Jacksonville, FL · Member since 2016 · 15 posts · 3 votes
it is about to go on the market.
However, I was wondering if I should buy my sister out since I already have half the equity and turn it into a rental? Selling price would be approx 180,000 and rents for nice homes in our zip code are 1200-1400. That would be less than 1% -----If I had to buy the whole thing. But, since I already own half, I could buy her out for 90,000 + closing bla bla black
Irwin, Jeff let it go to market and take the 90k and buy 2 or 3 PAYING properties. If you use 20 % of your equity as a down payment and walk away with enough cash to fund 2 more good properties you will have at best 2 winners and 1 mediocre property. Why would you do that? It makes little sense to tie up 90k(your equity) in a low yielding property when you could buy 2 or 3 paying ones. Cash in hand beats equity any day. That's why people do cash out re-fi's. They want the equity to purchase more property's. Your money earns a better cash on cash return if it's not setting all in one property. I.E. 3 leveraged properties should give you a higher cash on cash percentage than 1 property that you own 50% of. Also if your single property goes vacant 1 month you don't get any thing. If one of 3 goes vacant you still have the other 2 properties performing for you. I would never put all my eggs in one basket like that. RR
Cash invested, if you did that would be $108k, (90k you have sitting there, plus the $18k). I'm guessing you could much better elsewhere with $108k down.
Irwin, Jeff let it go to market and take the 90k and buy 2 or 3 PAYING properties. If you use 20 % of your equity as a down payment and walk away with enough cash to fund 2 more good properties you will have at best 2 winners and 1 mediocre property. Why would you do that? It makes little sense to tie up 90k(your equity) in a low yielding property when you could buy 2 or 3 paying ones. Cash in hand beats equity any day. That's why people do cash out re-fi's. They want the equity to purchase more property's. Your money earns a better cash on cash return if it's not setting all in one property. I.E. 3 leveraged properties should give you a higher cash on cash percentage than 1 property that you own 50% of. Also if your single property goes vacant 1 month you don't get any thing. If one of 3 goes vacant you still have the other 2 properties performing for you. I would never put all my eggs in one basket like that. RR
Irwin, Jeff let it go to market and take the 90k and buy 2 or 3 PAYING properties. If you use 20 % of your equity as a down payment and walk away with enough cash to fund 2 more good properties you will have at best 2 winners and 1 mediocre property. Why would you do that? It makes little sense to tie up 90k(your equity) in a low yielding property when you could buy 2 or 3 paying ones. Cash in hand beats equity any day. That's why people do cash out re-fi's. They want the equity to purchase more property's. Your money earns a better cash on cash return if it's not setting all in one property. I.E. 3 leveraged properties should give you a higher cash on cash percentage than 1 property that you own 50% of. Also if your single property goes vacant 1 month you don't get any thing. If one of 3 goes vacant you still have the other 2 properties performing for you. I would never put all my eggs in one basket like that. RR
my concern is that I am getting into this game at age 51. Don't I want all my properties to be paid off before retirement?
That way my monthly income would be better in retirement? ?
You're going to want cash to enjoy retirement, correct? The only question is: how much?
@Brandon Turner had this same debate on an #AskBP podcast: if you had 100k, do you buy one property? Or buy 5 with 20k down? Brandon responded that he would buy 5, netting the same cash flow but having the possibility for appreciation growth on 5 properties instead of one. Cash flow will be the same, but when you sell you stand to gain more from 5 than only 1.