All Forum Posts by: Amit M.

I agree with both of these comments. Especially if you’ll be paying off helocs. 
I essentially did this move in 2021-22, and kept my best properties debt free. It turns out to be A LOT LESS work.  Not only because you reduce the number of properties, but also because you get rid of the difficult ones. Now I just have a few high end condos that are much easier to deal with, so we can spend 4 months of the year out of the country :) Best. Decision. Ever. 
Good luck, and let us know what you decide to do. 

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I agree that the biggest factor is the market cycle. In bull market almost all syndications do well. Bear market and they almost all hurt. The syndicator quality and experience comes into play during bear markets…as you then see who’s swimming naked when the tide goes out.

But market cycle overrides everything imo. When I sold some lesser properties during recent market high of end of 2021/beginning of 2022 I chose to pay the cap gains. I knew that newly formed syndications and DSTs were not attractive at market highs, so I didn’t invest. I chose to pay off debt on my keeper properties instead. Basically I didn’t want to invest in this market cycle with debt money (by doing a 1031 exchange) as it felt risky. Once you make good money on your investments in an up market, and you enter a down market, wealth preservation takes precedence. The trick is to know when to shift gears!

I’d be nice to see past performances listed. Both during bull markets like 2014-2020 and during busts like 2009-2012 and 2022-present. I imagine DSTs initiated durning 2014-2017 did well, and those created the last 2 years…not so well. Besides the quarterly payments, what has the appreciation really been like after disposition, given all the fees DSTs take. 

@David Charles Edwards A question you should ask yourself is if your condos have strong appreciation potential/future owner user, or are they more limited and seen as only rentals in the future? Also do your kids really want these? Or would they be equally content with paper assets in the future?

Besides working out the numbers, IMO a big part of your decision should be based on how desirable these assets will be to keep in the future. Otherwise I’d lean towards a simpler is better solution to minimize headaches. 

Yeah this approach can work with rentals in the 1% range. But I think for CA properties in the 0.5% this wouldn’t work so well. 

I’d think one would be tempted to reinvest the $100k cash to help offset the “lost” rental income from that unit’s new mortgage. Using the $100k to pay off that mortgage would only be a temporary solution. So how does the mid to end game work with this scenario of serially taking on new debts?

@JD Martin if he leverages his properties how will he replace their income?

@David Charles Edwards  Hi, I did a similar thing 3 years ago. In my case I sold some properties that I felt didn’t have strong appreciation upside, and used the proceeds to pay off the few others I wanted to keep long term. So now I’m managing 4 higher end condos with class A tenants, and not the 9 others that were class C. In my case that made enough of a difference to make property management very light. And I get to keep prime properties with good appreciation potential. 

So a question you should ask yourself is if your condos have strong appreciation potential/future owner user, or are they more limited and seen as only rentals in the future? Also do your kids really want these? Or would they be equally content with paper assets in the future?

you do have the 1031ex as an option, but I passed on it for both NNN commercial and for DST. When I sold in latter 2021/early 2022 interest rates were super low (as well as cap rates). So I knew that once rates went up most commercial props would drop in value or go flat. Plus I dislike investing in areas I know nothing about. My properties are all in San Francisco proper which I know like the back of my hand, and I didn't want to exchange into a random NNN in middle America where I know f*ck all about the area. You don't know what you don't know, and that's risky dropping big cash on IMO ;)

I also couldn’t get on board for DSTs. Now THAT is where you pay fees up the wazoo, plus have zero control over your asset. I preferred getting rid of all debt (incl. on our primary and second home). Once you’re at zero debt it’s amazing how far you (more limited) cashflow can go. Remember, except for property taxes (in our case CA locked in super low) insurance, utilities and some maintenance, all other $ goes for the fun stuff in life. So I wouldn’t discount that approach, unless you really feel your units have strong appreciation potential (and in that case maybe a PM makes sense.) Best wishes.

@Becca F. if you add an ADU in San Francisco you change the status of the SFH to a 2 unit building, and then you're definitely under rent control. Not recommended IMO unless you have some pretty unique circumstances.

This is why ADUs have been a big fail is SF. Some apartment bldg owners added them (to an already rent controlled building), but few SFH owners have done it. Plus they are getting super expensive to build. Even the apartment bldg owners didn't make a killing in equity; they mostly added new income, as the build cost of +/- $250,000 per unit didn't provide much equity upside. Lots of hassle for so-so return IMO.