All Forum Posts by: Hunter Peterson

@James Hamling This was just meant to be a hypothetical. I should have left the part about the market tanking out of it. 

Seems like you have some deep seeded hatred for news outlets that preach doom and gloom. Totally get that. I was referring more to the fact that home prices with respect to average income are substantially higher than they were in 2007, mostly in secondary markets people moved to during Covid (and might not stay forever). Add huge rate hikes on top of all-time high prices, and it seems shortsighted to me to just say "well there's not enough supply and people have equity in their homes so Americans should be able to afford ever increasing prices to infinity." What about the huge influx of first-time millennial home buyers that can't afford current prices? What about those whose buying power has been inflated by this unprecedented stock market run that's now coming back down to earth? They'll all just be renters (maybe, I hope not). 

Anyways, just my opinion, but I'm not simply reading a headline that says the sky is falling and treating it as gospel. 

@Allan Smith ROE is a great metric here. You're right. 

@Carlos M. Totally understand your point. I do plan on this property being the first of many, but in my case current cash flow and my W2 savings would realistically take 5-10 years to save a down payment where I'd like to live. Seems to me like an ideal time for me to sell and reallocate not just with regards to the market, but my personal goals as well. 

@Luka Milicevic I appreciate your perspective. When I looked at tapping equity through cash out refi, I would have been able to access about a third of my equity, it would have cost me almost a sixth of my equity to do so, and my rate would have gone up 2 whole points. 

I guess I should clarify that this isn't my full time gig. I don't have 300 properties and I'm selling a small portion of them to reallocate. If you wanted to access the capital in that scenario, what would you do? 

@Patricia Steiner I hear you on that, but if living off the W2 and investment cash flow alone makes you a renter, whereas selling the investment and using some of the proceeds to get you into a home you own, would you consider that a worthwhile trade off? I'd invest the remaining proceeds back into real estate or stocks, but at least this way I'm not wasting five figures a year on rent!

@Curtis Mears My owner occupant status would help with some of the cap gains, but not all. I see a lot of sense in your strategy. Even if I don't know exactly what I'd do with the proceeds, I feel that having some capital available if things go south is a much better option that seeing my inflated equity in a property slowly decrease (admittedly a big "if" there)

@Nathan Gesner That is absolutely my thought process. Transition the equity into a set up that works better for my lifestyle, rather than let it all sit in one property and risk losing a portion of it should we see a prolonged recession. 

@Steve Vaughan Thanks for that insight. I see this as an opportunity to fast forward my investing rather than sitting on this great asset and not really taking advantage of it until retirement age. 

@Marty Boardman @JD Martin @Bill B. @Aaron Gordy @Jordan Moorhead

Thanks for those insights. In my case, the equity built in this property over the last several years now makes up a majority of my net worth. I'm a W2 employee with some savings, and my property is generating very healthy cash flows, but I'm still not close to having a second down payment saved for a primary residence where I want to live, grow my family, etc. unless I access the equity in this property. Cash out refi options were not attractive given the amount of fees I'd have to pay in order to access the amount of equity I'd be getting. Capital gains taxes would be low enough that I don't feel a 1031 is mandatory. 

I know rents will go up (as will property tax) and in the long-term values will always grow, but I look at the situation and sort of think I'd be crazy to not take advantage of the 20-25+ year's worth of current annual cash flow I could liquidate now, use some of that to reach my family's personal living situation goals, and reallocate the rest over the next few years either back into real estate or take advantage of some of the big dips in stock price we've already seen for companies like Amazon.

I guess it's the same question as - If you win the lottery, do you take the lump sum or the monthly installments? All depends on what you do with it I suppose. Thanks for your opinions! 

@Marty Boardman

Moody Analytics just announced 344 US markets are overvalued by 10%, compared to only 261 in 2007. This time, it’s concentrated in secondary/tertiary markets that people flocked to during Covid, rather than in the major cities like the last time. Forbes says pending home sales fell to the lowest level in a decade in April and are getting worse. With the recent rate hikes, the average home price would have to drop more than 50% to get the same monthly mortgage payment as just a couple years ago. 

I understand the effects of supply and demand on price, but at a certain point regular people won’t be able to pay ever increasing prices. No doubt inflation raises asset prices in the long run, but it seems like that’s just one piece of the puzzle here. Nobody knows the future, but I don’t think it is irresponsible to bet that some home prices take some type of step back in the coming months/years.

Plus… you never answered my question!

Answer this… If I could walk away with XX years of my current annual cash flow, it would be worth it for me to sell my property now.

Since we may be due for a correction here in the near future, I figure I’m not the only person reconsidering my buy and hold forever mindset and looking at cashing out now and reallocating those dollars more effectively in the years to come. For me, there are also some personal goals pushing me towards selling and reallocating the funds in a way that better suits my lifestyle. 

Thank you @Greg Scott. For my purposes, the property is owned in my name and my DBA name does not include my name. So in your example, I'm looking to put "Main Street Apartments" (if that was my DBA name) as the landlord line of the lease instead of my actual first and last name in that space.

I created a DBA (doing business as) for my rental property business that is tied to my personal name. Legally, am I ok to list the DBA name and only the DBA name on the line where it says "Landlord" on my lease agreement? Will that cause legal question marks should the lease agreement ever need to be enforced (knock on wood)?

If you care to elaborate... what good really is a DBA in providing a layer of anonymity to your ownership of a property? From everything I've seen, the important stuff (for example automatic rent deposits) requires me to use my name instead of the DBA name anyways. Thanks!

Thanks @Seth Williams. Yes - next calls are to utilities and post office. Will reply here if I uncover more.