4 Single Family and 1 duplex, where to go from here?

Question

Like the title says, I have four single families and one "duplex". I'm making about 200K in appreciation and 60K in cash flow and principle pay down. At this point I can move back into one of my other rentals and retire, but I planned on working for a few more years to maximize assets. My earnings from real estate investments outpace my earnings from my job (155K) and are much more tax advantaged but I want to use the W2 income to keep buying assets while I still can.

Option 1) I can sell one or two that have seasoned a bit and buy some commercial real estate out of state (storage, multi family, etc.). I could even buy a couple 15-20 unit complexes in Florida where I make six figures after all expenses, though I'd want to move there to either manage or be nearby. Then when the appreciation slows down in Seattle I could sell more houses and buy more apartment complexes raising cash flow to about 200-250K. At that point, I'd just retire from my professional career.

Or...

Option 2) Sell a couple and buy some turnkey out of state for more cash flow. Seems like a lower return now vs. keeping appreciating west coast property. I don't need the cash flow right now, though it is tempting to quit my job and go travel the world on that extra cash flow.

Or...

Option 3) Keep holding for now until I figure out what kind of commercial real estate I want to get into. The houses will appreciate nicely for a few more years in the meantime, and if I lost my job, I'd be OK anyways since I can downsize to one of my rentals and live off my investments.

Option 4) ?????

I'm a millionaire now and would be a multi millionaire in 5 years even if I stopped working thanks to investments. Not a bad position to be in but I would like to keep grinding this out for a few more years before I slow down. Ultimately I'm trying to 1) keep the equity and 2) find the next way to increase it drastically.

Grant Diggles · Answer

Its a tough question. Appreciation is a theoretical number until you actually realize a return via a transaction. So, if I'm understanding you correctly, I would be VERY conservative about comparing property appreciation to your day job of $155k. One is income, the other is appreciation and should not be considered a reliable source of future income. What happens if Seattle cools off dramatically?Sounds like you have a great job at $155k and I would continue that for as long as you can stand to. I live in Portland, OR and we are starting to experience the crazy appreciation rates that Seattle has enjoyed for several years. I am selling my rental property here in Portland as we speak to realize the currently inflated rates. A SFH ranch style home built in 1974 is expected to go for as much as $420k, which in my opinion is great but also a little ridiculous. Will it continue to go up? Maybe. Are we overdue for a major market correction and, most likely, a Bear market?... yup. We're overdue actually. I will be reinvesting in the midwest where I can experience great cash-on-cash ROI and stretch my dollar even further while protecting myself in less inflated markets where appreciation is realistic (2-5 percent a year).My opinions go much further than this, but are only opinions.PM me if you want to talk further...Good luck to you sir. I don't profess to know much as I'm in the same boat as you here in Portland.Cheers.

Andrew Johnson · Answer

@Jack B. For whatever it's worth, I wouldn't too much through "when the appreciation slows down in Seattle" as it's anyone's guess when that will happen and if it will be local or a nationwide slow down. So it's hard to really do any projections on that front. For me anyway. Maybe I should ask the obvious question: If you have an array of options where selling one or two properties would get you another $40K in cash-flow, why haven't you done it? There must be a reason. I'm guessing it's the appreciation but there's nothing to say that other markets (like Florida) haven't (or wouldn't) appreciated as well. Another $40K in cash-flow is a 66% increase and with a new multifamily purchase you'll probably have plenty of mortgage interest and depreciation. Or if you're numbers are right, why wouldn't you sell all right now that get your $200K-$250K cash-flow? Or does all of that assume that the properties will appreciate an X-rate over Y-years which will give you the capital to buy in Florida (or another market)? What happens if Florida appreciates as well?

Jeff V. · Answer

Jack,Your well ahead of me, but when I get there I plan to keep the equity working by investing in performing notes. Have you given any thought of entering into the note industry?If so @Dave Van Horn may be able to help get you going in the right direction on that.Just a thought.Jeff V