Strategy Advice for new investor: 2 Mortgage free properties in Grandparents Trust

[Crystal Hoover]

Looking for some advice from more experienced real estate investors.

I'm still relatively new to investing. I own a few rental properties of my own, but I'm very much learning as I go in a one man show. My family, on the other hand, has never really viewed real estate as a wealth-building tool, and does not have the drive to learn, so I'm trying to educate myself and help them make the best decisions possible.

I'm helping manage two fully paid-off properties owned by my grandmother (my mom is her POA, as my grandmother has advanced dementia).

Property 1: A 5-acre horse ranch near Temecula, CA. The land is beautiful and in a great location. The horse facilities are older but usable. The home needs significant work to bring it up to code and modernize it.

Property 2: A fully paid-off home in Las Vegas with a pool. It also needs some updating and work to bring it up to code.

If these were your properties, what strategy would you pursue to maximize long-term wealth?

Would you:

• Renovate and hold as rentals?
• Pull equity through financing and acquire additional properties?
• Sell one to improve or leverage the other?
• Develop or repurpose the horse property?
• Take an entirely different approach?

I'm not necessarily looking for a single "right" answer. I know there are a lot of variables. I'm more interested in hearing how seasoned investors would think through this situation and what questions you would ask before deciding. 

I appreciate any insight. I'm trying to become more financially literate and learn how to think like an investor rather than simply holding onto paid-off properties because they've always been in the family. I want to learn and I appreciate this community very much in its willingness to lift others up in their growth journeys.

Thanks!

[Travis Timmons]

Short and unhelpful answer is it depends. Given the step up basis at death and the fact that you will pay little to no taxes on the sale, it almost always makes more sense to sell an inherited property from a purely financial standpoint. How you re-deploy that capital is going to depend on your skill set and interests. Tossing that cash into an index fund or leveraged real estate where you have some subject matter expertise is probably the best idea.

This, however, is a family property. There is usually some sort of emotional connection, and that is okay. Be honest with yourself, and do not try to talk your parents into anything.

Lastly, whatever you do, do it slowly and deliberately. I've sold businesses and properties; there is this FOMO and rush feeling that you have to do something. I'd suggest waiting 3-6 months before making any decisions.