All Forum Posts by: Joshua Nunnally

@Joshua Nunnally, there's all kinds of directions you can go but make sure you do it with the right funds and in the right order and you can save yourself maybe 40K real dollars,

If you want to sell the lot then do so but do not pay off your house with that money.  Use a 1031 exchange and go buy a $160K rental property - or two 80K ones if you want.  They will be owned free and clear and because of the 1031 you'll have deferred all of the tax on gain.  You get to use it as part of the purchase of the new property.

Next decide what you want to do with the 200K in savings.   what are you making return wise vs what is your mortgage?  Maybe pay off the house and keep the other 40K for contingencies.  Or leave the house mortgage and buy another rental or two with savings.  Or do a blend.  Keep plenty of cash for reserves but also buy one rental and leave the mortgage on your primary.

The key is to use the lot sale to buy other investment real estate using the 1031 exchange that is where you get the massive tax savings.  The rest of the picture you can paint how you want.

@Joshua Nunnally, what about selling the lot and not pay off your mortgage? Use that money plus savings to purchase an investment property. Id recommend this strategy because if you reinvest your capital gains, you can file 1031 so that money is tax defered. Also, the benefit to keeping your mortgage is that most, if not all, your interest payments on current property can be written off on your tax's. If the investment property you purchase, was tri-plex or quad-plex, you could potentiality owner occupy, and rent out your existing property to completely cover the mortgage and also have cash flow.

As most other's have said, just my .02

I hope it helps!

@Joshua Nunnally,

My take on dead equity is that it's just dead equity: it adds to your net worth, but produces no income. If the property doesn't appreciate at or above the rate of inflation, your equity loses value.

Some folks want the "warm fuzzies" they think they'll get by not having a house payment beyond a monthly property tax set-aside. Then, they see a juicy income property come up for sale, discover they are house-rich and cash-poor, then they go looking for HELOCs and cash-out refi's.

My $0.02...

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

Joshua Nunnally I would also be interested in knowing where your lot is? I am new to real estate investing and looking for my first investment.

Hey Joshua,

There are a lot of builders here in Nashville looking for lots. I would consider partnering up with them, having THEM fund the construction of the house, and do some sort of split on the profit. That way you minimize your risk on building, not have to tie up your credit/capital, get some great experience in REI and get the money back on the land as well. I have a really good contact for you if you're interested. Just an idea.

Sell the lot, pay off the house then use a home loan to invest.

This would provide 100% leverage and assuming they have positive cash flow you are set to go.

What part of town is the lot in? In all actuality the lot may or may not bring in what you are asking for. If the lot is at a great price with the right zoning requirements, I may have an investor that would like to take it off your hands. lol! (shameless plug). If you want to start in investing I would have to agree with @Brad Taylor. Option A. Good luck hope it works out. 

I would sell the lot to payoff my personal residence. If you do this saving money for future investments would be much easier with no mortgage payment. Also, it will open up you Debt to Income ratio if you plan on leveraging any future investment properties. 

Are you saying that you can sell the lot for $360K or would the new investment be leveraged? I think it really depends on what your goals are. I am guessing that you are not in love with your current house, but how bad are you wanting the new house? Enough to possibly delay REI? Personally, I would rather be sitting in a paid for primary with a paid for (or even leveraged) rental rather than having a mortgaged new house with a mortgaged rental.