Cash Poor, House Rich!! Need Advice

[Carlos Handler]

I own 10 properties in Southern California area. All my properties pay my mortgages on all homes and break even. In all my homes I have about 1.7 million equity. The problem is I can’t touch any of the equity. Recently my employer downsized and I’m making 50% less income. Not sure what my next move is. In the process of selling one property but don’t want to. I need advice from experienced investors. Thank you in advance! 

[Carlos Ptriawan]

Quote from @Marcus Auerbach:

Some day dreamer advice here. Above all, protect your principal. Which means avoid getting on thin ice. Liquidate a small portion to stabilize and protect the larger portion, avoid going into a downward spiral at all cost. It could cost you everything. You have to maintain liquidity, pay your bills, maintain your properties.

This is not the time to start a new business without time and reserves. Going into more debt is horrible advice, especially with current rates.

The point of investing in real estate is primarily long term wealth, secondly cash flow. Fix your active income side first before you go an invest out of State. OOS is everything but easy! I live and invest in a classic "cash flow markets" (which has seen 8 years of steady appreciation and is hyper competitive and has very little inventory), and I would not feel comfortable to promise you quick and easy cash flow, certainly not within the time limitations of a 1031. 

It takes time to learn a new market. We see it all the time. Just had an investor here from LA, who has been a PM for 17 years and said rough areas don't scare her. One of my agents took her on a tour to see B, C and D areas and now she understands why we don't buy in D or even C minus markets. Whicht BTW is only a smal part of the inner city. Milwaukee is very often misunderstood; what looks great online and on paper (super low price, high cash flow) is usually fools gold in the form of a 100 year old hours that needs everything new, the poorest neighborhood, and high maintenance tenants. It takes time to learn these things. MKE is still a great market, but quality investment grade properties are not exactly cheap and that is probably true for most Midwest markets.

 This is very sincere post ! 

I would say to Carlos, if you manage your property in CA actively and you know how to manage it, Do not move it to OOS. Because then you would lose your expertise of yours.

The cost, is always manageable when you yourself as the manager of the house. 

ACtive management locally is always better produce outcomes compare to "semi passive outsource" to OOS.

[Timothy Howdeshell]

@Carlos Handler When you say that these properties "break even" what do you mean? For instance, is your rental income $3000/mo. and your mortgage (PITI) $3,000/mo., or are you breaking even after setting aside reserves.

In the first situation, given the reduction in income and future income uncertainty, I would be selling those properties and moving into an area with true cash flow via the 1031 exchange. Also, what is your leverage position on these? If they are all at 50% LTV for instance, you could sell a few, and pay off the mortgages on a couple freeing up cash flow immediately. You're more open to lawsuits via exposed equity, and you're missing out on loan paydown, but I think it's less risk overall.

[Tim J.]

I would consider taking on a partner on one or a few of the properties...  allows you to keep the properties and get some cash.

Just a thought

[Carlos Handler]

I’m definitely open to the idea of a partner and  or mentor. I had money prior to Covid and I purchased as much as I could during the time and now I’m lost. I just don’t know the next move. I decided to sell a property. It’s listed at $699k and I owe $440. I’m prob being negative but I can’t see it selling. I’m breaking even. The rent pays the mortgage for on all homes and my primary, secondary and my mother in laws home. 

[Julian Sanchez]

Well if you have some money to invest I offer DFY Ecommerce business, online stores at national retailers.

Consistent recurring money in the bank. Real estate is long term wealth generating. 

The equity rich cash poor problem is one I was faced with as well because I put it all into our apartment buildings. Put all my eggs in the real estate basket.

Then cost of living increased and my parents needed help financially. 

This allowed me to supplement my real estate cashflow.