Should I sell to pay off debt

Question

Background Info: My husband and I own 1 rent house with about $35,000 equity and 6 rent houses with 2 other partners with about $50,000 (our share) equity.We have about $20,000 in debt other than our house that we would love to pay off, but just not sure what the best move is.We make about $100,000/year combined at our jobs.We are considering selling the 1 rent house (with the $35,000 equity) and paying everything off except our house.I am just torn on whether to do this or not.I would love to be out from under the debt, but the rent house will be paid off in 15 years and the rent is $9,000/year. We are ages 35-40.We could probably pay off the debt within 2 years or pay it off now and forgo the $9000/year later.Any thoughts on this?

Bill Gulley · Answer

Frankly, you're blowing money. If you have 100K income in Jonesb you're doing pretty well, you should be able to slow down on the social and toy buying for a couple years, live on 75K and pay your debts off. At your income level you shouldn't have a balance on any card. Anything you buy and finance, like a boat, should be half down and financed to be paid off in 18 months no more than 2 years.

Unless you have a huge student debt thing going on or supporting your parents or have medical bills that are not disclosed, you don't need to do anything but tighten up your belt. There's some tough love for ya. :)

Jeff S. · Answer

So what you are saying is your boat is a better investment than your rental so you want to keep your boat and sell your rental. That is your choice. I have a friend that did that and his 30k boat is now worth 7k and he is broke. Guess who buys when we eat out; it aint him.

Robert Steele · Answer

It's already been said but I'd like to re-iterate the two most important points as far as I see them.

1) You want to get rid of a incoming producing asset but keep a depreciating liability? Keep the rental - sell the boat.

2) Be mindful of depreciation recapture and capital gains tax that will eat any equity you are trying to squeeze out from the rental sale.

Steven Hamilton II · Answer

First rule of making money:  Don't lose money.

Second rule of making money: Don't lose money.

Steven Hamilton II · Answer

@Heather C. ,

What I'm about to say is not mean and I'm not picking on you but you need to hear it. You need to learn the difference between wants and needs.

You need income. The rental provides income.

The partnership provides income/equity growth.

The debt needs to be disposed of. Either cut your bills, lower your cable package, and your other expenses. Don't get Starbucks.  Give up a few luxuries as your lifestyle is not fitting your budget.

You have to give up some things in order to end up secure. Keep the rental and try to refinance.  Try to refinance your own home.  Consider a home equity line that you can use to "refinance" the credit card debt.

Brian Mathews · Answer

The first thing I would do is get out of the partnership thing.  Then pay off credit cards, etc...    How much do you owe on the rental?  It looks as if you'll have $30K left over after paying off consumer debt if you sell partnered properties.  Will that put a dent in the rental or allow you to refinance it at a better rate and lower principal.  That might make it more cash flow friendly.  Then take any extra cash you make off the rental and punch it in the face and pay it off as quickly as possible.  $100K sounds like a lot of money, but I consider that to be a middle class income any longer.

Kyle Hipp · Answer

also I forgot a big factor. How long have you had the property you are looking at selling. Make aure that you account for your lowered cash basis from depreciation. For example if if you bought the house 10 years ago you and bought for $120,000 you could have depreciation of roughly $35,000 so even if you sell for the same $120,000 you would have to pay taxes on $35,000 of gains.

Lynn McGeein · Answer

Heather, It seems to me the important decision is whether or not you want to remain landlords.  If you do, then keeping the house and working towards having that income stream in 15 years for retirement would be worth more than selling it just to pay off credit card debts or a boat loan, then wishing you still had the house down the road.  While you say you will not go into any more debt, finding ways to cut back to pay it off might be more beneficial for you, a lesson to insure you won't run it back up again after you've experienced cutting back to pay it off.   For us, touching our investment properties and retirement accounts is a last resort as we consider that to be paying ourselves for our future, and sacrificing our assets to pay off a credit card or boat just wouldn't seem right.   If, however, you don't want to invest in property anymore, than it's an easy answer that solves both issues.

Kyle Hipp · Answer

Do you see yourself in the rental business down the road? I understand wanting to get out of debt but what I am also hearing is that you do not see yourselves in this business long term. If I am wrong I would definately lean towards having your partnera buy you out on several of your other properties. I think if you are going to see yourself growing in this business down the road you would want to keep the one and only peoperty you own yourself and cashout of the partnership. That would be the path I would choose.

Should I sell to pay off debt

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