All Forum Posts by: Account Closed

Thank you all for your advice! I really appreciate the feedback here! I just looked at another potential 1031 exchange in West Colfax in Denver. Neat area with lots of new projects going up left and right. 

I want to explore all options, rental rates too. We went ahead and put a down payment on one town home in Denver and market rents are really good there. I am hoping for about $700 clear a month (after expenses).

Our other older property is in NE Denver, which has appreciated somewhat but because the zoning is all single family, the appreciation is not going to be as much.

We currently clear $700 net after all expenses on this per month but, since it is older and always needs repairs, that eats into our net. So maybe we end up with $200 or $300 a month? We just finished up a lease, so it's vacant. We were thinking of taking out about 40k in home equity loan to fix it up so we could bump up the rent.

The property I looked at today in West Colfax, is a new town home, could probably net about $600 clear with no issues for about 10 years.

More debt, but better property. Also since the area is going up, potential to make more on the value of the home later on down the road.

Lots to consider!

We actually thought about multiple smaller properties but the problem is we live in the Denver metro area and real estate is ridiculously expensive.

Another option was to look at a couple of these Townhomes as a means to eventually downsize into one of them. We don't have a mortgage on our primary residence and once my son gets out of high school we would like to sell our primary residence which is getting kind of large for us and to downsize into one of these smaller Townhomes converting it into our primary residence.

Right, it's difficult though because debt, to a certain degree is scary.

We are only small time investors, but if we did not take on the debt, we would not be where we are today. The debt allowed us to build up a nice nest egg, plus the rental income has been a nice perk.

The second property, we bought right around the housing bust and we were literally under water for about 4 years. We had to feed the property, but always maintained it and kept it rented. I really contemplated my own sanity for a few years! Now, after the housing market came back, I am so glad we kept that property. It was a struggle though!

My husband is retired and I am nearing retirement soon. We have always been hands on with our properties. Never really hired out for a lot of things, but now that we are getting older, we don't want to spend weekends messing with broken pipes and broken dishwashers. 

Exchanging the property for a newer lower maintenance one seemed like the most logical choice. I had our realtor look at the other property and am leaning towards an exchange with that one as well. We have a small mortgage on it but once again, it is an older property and will need quite a bit of rehab to get it rented out again.

For now, leverage seems like the most logical approach.

I just came across this thread today, thought I would add my 2 cents on debt and leverage. 

My husband and I are at a cross roads with an older investment property. We have had it for about 10 years and I am kind of over it. It always gets rented, but since it is older, there are always repairs and maintenance issues. Do we sell it outright? Do we fix it? Do we exchange it?

Don't get me wrong, I love Dave Ramsey, but the anti debt thing sometimes drives me crazy. When he tells people that have real estate to "just sell everything" and pay off debt, I wonder if he ever considers capital gains and all the other issues that come along with that?

To make a long story short, we talked to an accountant about the ramifications with selling this investment property and keeping the proceeds vs. reinvesting it into another property (1031 exchange). By selling and keeping the proceeds, we would be hit with a 60k tax bill, yikes! This included all of the rental income recapitulation (another thing a lot of investors don't think about). So what are we going to do? We are in the process of exchanging this property for a new construction townhome that will put us in another 80k of debt. 

Of course we could have just fixed it, but guess what? That would have still put us in more debt, probably 30-40k in rehab costs for an older property that would have still needed maintenance.

It's makes me crazy, the whole leverage thing. On one hand taking on debt is scary to me, but on another hand, as an investor, it appears to be one of the only way to really build true long term wealth. Selling and not taking on the debt would have meant a 60k loss for my family, how long before we recapped that loss? 

Food for thought...