All Forum Posts by: Chris Meunier

Hi @Joe Splitrock--here are some more details. There is about 26 years remaining on 30 year fixed mortgage at 3.75%. Initial cash investment was minimal, let's call it $20k. Also for everyone else on this thread, I totally get that cash on cash return as a % would be maximized by allocating this money across multiple REIs. However as I stated originally, my goal at this point is to maximize passive income and grow that as quickly as possible. 

Interesting @Derrick E. Would you mind sharing more about your reasoning for doing this, in light of the many other responses saying its better to leverage your money in other ways?

Thanks everyone! This is all great advice. 

@Joe Villeneuve thank you for articulating it that way--I definitely see your point now that i'm putting myself in a hole right away! 

Thank you! @Joe Villeneuve, to answer your questions: yes it would be paid off with cash. After paying off with cash, my total income would rise to 30k/year (before any maintenance costs). The current PITI+HOA is about $1950/month. I do get your point about investing it elsewhere that also has a positive cash flow, but part of me was thinking this is an easy way to immediately increase my cash flow and return on the 200k investment. But as @Samuel Liapis has said, there are also tax benefits I would lose out on that are not factored in to my calculations. 

Hi Everyone! I have a rental property with the following details:

• 210k loan balance 
• $2500/month rent
• $6000/yr in income after PITI and costs today

If I pay off the remaining balance on the loan, I will have over 10% cash on cash return which sounds amazing. It is already cash flow positive today, around ~$600/month. My overall investment goals right now are to create passive income, so this would fit in with that. Is there anything I am missing with my considerations? Of course there is the option to invest the 210k in other real estate opportunities, but I may be hard-pressed to find something above 10% return. Thanks in advance for your thoughts.

A simple question--I am fairly familiar with the 500k capital gains exclusion rule that is for properties lived in 2 out of 5 years. My question is around what tax goes into that 500k calculation--only federal tax? CA state tax too? Anything else? 

On another level, could someone recommend a good website that details out all the taxes I would expect to pay when I sell a home in CA? 

With the reform that was passed. the 2 out of 5 rule was left unchanged in the end. 

Wow, I am amazed by all the responses! Such great advice and different perspectives I had not considered. A few additional points to add, based on what many of you have said or asked about:

• For Rental B, we still have until 2020 to use the 500k capital gains exclusion, given the 2/5 rule
• For Rental A, we can't use the 500k exclusion
• Generally speaking, a 1031 exchange is not a good option for us because we do want to pull some cash out with whichever path we choose. I would hate to pay extra taxes if we do a 1031 exchange for less than our current property B is worth, leading to taxes. If someone knows of a way to do this without paying taxes though, let me know!
• Right now we are leaning towards selling Rental B in 2018 or 2019, pocketing the proceeds nearly tax free, and then possibly doing an out of state investment with 200-300k of our money

Thanks all! 

@Lana Lee - yes it's a single family. The SF Bay Area is likely too expensive to 1031 into better cash flow situation so I would likely need to explore out of the state, which I have not thought about at all yet.

@Aaron K. - good call on using the HELOC to fund improvements, and I had not thought of refinancing our primary down the road to help pay off the HELOC. Our cash savings would not reach the level we want for several years probably for us to feel comfortable, hence our desire to unlock some cash.

@Christian Wathne - I had not thought about getting into another property/set of properties if we sell one of ours, partly because we want to reduce the stress and time of owning/managing another rental. However if there are low-risk hands-off ways to do an out of state investment I would certainly be open to it, especially if it provided solid cash flow. Where might I research available options like this?