All Forum Posts by: George Pauley

First, your tennant is valuable, even if they are getting their deposit in at the last minute.  Vacancies are expensive and destroy your cash flow.  You need a compelling reason to dump a tenant.  Specifically the tenant needs to be costing you more than the vacancy is going to cost you.  Make sense?

Second, stuff happens.  Water heaters need replacing, bank errors occur, tenants move out, real estate bubbles happen, etc.  Complaining, or (overly) worrying, about these things is counter-productive.  Just do what needs to be done to rectify the situation, and proceed to the next issue.  My wife and I got this piece of advice early in our investing career and, to this day, we both look at each other and say "NEXT" in unison whenever one of these myriad annoyances occurs.

@Shiloh Lundahl, do you still run your own meetup?

My wife and I joke that we learn a new $lesson$ with each deal we do. You're going to make mistakes, and you will, hopefully, learn lessons from those mistakes that will cause you to make a better deal next time.  Don't beat yourself up too much about it.  Just pull the trigger, learn the next lesson, rinse and repeat.  :)

We go through a lot of effort to put LLC's in place to clearly and legally remove our personal selves as the owner of our investment properties. And we have pretty good reasons for doing that. I think those same reasons apply when deciding to "advertise" to our social circles about our real estate wealth. Many of my friends and family know that I'm an investor (as I encourage them to follow suit), but I keep most of the details pretty quiet.

One of the nice things about this forum is the opportunity to discuss things like this without making myself a target.

This is very insightful. Yes, I want dependable cashflow to live off of in retirement. NNN is something I should be considering. Thanks.

A few reasons. These properties are in Tolleson and San Tan Valley, so the rents aren't as high, nor have they grown as fast as Phoenix metropolitan proper. Second, I am brutally honest in my bookkeeping. Those CoC values include EVERY cost associated with the properties. All vacancies, rehabs, replaced A/Cs, flood damage from burst water heaters, HOA fees, taxes, insurance, property managment etc. When things are going well the cash flow "looks" great on a month to month basis. But when you wait long enough something eventually happens to eat up all that profit. (Which is why I'm contemplating just moving to patch of land.)

Yes on the taxes.  Right now the Mrs and I make too much money in our day jobs to take passive losses off our returns.  But I have definitely recognized that having a boat load of leveraged investment properties, while being retired, pretty much means I should never have to pay taxes again.

I'm 55, work out hard, and eat well :)

I recognized that my post wasn't a solid question, but I'm not necessarily looking for affirmation of my plan to sell.  Rather I'm looking to start a conversation.  I will often get good ideas that I had never thought of when discussing deals.  Given that converting 3 Phoenix properties into 10 midwest properties via 1031 will be the biggest deal I've ever been involved in, I definitely want to give those out-of-left-field ideas a chance to be stated before I pull the trigger.

Replacing debt shouldn't be a problem.  I intend to use the cash for 25% down payments on as many properties as possible.  (I have a turnkey provider who can give me that many.)

Thanks for the PeerStreet recommendation.  I will be rolling substantial 401k savings into Patch of Land and similar investments in a few years.  I definitely want to spread the money around to reduce risk.

I had definitely considered moving up to multi-family or commercial.  My concern is, given how many expensive lessons I learned while getting into single-family rentals, how many expensive lessons do I have to learn about multi-family?  But these options are definitely on the table still.

Hi BP'ers!

I am planning on selling my 3 AZ rental properties and wanted to put my thoughts on why and how up for review, critique and alternative thoughts.  :)

All three properties are in the Phoenix AZ area, and were bought between 2009-2011.  I'll tag them by their street names.

Superior:   Purchase:  $142k   Down $40k   Owed $101k   Sell $280k   LifeCoC  $-17k

DragonTree:   Purchase $147k   Down $35k   Owed $103k   Sell $240k   LifeCoC $0

Trellis:   Purchase $155k   Down $35k   Owed $114k   Sell $260k   LifeCoC $-7k

   
My motivations for selling are, first, I've bought other, much better cash flowing properties in the meantime.  (Though I'm not seeing near the appreciation.)  Second, I'm hoping to retire in the next 4-5 years and figure I should get my appreciation cash out while the getting is good.  I think Phoenix is a solid market with plenty of room for more growth, but you think about these things a bit differently as you get close to retirement.  Finally, I would like to get rid of the negative/flat cash flow properties before retirement.

Thoughts, comments?  Are there compelling reasons to hold on to these properties that I haven't considered?  The appreciation on these properties rocks, and maybe that's worth more than the horrid cash flow?

I see the deal as $780k total sales price. Minus 10% commissions/fees. Minus $320k mortgage payoffs. Leaving me about $350k cash afterwards. That's a profit of $240k in 7 years on $110k invested. A bit more than 10% ROI. Any problems with my calculations?

Finally, taxes.  If I take the cash, my accountant is estimating $70k in taxes, leaving me $280k in pocket.  I am vacillating between just taking the $280k, putting it in Patch of Land, or other equivalent vehicle, and getting my 9-10% a year without having to deal with properties, managers and tenants in my retirement.  (At least on these properties)

The other (mathematically better) option is to go through my first (mother of all) 1031 exchange and buy about 10-15 properties in more favorable markets (midwest) each cash flowing about $200/month.

I'm interested in everyone's thoughts on these two options.  Mathematically 1031 is the way to go.  But does impending retirement and the idea of getting my equity safely out of properties that may experience a down turn mitigate the math?

No right or wrong answers here.  Just looking to see what kinds of creative input this group comes up with.  Thanks much!

I think diversification is one of those words that means different things to different people.  You could diversify by branching out into commercial, multi-family, agriculture etc while staying in the same geographical area.  To date my diversification has focused on dominant industry in an area.  For example, one city I'm in is dominated by transportation, another by a military base.  I'm basically trying to tap different economic sectors.  I know folks who invest out of country chasing tax advantages.  
If you can concretely state what risk you are trying to mitigate, I think the if, when, where, and how of diversification becomes self-evident?