Need at least $15,000 a month on $2 million investment (1031 exchange conversion)

[Srinivas Reddy]

Hi All,

I'm totally new to this so bear with me (acronyms!). We own 2 homes - we live in one and rent the other. We plan to sell the rental home which is valued at $1.8m - $2m. We plan to sell our current house and net $500,000 in proceeds which will help payoff the mortgage on that rental. We figure we will have roughly $2m to make a 1031 exchange so we can sort of live off of it because we are nearing retirement. We don't mind living in a nice apartment!

Is it possible to invest our nest egg (no other income source other than social security and a little bit of 401K) in a safe manner so as to fetch between $10,000 to $20,000 a month. Just throwing numbers out there! A friend of mine suggested investing in a warehouse but that didn't work out.

Any info or ideas are appreciated. We plan to move to LA to be closer to family.

[Bill B.]

So the plan is to go from $1.8m in rental properties to about $2M in rental properties. So your income should increase about 10% minus you living in the property. So my back of the napkin math says you’ll make about the same about your making today. How close to the $10k/mo mark are you now?

If you’ll own the property outright you could probably get the $10k/mo off a $2M investment outside of CA, that’s only 6%. But you’d probably be better off taking $8,500/mo off a bank CD. By the time you subtract for management, vacancy, repairs, capex, property tax and insurance you’ll be lucky to equal the bank. 

It can be done. But $20k/mo probably takes $3-$4M in PAID off properties. So if your $2M purchase will be all cash, and you don’t live in it, and it’s not in CA, and certainly not LA you might get to $10k. Good luck.