Portfolio Review - Equity Deployement

Buying & Selling Real Estate
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Portfolio Review - Equity Deployement

Jordan Blanton
Member since 2019 · 37 posts · 30 votes

Primary Residence – Market Value: 385k, Principle Owed: 216k - 3% interest rate

Rental Property #1 – Market Value: 165k, Principle Owed: $0 (Cash flows $1,050 per month)

Rental Property #2 - Market Value: 220k, Principle Owed: 108k (Cash flows $720 per month), 5.11% interest rate in year 4

Rental Property #3 – Market Value: 325k, Principle Owed: 242k (Cash flow $365), 5.875% interest rate in year 1

Rental Property #4 – Market Value 330k, Principle Owed: 258k (Cash flow $385), 5.875% interest rate in year 1

PORTFOLIO WORTH: 1.42M - MONTHLY CASH FLOW: 2520 

Asking for a portfolio review and more specifically how do I redeploy equity? Leaning towards doing a 1031 exchange on the paid off, lower valued property, as the other ones are newly aquired in better neighborhoods. Only negative about a 1031 is finding something that cash flows. But even if breaking even, assuming (and I do) that I have enough to cover payments, I'd be doing the 1031 to lock in 500k more control of real estate. Any thoughts or directions would be much appreciated! 

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Matthew MorrowBusiness Member
Investor · PA - NY - NJ · Member since 2019 · 458 posts · 168 votes
4mo
Quote from @Jordan Blanton:
Quote from @Matthew Morrow:
Quote from @Jordan Blanton:

Honestly, you’re in a pretty solid position overall. Low interest primary, decent equity spread, and positive cash flow across the board puts you ahead of a lot of investors right now.

Personally, I'd be careful selling the paid off property just because it's smaller. Free-and-clear rentals are hard to replace today, especially if it's producing over $1k/month. That's strong. I'd probably first look at whether there's a way to leverage some equity instead of fully disposing of it. A HELOC or portfolio loan against multiple properties could potentially let you redeploy capital while still keeping the cash-flowing asset.

The 1031 logic makes sense if your goal is scale and consolidation into a larger multifamily or commercial asset. We’ve done a lot of creative finance and portfolio growth over the years, and one thing I’ve learned is cash flow matters way more than just “controlling more real estate.” Bigger isn’t always better if the deal becomes tight every month.

I’d probably ask yourself what the actual goal is over the next 5–10 years. More doors? More cash flow? Less management? Better appreciation markets? That answer usually tells you what move makes the most sense.

Overall though, nice work. You’ve built a strong base already.


 Thanks for the reply Matthew, greatly appreciated! 

I've thought about doing a cash-out refi, and would still be able to cash flow a healthy amount per month. And exactly what you said is concern: selling a cheap paid off house that costs me nothing per month and making me 1k, and trading up to a ballpark 3k a month mortgage (4k monthly swing on paper). A lot more debt to pay every month just to capture some extra appreciation. 

Regarding my goals, would just be to create wealth efficiently. Sometimes I think I am too anxious in that goal and need to just let relax and let things marinate.


 Anxious is good! But investors harness that and know when to dive in / punch out. Youre further along than you realize. Trust your gut- and when it doubt- hit the forums / ask a mentor or someone whos walked it before. Happy to help in the future. 

[email protected]484-791-6200
CORE Team | Realty ONE Group Supreme547 Reviews
WebsiteView Page
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  • Matthew MorrowBusiness Member
    Investor · PA - NY - NJ · Member since 2019 · 458 posts · 168 votes
    4mo
    Quote from @Jordan Blanton:

    Honestly, you’re in a pretty solid position overall. Low interest primary, decent equity spread, and positive cash flow across the board puts you ahead of a lot of investors right now.

