Quote from @JD Martin:
Quote from @David Charles Edwards:
I'm not referring to a HELOC, since you normally don't get those on investment properties - I'm talking about straight up mortgages on the property. Read up on equity harvesting here and elsewhere, but yes you get the general idea in your last paragraph - cash out, let the PMs deal with the properties, rinse and repeat every 15 (or 20, or 30) years. Yes, you have to open up a little bit from the Dave Ramsey mindset which works great for people on the edge but not very well for investors or those with money.
Even at 8.5%, as long as everything gets paid for it's largely irrelevant. If rates fall significantly, refinance. Now if you don't need or want the extra income, then you can just leave thing as is, but then there's also little compelling reason to sell and take the tax hit.
After 25+ years of acquiring and managing our rental properties, the "compelling reason" to sell is just freedom, peace of mind, reduced liability, and guaranteed income from an annuity. I suppose I need to at least try the Property management route first before I cash out and walk away. I've still got another year before the last one graduates high school and we are empty nesters.
Another wrinkle to consider. I own all these properties in my name. Rather than setup LLCs for each property and deal with the added expenses and book keeping, we just file them on schedule E and I have a butt load of liability coverage.
If I keep them, I might want to restructure as part of the refinancing to reduce my exposure and maybe even set them up so the kids could take over without having to be actively involved. I'm not sure how that would be done.
I have the same setup as you. Don't overthink it. Maximum liability coverage and a good umbrella policy is going to take care of 99.9% of your needs and exposure. As far as your kids, that's easy too - set up a trust and move everything into the trust.
Real estate is best served by holding it forever, at least the way our current tax system is designed.
This definitely is a big brain move @JD Martin !! Especially if they're all paid off!! But I would definitely restructure to remove exposure, shouldn't be too much of a lift to organize LLC's and proper trust!
The only other option that I have seen that is "the best of both" is a company here in California that has setup a fund you could contribute the properties to and receive equity as an investment partner of the fund that gives equitable share of the entire funds properties without exposure to liability. Investors receive % annual cash flow, increased deprecation benefits, refinance distributions, with long-term generational returns.
Since they're focusing on multifamily units here in California I don't if it would work for you, but applying the same equity harvesting strategy is gold, imo.
Congrats on retirement btw!!
