too have been lucky enough to build in this bull market in CA. Sometimes however life can't wait. My daughter is 4 and waiting for my Ca properties to provide enough cash flow to live would mean that she is kissing boys and drinking beer before I can escape corporate slavery! Feeding a kid off equity on a spreadsheet is a bit tough! Good luck with your out of state adventures - I'm sure you'll make it happen.
Originally posted by @Kate Stephens:
I am selling some of my sfh in CA and am 1031 exchanging into property out of state for cash flow. Markets that I like with population growth, diverse economy, landlord friendly are Indianapolis, Columbus OH, Cincinnati and Grand Rapids. I understand others caution and wise words around protecting equity that I too have been lucky enough to build in this bull market in CA. Sometimes however life can't wait. My daughter is 4 and waiting for my Ca properties to provide enough cash flow to live would mean that she is kissing boys and drinking beer before I can escape corporate slavery! Feeding a kid off equity on a spreadsheet is a bit tough! Good luck with your out of state adventures - I'm sure you'll make it happen.
Good for you! Family first. I think most folks are too afraid to actually stop working. I have low overhead and flip money to keep me "employed".
i use a reputable turnkey company in Indy and Charlotte. Over 3 years i've purchase 8 SFH's with good, consistent cashflow. They have over 1500 homes under management. Pm me if you'd like more info
Originally posted by @Kate Stephens:
I am selling some of my sfh in CA and am 1031 exchanging into property out of state for cash flow. Markets that I like with population growth, diverse economy, landlord friendly are Indianapolis, Columbus OH, Cincinnati and Grand Rapids. I understand others caution and wise words around protecting equity that I too have been lucky enough to build in this bull market in CA. Sometimes however life can't wait. My daughter is 4 and waiting for my Ca properties to provide enough cash flow to live would mean that she is kissing boys and drinking beer before I can escape corporate slavery! Feeding a kid off equity on a spreadsheet is a bit tough! Good luck with your out of state adventures - I'm sure you'll make it happen.
if you need some local insight into Cbus, i'd be happy to connect!
- Robert Ellis
Interesting thread, despite it being a few months old. I think the OP would be best to sell the 4-plex and buy a bigger commercial deal in the same area. When you are ready to retire for sure, then cash out for cash flow properties.
Personally I'm starting to lean toward renting out RV storage. Much less fuss. But that's for when I retire, for now I'm all into single family homes in the Seattle area for the appreciation. When I have a couple mil worth (1 down, 1 to go) I'll transition to commercial apartments or storage.
Trees do not grow to the ionosphere, so why do people think California RE can only go up? Are incomes going up? Are taxes going down (consider both the upcoming large new fuel and car taxes, and the possible federal tax cuts)? Is California becoming more landlord friendly, continuing to be very landlord hostile, or possibly becoming more landlord hostile?