    Personally, I'd be careful selling the paid off property just because it's smaller. Free-and-clear rentals are hard to replace today, especially if it's producing over $1k/month. That's strong. I'd probably first look at whether there's a way to leverage some equity instead of fully disposing of it. A HELOC or portfolio loan against multiple properties could potentially let you redeploy capital while still keeping the cash-flowing asset.

    The 1031 logic makes sense if your goal is scale and consolidation into a larger multifamily or commercial asset. We’ve done a lot of creative finance and portfolio growth over the years, and one thing I’ve learned is cash flow matters way more than just “controlling more real estate.” Bigger isn’t always better if the deal becomes tight every month.

    I’d probably ask yourself what the actual goal is over the next 5–10 years. More doors? More cash flow? Less management? Better appreciation markets? That answer usually tells you what move makes the most sense.

    Overall though, nice work. You’ve built a strong base already.

    [email protected]484-791-6200
    CORE Team | Realty ONE Group Supreme547 Reviews
    WebsiteView Page
    0Reply
    • Jordan Blanton
      OP
      Member since 2019 · 37 posts · 30 votes
      4mo
      Quote from @Matthew Morrow:
      Quote from @Jordan Blanton:

      Honestly, you’re in a pretty solid position overall. Low interest primary, decent equity spread, and positive cash flow across the board puts you ahead of a lot of investors right now.

      Personally, I'd be careful selling the paid off property just because it's smaller. Free-and-clear rentals are hard to replace today, especially if it's producing over $1k/month. That's strong. I'd probably first look at whether there's a way to leverage some equity instead of fully disposing of it. A HELOC or portfolio loan against multiple properties could potentially let you redeploy capital while still keeping the cash-flowing asset.

      The 1031 logic makes sense if your goal is scale and consolidation into a larger multifamily or commercial asset. We’ve done a lot of creative finance and portfolio growth over the years, and one thing I’ve learned is cash flow matters way more than just “controlling more real estate.” Bigger isn’t always better if the deal becomes tight every month.

      I’d probably ask yourself what the actual goal is over the next 5–10 years. More doors? More cash flow? Less management? Better appreciation markets? That answer usually tells you what move makes the most sense.

      Overall though, nice work. You’ve built a strong base already.


       Thanks for the reply Matthew, greatly appreciated! 

      I've thought about doing a cash-out refi, and would still be able to cash flow a healthy amount per month. And exactly what you said is concern: selling a cheap paid off house that costs me nothing per month and making me 1k, and trading up to a ballpark 3k a month mortgage (4k monthly swing on paper). A lot more debt to pay every month just to capture some extra appreciation. 

      Regarding my goals, would just be to create wealth efficiently. Sometimes I think I am too anxious in that goal and need to just let relax and let things marinate.

      1Reply
    • Matthew MorrowBusiness Member
      Investor · PA - NY - NJ · Member since 2019 · 458 posts · 168 votes
      4mo
      Quote from @Jordan Blanton:
      Quote from @Matthew Morrow:
      Quote from @Jordan Blanton:

      Honestly, you’re in a pretty solid position overall. Low interest primary, decent equity spread, and positive cash flow across the board puts you ahead of a lot of investors right now.

      Personally, I'd be careful selling the paid off property just because it's smaller. Free-and-clear rentals are hard to replace today, especially if it's producing over $1k/month. That's strong. I'd probably first look at whether there's a way to leverage some equity instead of fully disposing of it. A HELOC or portfolio loan against multiple properties could potentially let you redeploy capital while still keeping the cash-flowing asset.

      The 1031 logic makes sense if your goal is scale and consolidation into a larger multifamily or commercial asset. We’ve done a lot of creative finance and portfolio growth over the years, and one thing I’ve learned is cash flow matters way more than just “controlling more real estate.” Bigger isn’t always better if the deal becomes tight every month.

      I’d probably ask yourself what the actual goal is over the next 5–10 years. More doors? More cash flow? Less management? Better appreciation markets? That answer usually tells you what move makes the most sense.

