Growth Strategies/ Sales of Current Holdings to Larger Properties

5 Replies

I am a long time real estate investor who invested in Jersey City NJ before it was ultra hot in '97.  I am looking to take my real estate holdings to the next level but debate my best next move. I have a 3 family and condo both bought before 2005. There is quite a bit of equity in them, probably about 1.5m and I have about 200k in cash in hand. Looking for suggestions and ideas. I already make great income from the investments but would like step up to the 2-4m range (using sales proceeds as down payment) with a net income of at least 175k. My challenge in buying a new property will be current income with all my write downs. Thank you in advance for your thoughts.

@Michael Willis Are you on the buyers list for any large scale multifamily properties? If not I would get one several list, I receive about 5 emails a day for multifamily properties of 20 units up to 350 units. With the near 2MM you have available you have a lot of options to move up to a true multifamily property.

@Michael Willis I️ would sell the condo and 3 fam (depending on which neighborhood it is)
And 1031 into a 12 unit in the upcoming neighborhoods of Jersey City, but one drawback might be that those kind a assets trade at 5-6% cap rates

Ray and David I appreciate your suggestions.  I am grossing on the 4 units about 140k/yr, which as I look around seems very high.  So if I trade up, it may be for a much lower cap. But over the long term I assume will provide more growth and income. 

David, the condo (small studio) is in the best area possible in Jersey City by the river and has off street parking included, which is unheard of.  So its a little like a pearl. The three family likewise is also in downtown Jersey City but a little less hot.  

I have seen properties pop up now and again in up and coming areas for possible 1031. Isn't it a big challenge to pull off a 1031?  Even with the properties Ive seen, the revenue at the higher prices wouldnt produce that much more income than I currently make.  Thoughts? 

To add to the mix:  I have also considered (1) simply buying another smaller property with the cash in  hand in Jersey City, (2) keeping what I have and buying with cash in hand an out of the area other type of real estate asset like a mobile home park (3) trying to buy the property next to mine in JC with cash in hand, creating a double lot and reselling with plans (4) 1031 for a short term rental/high end motel property in the Fort Lauderdale area by the beach making cap rates in the 9-11 range (all year round market for rentals) (5) sticking with what I have and wait for now.

@Michael Willis , You're not way out of line in your wishes.  With the information given I have to swag a little and back in to a number.  But if you're wanting $175K of income with 1.5m of equity then considering an avg cost of financing you're probably needing to  look at a 7 - 7.5 cap rate.  Maybe a little higher.  That dog can hunt in a couple of markets and sectors.  The issue of you getting financing is more problematic.  

One addl thought to consider.  Right now NJ does not have a 1031 claw back which means that if you 1031 out of state you will defer those gains as you leave NJ.  And if you buy in a state with no income tax and later sell you can eliminate the state capital gain in total. if you just follow I-95 and come on down south and set up FL residency.  There's no income tax on that 1031d florida property (or TX, NV,WY, WA, and AK).  That can add a lot to both your bottom line and your tan line.

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