Using rental property for reitement after 60 or so
va beach, VA · Member since 2018 · 66 posts · 4 votes
Hello,
How are you guys determining when a proper/ty has maxed out its value from the market recovery and its time to sell ?
How are you detetmining when we are close to a peak in the housing market? or how do you decide to sell, your personal perspective? making a selling decision is really hard...
Is anyone using real estate for income in their retirement. Years Old? Or is everyone liquidating before 70?...how long you think u will keep the rentals into retirement? or are you keeping? Seems real estate is good for retirement but i would like hear from some that has retired. I am 40 i have not reached this goal
While I understand what you are saying, retirees aren't most concerned with making the highest return at this point. It becomes more about stable monthly cash flow and wealth preservation and having a few properties paid in full generating significantly more and stable cash flow than when having debt to service will accomplish this and may give them piece of mind as it is an asset they have held for many years 15, 20 30 years so they feel comfortable and trust this asset to continue to pay them monthly VS. going into the stock market or another security where you have less control over the assets ability to produce stable steady income. Sure your return will be less not leveraging but there is piece of mind and more net monthly cashflow which they will probably want at this point if they are not working
I have 2 paid off properties that each currently generate ~ 11% annual return before any tax benefits. That to me is not a bad return at all. Sure, if I leveraged them I would boost this ROI to the mid to high teens however I have a good amount of leverage currently and like the fact that if I need cash in a hurry I can always pull cash out and re leverage.
There is no right or wrong answer here
Best,
Chris
I pay my mortgages to the guy who sold me his properties. When I retire I will definitely hold the note on my 5 unit because I think you can maximize the selling price while offering a fixed loan which is far better than the commercial loan one is forced into at 5 units. I would be very happy at 1% below the commercial rate at that time.
Guy who sold me his properties held onto his newest building after unloading 6 others. He "retired" and manages the other from out of state. Called me up a couple of months ago wanting to know what my tax assessment came in at, he was upset because his was valued at over a million and he was waiting for the other shoe to drop. Called me up two weeks ago after one of the nor'easters because a tenant was screaming about a leaking ceiling in his "new" building and he needed a roofer- he was calling from vacation in Hawaii.
Heed @Thomas S. words of insight.
Great info Patrick....I like it....if you buy an apartment building ...dont you have to get a commercial loan if you go with a bank?
i have only towne homes and single family....whats your take on townehomes and single family vs an apartment complex ...pluses and minuses?
@Joe Szymczyk "So if you have a 300k property paid off" ...
That $300K in my account would have averaged a return of 11% over the past 10 years in a moderate income fund. That's $2750/month (average) and I never lift a finger, answer the phone or make any decisions.
I am 65 and have enough hobbies to keep me busy all day long 7 days a week if I choose. I still work at my rentals and it takes me away from what I want to be doing. At 65 my clock is winding down, my days are numbered and I have things in life I still want to do besides work. My money should be working for me.
Real estate will never be passive and I can almost guarantee every investor will want out eventually. I am hopeful I can escape in the next 3-5 years if I live that long.
@Joe Szymczyk "So if you have a 300k property paid off" ...
That $300K in my account would have averaged a return of 11% over the past 10 years in a moderate income fund. That's $2750/month (average) and I never lift a finger, answer the phone or make any decisions.
I am 65 and have enough hobbies to keep me busy all day long 7 days a week if I choose. I still work at my rentals and it takes me away from what I want to be doing. At 65 my clock is winding down, my days are numbered and I have things in life I still want to do besides work. My money should be working for me.
Real estate will never be passive and I can almost guarantee every investor will want out eventually. I am hopeful I can escape in the next 3-5 years if I live that long.
Thanks Thomas, interesting points
@Joe Szymczyk Plenty others will chime in on this but a multi-family is a truly wonderful thing. I was very fortunate- and because he carried the note I did not have to deal with a bank and all of the requirements.
Bottom line is my buildings cash flow in a way that a dozen sfh could not. Any one or 2 or 3 or...tenant(s) will never have me by the balls. I feel, especially with this new tax law, that my buildings are pretty much bullet proof to market forces. Antidotally I get the sense that there is a lot more hands on with sfh, potential problems with the "owning" neighbors and the town- but I am sure others would dispute this.
If you could get your hands on a 3+ unit I would say jump on it and pass up 3 sfh to do so... all things being equal. (which they are not)
@Joe Szymczyk Plenty others will chime in on this but a multi-family is a truly wonderful thing. I was very fortunate- and because he carried the note I did not have to deal with a bank and all of the requirements.
Bottom line is my buildings cash flow in a way that a dozen sfh could not. Any one or 2 or 3 or...tenant(s) will never have me by the balls. I feel, especially with this new tax law, that my buildings are pretty much bullet proof to market forces. Antidotally I get the sense that there is a lot more hands on with sfh, potential problems with the "owning" neighbors and the town- but I am sure others would dispute this.
If you could get your hands on a 3+ unit I would say jump on it and pass up 3 sfh to do so... all things being equal. (which they are not)
Interesting Patrick. One thing i have noticed with the Towne homes..is they appreciate less than SFH. How is the appreciation of a Multifamily unit vs a towne home or single family/? or you dont look at that? you just look at the income from the tenants?
i understand what you mean...in a single family you have only one tenant if they leave...no income til you get the next one....where in multifamily ...one leaves no issues...
Technically my 4 unit is valued at the "market" rate- the Zillow-like rate if you will. I would never allow that to happen because it would be broken down based on it's return. The 5 family is valued at its investment value.
For all intents and purposes I don't even look at that- I have 0 interest in how much it appreciates on paper- they are producing a cash flow that is equal to or greater than my monthly take home from my w-2- that is after everything is paid.
But one very important difference is what you control.
For a multi-family, as long as I increase rents every year and maintain/upkeep my building it will appreciate. I therefore control a huge amount of my buildings value.
The opposite is true for SFH. First, one of the things I have noticed is that sfh landlords are constantly evaluating and speculating on there homes worth and what it will be worth on x date or year. Second, the value of their home is only partially under their control. I speculate that here in NJ; with the high property taxes, new tax law, rising interest rates and changing desire to own a home, there will be atleast a 10% drop over the next year or 2. That is huge and I think that is conservative.
The whole point of having my SFH is to have them paid off BEFORE I retire and then when I get tired of dealing with them find a good PM company and let them deal with it all. Then I can sit back and enjoy the profits.