All Forum Posts by: Immanuel Sibero

@Brian V.

Imagine you were selling your home in today's hot market and someone offered half of your asking price. How would you react? Would you feel insulted? Or would you think the person making the offer might just be "severely uninformed" (to put it nicely)? One thing is for sure, there is now way you would sell, would you? So why bother?

Unfortunately 4-plexes are not normally valued by their NOI. I can sympathize because there are a few in my market I would be interested in buying.

Cheers... Immanuel

@Account Closed pointed out, cap rate is dependent on the local market. Cap rate is commonly used in commercial and multifamily space (i.e. 5 unit or more). From your post, seems to me that you calculate the "cap rate" of your single family properties portfolio every year. I'm not sure what information you can gain from it.

To me, calculating cap rates of single family properties is of little use. Also, cap rate is more of a valuation/risk metric rather than a performance metric therefore it's very relevant during a purchase/sale transaction (it is not or less relevant during the time you are holding the investment). For example, you would want to know the local market cap rate if you're a buyer trying to come up with an offer price for a multifamily/commercial property. Similarly, you would want to know the local market cap rate if you're a seller trying to come up with a listing price for a multifamily/commercial property.

If your objective is to measure the performance of your real estate portfolio periodically (i.e. annually, monthly, etc) there are many other metrics beside cap rate that are more useful such as cash on cash, yield, IRR, ROI.

Cheers... Immanuel

@Marshall Hooper

My guess is yes, but I would consult a CPA at this point.

Cheers... Immanuel

@Marshall Hooper

@Lynn Dee Murrow

Lynn's explanation is the basis of the inherited properties are stepped up to the market value at some predetermined date. This step up in basis effectively wipes out the deferred gains you referred to in your question. So yes, they will pay no taxes on the wiped out "deferred gains". But note that the value of inherited properties may continue to go up after the predetermined date which would result in gain that IS taxable (however small) should the heirs decide to sell.

You mentioned inheritance tax, well now you're getting into "death taxes"...  we were only discussing "capital gain" tax. Death taxes can be assessed by federal and state, the taxes can be on the decedent/estate ,heirs, or the inheritance itself.  It's tough to die. It's best to consult a CPA.

It's quite an overreach to say that any aspect of real estate investment is "tax free". The above example of "stepped up" basis would only "free" deferred capital gain up to the step up date. In addition, as you have pointed out there are other types of death taxes looming.

My advice is consult a CPA and avoid death if at all possible.

Cheers... Immanuel

You can always get a corporate job. They usually have an anonymous complaint box.

Seriously, this is all part of the capital market that we all have come to embrace in this country.  I wouldn't have it any other way. If you feel everyone is out to deceive and screw you then maybe you should find something else.

Cheers... Immanuel

@Andrey Y.

So which is better?

- Pulling out the money at a cost of 5% annually to earn 10% annually OR

- Leaving the money in dead equity at a cost of 0% annually to earn 0% annually.

LOC is Line of Credit, an alternative to refinancing. LOC can be set up based on the equity of your properties.

Cheers... Immanuel

For some, waking up at all is a success.

Just like beauty is in the eye of the beholder... zestimate is in the eye of the beerholder.... cheers!

@Federico Cantero

Federico, sorry I think the thread discussions have gotten slightly off topic... LOL

Seems to me your strategy is to time the market. I don't have a good answer for you because I'm focused on buy and hold. But if I were to time the market I imagine I would NOT use the metrics specific to the properties (i.e. "cap rate", cash on cash, or ROI, etc). I would use the local market and economic metrics instead. For example, I have rental houses in Dallas so I'm currently in the situation you described (i.e. my rentals have appreciated more than 60% in the last 4 or 5 years). If I was a market timer I would start thinking about selling so my question would be -should I sell now? -will prices still go up in another year or two years? So the local market conditions would be the determinants.

In Dallas there is still shortage of single family housing stock. Inventory is less than half of what is considered a balanced market, so it's a seller's market. Unemployment is very low, many businesses and people are relocating to Dallas. Home constructions have been at a break neck speed. All these metrics point to additional run up in prices so I would probably wait another year or two, in the mean time I would monitor those market metrics and look for a sell signal.

But as I said earlier, I'm a buy an hold... so I haven't really put a lot of thought in market timing as a strategy.

Cheers... Immanuel

@Andrew Johnson

"old jaded guy who" ... "enjoy taking candy away from small children and yell at any toddler that dare play in front of my house"

Hmmm... the picture in your profile is highly misleading... LOL