Quote from @Michael Cai:
Quote from @Sunny D.:
Quote from @Michael Cai:
Quote from @Corby Goade:
@Michael Cai Absolutely- you can still access most of that equity tax free if you keep it, and I assume you haven't had a buy and hold rental before? If not, you haven't even begun to experience the tax benefits and they only get better over time.
Yes- keep it, and if you want to scale, get a HELOC before you move out and begin your journey. Don't miss the forest for the trees- there are thousands of people here who are kicking themselves for selling their primaries and flips without really considering finding a way to keep them.
I did my calculation, if I keep it long term - I mean really long term, suppose the property goes up to 840k in 13 years, not unreasonable, by that time my 15 tear mortgage is paid off..so I will have 850 minus 500k gain * 15% long term tax = $75k, so I after tax will have 775k, compare to sell it now and net 380 or 390k. Nothing else will make me an extra 380k after tax in 13 years, all while still cash flowing on that property, so you are completely correct that to build wealth I can hold it for a really long time and no worry about paying tax on the gain. Plus I already have a HELOC of 250k on that house, so holding long term is an option.. but if I sell it in 4 ,5 years then it's not worth having to pay tax
If I need the money then sell it in 2 years. Unfortunately I may need the money, I'm supporting wife and two kids :), either way I will rent it for two years and see what my situation is at that time and decide..
My first CA rebtal home in Folsom, I bought it for 255k in 2012. I rented for 1750$ and broke even on cashflow. I took a 15 year mortgage, refinanced at 2.25 pct and only have 40k left on the original 205k loan. I paid off a few 100$ a month once in a while . Property is worth 700k and rents now for 2850$ with 1000$ cash flow. In 2 years I will own it clear. I don't plan to refinance, the cash flow of 3000$ is what I seek. There is no need to keep chasing volume in assets, I have 2 other sfh in folsom that will be paid off in 10 years. Cashflow is not king, debt free with high quality growth assets is the king.
Are you saying I should keep holding this property and not selling it?
Yes if it's a class A asset which will have a good balance of rent growth and appreciation , given you have a sweet mortgage. Anything you buy for next 2 years, expect 6 pct min interest
Eventually in 10 years you can 1031 to a high end investment asset if you are bored ;)
This is coming from someone who tried too many things in last decade (mostly in last 6 years)
- bought 7 sfh or duplex in Cleveland west side (sold 4 for nice profit , 3 left)
I won't buy there anymore, tenant class not appealing for me
- 2 flips in Cleveland, marginal profit
- 1 sfh in Birmingham, will get rid of it someday
- 3 out of state flips in Chicago ( lost net 60k on all)
- 5 bay area flips with a partner ( my net profit maybe close to 300k)
- close to a million in multiple real estate syndication deals
- 3 sfh in folsom
At this point, i will be happy to own 5 sfh in class a areas debt free and rest go for passive deals.
