All Forum Posts by: Edward C.

@Paul Choi - yep, i get that math. the additional 400-500bps in an alternative investment is nice, but not the primary consideration. have always viewed RE primarily an inflation hedge.

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@Caleb Heimsoth - super helpful. thanks.

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Yep, that's what I'm looking to do (but not re-invest into real estate).

Originally posted by @Jeremy Beaumier:

Could you not pay sell off the low performers, pay off some of the mortgages, then use the equity from the paid off properties to finance new investments and still keep a higher cashflow?

(I'm new, so maybe I'm missing something)

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Thanks Thomas. I get the math, but remember this is trapped equity that can't be pulled out because the LTV is ~75% currently (following cash out refis mid last year). By selling the properties, I'd be able to take out the trapped equity (25% equity value) and then (to your point) redeploy it elsewhere. Since I'm not inclined to purchase more real estate at this stage in the cycle, I'd rather pay down debt or potentially invest the funds elsewhere to earn a higher return. I'm kind of at the stage with the size of my investment portfolio, where I'd be comfortable paying off entire mortgages and just collecting cash.

Am trying to understand if others had followed a similar path and what their rationales were for doing so. If there is anytime to pursue such a strategy, I think it's now (with the exception of the financial caveats that I mentioned above).

Originally posted by @Thomas S.:

You will not increase cash flow by paying down a mortgage. What you are actually doing is buying cash flow at a very high cost. With mortgage rates at 4% and the opportunity value of cash a realistic 10% you are losing 6% annually on your cash not increasing cash flow. Realistically would you have considered investing in real estate when you started out for a 4% return. Buying cash flow and increasing cash flow are entirely different. One is investing, the other is not.

Selling losers is a good plan however parking surplus cash in real estate is a bad plan. Take the money and diversify your investment farther. Investing in a moderate risk income fund should be able to achieve a 10% return on average over time. You should also pull dead equity out of your remaining properties to increase ROI and reinvest it as well.

With the possibility of a correction in real estate values on the horizon you do not want to leave dead equity at risk in real estate. Real estate is the last place you want to park excess cash if you believe we are at the top of the cycle. As long as you have positive cash flow there is very little risk with leverage.

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Hi all, Was hoping to get perspectives / hear stories on how others approached the possibility of selling RE assets and using the proceeds to paydown debt on other properties. Here is what I see as potential +’s and -‘s: + increase cash flow by removing mortgages (so more passive income) + opportunity to sell underperforming assets - less assets under management (so less potential equity appreciation) - taxable gains (will not redeploy into RE as my sense is we are near the top of the market) - 30 year fixed mortgages in place at low 4-handle rates (based on simple bond math, the value of my liability is shrinking on a relative basis as rates rise) Other facts relevant to my situation: * RE is but just one asset in my portfolio (and I’m fine with that); cash flow and appreciation are great, but I’m looking at the asset class as more of a long term hedge against inflation * not looking to leave my day job and / or replace W-2 income entirely with passive income * don’t need the cash flows from RE; again, I see the asset as a levered inflation-hedging play

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Welcome. You're joining a well established community of like minded folks. Tons of knowledge, connections and local know-how (i.e., connections to leads, financing, contractors, investors, etc). Hope you can effectively tap into the network and add value thereafter!

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All Forum Posts by: Edward C.

Edward C. has started 5 posts and replied 44 times.

Post: FSBO: Palisades Park, NJ (2/2 condo)

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: Selling half of portfolio to paydown mortgages?

Post: New To Bigger Pockets (NJ)