From Malibu to Florida - First time investors- What do we do?

Question

Any advice is appreciated. First post.

Family with 3 young kids.

Have a home in Malibu, CA.

We Rented it for $15k a month.

Our Payments around $9k

Could sell and pocket around $1m to reinvest 1031.

—-But can’t imagine we’d get much better monthly cash flow? Unless we buy a few buildings in a new market (preferably south Florida because that’s where we are for now). But I’d appreciate opinions? Do we hold the house or re-invest?

Second question.

We are in South Florida and have about $200k for a down payment on an investment property.

-Do we go safe with a $600k+ SFH and rent it?

-Do we try to get a small apt building?

- Do we buy a few cheaper homes to rent?

I know this is all predicated on your situation. But we appreciate any and all advice.

I’m reading all the books suggested here.

Thanks.

Mitchell Jaworski · Answer

You definitely have several options.  You can use the 200K as down payments on a few homes/condos or you can go after a multi valued up to $1 million (assuming you can get financing) and there is also the option of investing the funds into a syndication deal, which would be the most passive of the bunch.

In the end it comes down to which offer the best cash on cash for your time and effort spent.

Also, the area in FL you are in will play a big factor.  Prices in Miami are different than Tampa, for instance.

Dave Foster · Answer

@Mitchell P. IDK - I live in a world of the 1031 exchange which encourages you to sell that property and use the proceeds tax deferred to buy elsewhere.  But of all the places in the world I'd be very reluctant to sell, Malibu comes to the top of my list.  Think long and hard before chasing cash flow.

1. SOFLO has always been a boom/bust market.  You can easily lose a ton of paper wealth quickly if the market turns.  SoCal (Malibu esp) may stagnate but then grows without out nearly so much boom/bust feel.

2. On an asset that size appreciation is going to be king.

3. I don't get the sense that you're driven to be hard core, this is my passion, real estate investors.  So accessing all of your equity to grow a kingdom that isn't your real passion may not be the best idea.

4. You can probably make more cash flow from selling and reinvesting in more doors or cheaper doors.  But that's also going to come with a risk and effort price tag.  Maybe growing organically using the Malibu house as your treasure chest and tapping the cash flow and your 200K and use that to start to build.

Michael Haynes · Answer

Hello Mitchell P. from Malibu. I am in Tampa and kind of in your situation as I just sold my Commercial property in S. Tampa and cleared $340K. I paid Cash for a 3/3 Townhome with garage and pool to get out of the City limits to my Target area in Valrico for a quieter life. I am finishing the repairs on my Residence in Tampa to Sell or Rent. I will make $50,000 Tax-free if I Sell right now, as my Residence, but, I want to get a HELOC on my paid off new home to use to buy a fixer upper house to Rent and I need more Income. I just sold my last Rental and it is easier for me to Rent my Residence for a year and then get the HELOC. After that I can find another fixer upper to Rent and still Sell my house in Tampa next year after some more upscaling renovations, for more profit. I am counting on Trump getting re-elected and the Fed continuing to pump up the Market and people like you fleeing from CA and NY. I could Rent my Residence in Tampa for two years and still Sell as a Tax-free Sale of my Residence. The rule is still 2 out of 5 years as your Residence to sell Tax-free. My question for you is that you obviously have a winner in Malibu. Why are you not Selling at the top of the Market, to get the Tax-free Sale of your Residence money as far away from Pelosi as you can get? You could try and 1031 the remainder of your profit out here to Florida. How many taxes do you have to pay on that $15,000 a month in Rent in CA, compared to what you can do with the money in Florida? There was a news flash this week saying that Pelosi wants to charge you CA Taxes even after you leave their State. I know they do that with any Retirement money. If you made the money in NY or CA, they want to tax you, forever. My brother is 30 years with the Electricians Union in San Jose and he said he is going to take a Cash payout and just move. His Townhome in Campbell is worth $1.5 million and the Asians all want to live there, so, it is a Bidding UP Auction situation whenever a home goes for sale there. I sold one Rental house in S. Tampa two years ago Without a Sign or Advertising, to a mother and daughter walking the neighborhood, looking to live as close to the old boyfriend who owns the home two doors away. I got my full Asking Price with a few demands. I just made a Bid two weeks ago on a Home with a pool and in five days they had 30 Offers and my high Bid was not even considered. If you think that you are going to make a Full Price Offer and get an Acceptance on houses in Florida right now...think again. I have one 3/2 with a popped pool that I want to buy as the owner needs to move and it is Off Market. Been talking with her for two months and I hope I can make some kind of arrangement to get that one as I don't like spending all the time making a Bid that is not accepted, against the Auction type situation we now have. You can't get a nice home offering Cash for the Asking Price.  There are reports of people getting 50% more than the Asking Rental Price in Miami! My Agent in Brandon rented a house before noontime on Monday and she just listed it. You say you are in S. Florida and you see Hurricane Laura coming onshore right now in Texas? I used to run Crewboats out of Camaron La. Right where she is headed. If you look at the 130 year Hurricane map that we had on the Oil Tankers, you will see that all the hurricane tracks avoided hitting Tampa, Florida except for one in 1926 when this area was all orange trees and cattle ranchers. The only other "safe" place that I considered to set up my Rental Portfolio, thirty years ago was Jacksonville. I had a Union Hall to ship out in Tampa, Ft. Lauderdale and Jacksonville and I chose Tampa. Been lucky so far. There are some specifics for you to digest.

Matt Broccoli · Answer

I own and manage a cohosting company around the Malibu area...would love to help in any way i can as well!

Edgar Rodriguez · Answer

It is definitely a personal preference situation @Mitchell P.

Do you want to be more hands on and build your business from the ground up?

Are you looking to get passive income by investing in a syndication?

What are your future plans for the Malibu home? Are you planning on going back after a few years? Is the appreciation good? What is your return after mortgage paydown and expenses? Is that return okay with you based on the amount of equity you have?

These are all questions I would ask myself if I was in your shoes.

Luis Vilar · Answer

@Mitchell P.

As @Mitchell Jaworski (Hey Mitch!) mentioned, you certainly have several options and it comes down to how involved do you want to be and what are your expectations on the investment.

With $200k you can:

1. Finance a flip

2. Buy one investment property cash

3. Down payment on a "small" multifamily.

4. Invest as LP on a syndication deal.

Just a few options to consider.

Frank Boza · Answer

@Mitchell Polatin I’m currently investing in the west palm beach and boca Raton area for condo rentals.  What area are staying in south florida ?  I recommend cash flow from your rentals. There’s a lot of vacant condos right now. Cash is king always.

Have you encountered any rental moratorium issues?

From Malibu to Florida - First time investors- What do we do?

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