Advice on Currently Held Properties

[Gigi Michaels]

Good morning all:)

I am looking for someone who might be able to advise with respect to my current situation. I own two properties that I purchased during the time I was married and received as part of the divorce settlement a number of years ago.

Both have been primary residences at different points. Neither would have typically been considered investment properties as they were purchased as a primary residence at the time. Both are in in demand homes in terms of rentals in excellent locations, with good schools etc. I have rented them both out at different points and can cash flow them. One cash flows for $1000 a month, and the other for over $500. The next time around they will most likely go for more. I can manage them myself.

I am 53, and looking at these properties in terms of long term retirement strategy investments. From a cap rate perspective, they would not ordinarily fit the 1-2% rule. But it has been suggested that given I received them in the divorce, if I consider that if I sold them and had to try and find other properties to invest in, I am already in these properties without having to incur transaction costs or qualifying. Due to the nature of the neighborhoods and level of renters that they attract, I am always at low risk as the people I will get consistently have high credit ratings and good incomes. Both homes are in areas with stable employment for high income earners. Housing is difficult to find as well in both areas.

My question is, though it doesn't fit the typical investment formula, would it still be in my best interest to hold on to these properties long term? I am on my own with having to figure out what is in my best interest. I have built and remodeled houses throughout my life and am good getting renters and maintaining. I have had good loans on both of them, and am in a position to refi them to a 30 year fixed right now. The only reason I wouldn't would be if I was planning on selling them in the next 5-7 years. My other question is whether or not it might be wise to get a 15 year fixed on the one that cash flows $1000 plus if I can still cash flow $500 or more on that property.

And if I didn't live in either, would I be ok if I was to rent something smaller, or would that cancel out the benefits? I am comparing it to investing in an S & P 500 index fund, which scares me a little bit, but seems like it might be easier if I was told that what I am doing does not make sense.

Any thoughts or help would be greatly appreciated:)

Thank you:)

[Drew Castleberry]

Personally, from everything you said in the post, it looks like you've answered your own question. They're great properties, in great areas, can easily attract great tenants and you get a lot of cash flow from them. Personally I'd hold on to them, long term as part of your retirement strategy. That $1,500 income would be great supplemental income, especially in retirement. Definitely don't sell them to invest in the stock market!

As for refinancing, you'd have to post more detailed information about the properties (current mortgage, rent, etc).