Updated almost 2 years ago on . Most recent reply
In need of advice for an accidental real estate investor
HI - - With no real strategy in place, my husband and I have ended up with three properties - two we rent long term and one we live in. We own two townhouse rentals free and clear (Value about $450k each) and took a $250K Liquid asset line of credit (at 1.5%) to buy the home we're in now (a 1952 fixer-upper - which we've almost completed - current value $450+).
The $250K LAL is due in June 2024, so trying to figure best way to pay that off. Take a traditional mortgage on our home? Sell assets (stocks, etc) to pay it off? Sell one of the rentals? Get a short-term loan and wait for mortgage rates to go down?
We've read a lot about the diversity of assets - some say no more than 25% in real estate, others say it depends, etc. We're about 65% real estate now.
If we sell one of the rentals, we'll have $200K profit so there will be tax implications.
Other consideration - we're two years from retiring and it's nice to have the cash flow that rentals provide...
Would love to hear ideas from you all!
Thank you!
Most Popular Reply
Despite not having a strategy, it sounds like real estate has done very well for you.
It is clear that I come from a very different philosophical position on my real estate investments, so I suspect you would not like my approach. I would never have paid-in-full real estate. There are several reasons 1) it diminishes your returns 2) your cash is locked up and unavailable in an emergency 3) paid-in-full rentals are a magnet for lawsuits and fraud and 4) it limits your tax benefits, assuming you use the extra cash to buy more rentals.
With that in mind, I would just get a 30-year mortgage to pay off the LAL. There is no point in getting a short-term loan because you can always refi the long-term mortgage later if rates come down. Furthermore, I'd also put mortgages on your other real estate, even if it is just 50% LTV. You can use that cash to buy more rent properties. Alternatively, you could use the cash to diversify assets.