      Overall though, nice work. You’ve built a strong base already.


       Thanks for the reply Matthew, greatly appreciated! 

      I've thought about doing a cash-out refi, and would still be able to cash flow a healthy amount per month. And exactly what you said is concern: selling a cheap paid off house that costs me nothing per month and making me 1k, and trading up to a ballpark 3k a month mortgage (4k monthly swing on paper). A lot more debt to pay every month just to capture some extra appreciation. 

      Regarding my goals, would just be to create wealth efficiently. Sometimes I think I am too anxious in that goal and need to just let relax and let things marinate.


       Anxious is good! But investors harness that and know when to dive in / punch out. Youre further along than you realize. Trust your gut- and when it doubt- hit the forums / ask a mentor or someone whos walked it before. Happy to help in the future. 

      [email protected]484-791-6200
      CORE Team | Realty ONE Group Supreme547 Reviews
      WebsiteView Page
      1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    4mo

    @Jordan Blanton First thing I would do is eliminate the primary residence from the discussion. There used to be a guy named Joe Vesey? (I loved him) Who would shout from the tree tops - Your primary residence is not an investment. It's more accurately an appreciating asset. And nothing wrong with that. But you shouldn't treat it like an investment. Cause it will change your investment underwriting. Let it be your anchor

    Your thoughts on that paid off property are pretty right on. $150K of equity (after closing costs), bringing in $12000 a year is OK or not so OK, depending on what you mean by "cash flow". If it is cash flow without allowances for vacancy, repairs, or any type of risk, then your true return isn't so great.

    Since you have to exchange into equal or greater real estate, it can be any type of investment real estate in any state. I'm sure you'll be able to find a property with better cash flow potential. Even a stodgy DST is going to net you close to that. And both a DST or a bricks and mortar property purchased with leverage will greatly increase your IRR. If you ever feel overleveraged and want to mitigate risk or are just tired of managing a bunch of properties, you can always do what we call a consolidation exchange and sell two smaller properties in a 1031 and exchange into a duplex or something larger, like a commercial property.

    The 1031 Investor5137 Reviews
    WebsiteView Page
    0Reply
    • Jordan Blanton
      OP
      Member since 2019 · 37 posts · 30 votes
      4mo
      Quote from @Dave Foster:

      @Jordan Blanton First thing I would do is eliminate the primary residence from the discussion. There used to be a guy named Joe Vesey? (I loved him) Who would shout from the tree tops - Your primary residence is not an investment. It's more accurately an appreciating asset. And nothing wrong with that. But you shouldn't treat it like an investment. Cause it will change your investment underwriting. Let it be your anchor

      Your thoughts on that paid off property are pretty right on. $150K of equity (after closing costs), bringing in $12000 a year is OK or not so OK, depending on what you mean by "cash flow". If it is cash flow without allowances for vacancy, repairs, or any type of risk, then your true return isn't so great.

      Since you have to exchange into equal or greater real estate, it can be any type of investment real estate in any state. I'm sure you'll be able to find a property with better cash flow potential. Even a stodgy DST is going to net you close to that. And both a DST or a bricks and mortar property purchased with leverage will greatly increase your IRR. If you ever feel overleveraged and want to mitigate risk or are just tired of managing a bunch of properties, you can always do what we call a consolidation exchange and sell two smaller properties in a 1031 and exchange into a duplex or something larger, like a commercial property.


      Primary residence is listed to paint full portfolio picture, and with a HELOC for future opportunities, it serves as an investment tool while being an appreciating asset.

      Thank you for your insight. Multi-families in my area are difficult to come by, and even more finding one that would cash flow over 1050 per month. Also, concerned about taking a paid off asset that could sit for a year and not cost me anything, and move it to a mortgage that would be over 3k a month (4k monthly swing on paper). I understand that the trade up and avoiding taxes is the move, but the opportunities don't seem there at the moment and I don't want to force the timing. 

      0Reply
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