How to get $ out of free and clear rental homes

[Michael Davis]

I own two rental homes in California that I purchased for around $275K each absit 8 years ago.  Today they are valued at around $625K each.  No mortgages.  Great renters and rent totals  about $4500/month from both when combined.  However, I feel like I should be able to get more dollars out of my original $550K investment.  The equity just sits there.  Thoughts?

[Joe Villeneuve]

Your equity is your cash that has gone and died.  It represents what "could be" your cash.  That means your money paid face value for these properties.

Sell them.

Right now, your paid (your cash) $1.25M for properties whose PV total $1,25M.  If you sold the properties, and invested the proceeds as 20% DP (let's take out 10% for CC), you'd be paying $1.125M for a PV of $5.625M.  Big difference!

Cash flow right now is based on the initial value of the property.  So, if the current CF is based on properties worth $550k, that means by selling, and expanding your portfolio, the new CF should be at least 10 times what it is now.

You're losing money...big time.  Sell.  Keep your cash moving forward and working for you, instead of retired and working for nobody.