All Forum Posts by: Josue Vargas

@Josue Vargas I know I've already weighed in with my opinion, but it looks like you're getting some conflicting info so I thought I'd chime in again to address your points:

1. If the profit from this sale isn't your only capital, and you don't need it to live off of, you're in a great position. With that amount of flexibility, you could take your time after the sale, move to Austin and settle in, and then use some of your additional capital to reinvest in a portfolio of cash-flow properties.

-I am not as familiar with the TX markets as I am Birmingham, of course, but if you were determined to invest close to home and self-manage, taking the time to learn Austin and its environs super well will pay off.

-If you don't need to invest nearby or self-manage, you could find plenty of opportunities to reinvest in other markets with lower prop values, higher cash flow, and reputable PMs. 

-I definitely agree that you want to avoid C/D areas, at least for now. Some people definitely make money in those areas, and ROIs do tend to be high on paper, but you need to be very very familiar with the market and local housing authority regs, and be able to manage them yourself. It's not typically a great strategy for new investors.

2. As we discussed earlier in the thread, since you have lived in the property for more than 2 years out of the previous 5, you shouldn't have to pay any taxes on up to $250k of gain (or $500k if you're married). The anticipated 90k is well below this threshold so you should be fine.

-While it is true that it's unlikely you could find a comparable property in the same area for less than what you paid, you could absolutely find properties elsewhere. In REI, you often have to be flexible about market if you live in an area where good B/B+ props are pricey (C/D are too risky, A's typically have PITI payments so high that they negate cashflow). There may even be other areas in TX that would be suitable. Again, I don't know the full value of your current prop so I can't be more specific, but given the numbers you've posted thus far, I don't think looking to get another prop with the same specs is what you're shooting for.

-It sounds like you're at the high end of the rental spectrum as it is, which can be a dangerous place to be if the market turns. Your cash flow is nothing to get excited about, and the HOA/pool issues...well we've already covered why that's a headache, especially from a distance. You don't have the margin to hire a PM, so you should be using the capital to find properties with more wiggle room

3. While it would be possible refi for 30yrs and lower your PITI payments, how much of a difference would this make in your cash flow vs how much would it cost in fees and hassle? Would it make it a truly profitable property or would it just make the numbers less mediocre?

4. Since you don't need the capital now and won't pay taxes on the sale, I think you have the right attitude. You have time to do your research and see which direction you want to go. I don't typically advise letting that amount of money just sit, however. There are other, more liquid, options you could pursue to put your capital to work without it being locked up long-term. You could put some of it in an indexed ETF, for example, which would allow you to pull it out at-will with minimal fees (I believe the Vanguard S&P 500 index ETF has an expense ratio of like 0.05% or less).**I'm not personally advocating this investment, but using it as an example of a relatively cheap, liquid investment with historically positive returns. If you're wanting to deploy your capital in the very near future, of course, this option is less useful. Always do your own due diligence on any investment.** 

-My point is that, if you don't want to jump into an REI investment right away, look at other options for earning compound interest that would allow you to pull your capital at your discretion (so, not hedge funds etc). I personally think REI is one of the best places to stash your cash, but everyone works on their own timeline, so just be aware there are options out there that don't leave huge chunks of capital languishing in your checking account.

5. A point of my own: Your taxes are NUTS. That's a huge waste of cash flow every year. If you invest out of state, you'll pay approx double the residential rate, but that can still be far, far lower than what you're paying if you invest in a state with low property taxes. 

-SmartAsset has a great tool for comparing property taxes in different areas. I'd recommend putting in San Antonio with the value of your current prop and then comparing to other markets. For example, if you put in Birmingham, AL and double the tax bill on a $120k property (a higher-than average price tag for a B/B+ cash flow property here) it still comes out waaaayyyyy lower than the figure for the same value property in San Antonio or Austin. Take a look and see what you could save if you went out of state: https://smartasset.com/taxes/property-taxes

While I, of course, think turnkey is a fantastic way to start an REI career - and a good way to get a portfolio of reliable passive-income-producing assets under your belt - there a billion right ways to do REI. If you're not ready to dive into anything right now, use your flexibility to do your research and vet your options. Jumping into a new property just because you feel like you should be doing something is rarely a good move. 

Figure out what your goals are for your investments, how much time/effort you want to devote to them after you cut a check, and how much control you need to feel over the day-to-day. Can you invest out of state or do you need to be able to see the property? Do you want to do some hands-on rehab work, or do you want a professional do take care of it? Do you want to be a landlord, or do you just want to collect rent and pay someone else to handle tenants and maintenance? Do the work of figuring out where you want to go and be brutally honest with yourself about where you are right now. REI will still be here when you're ready to take the plunge ;)

Best of luck!

Clayton

Your goals needs to be much more specific than that in order to be helpful. Need income? What's your target return for each deal? Cash-on-cash return target? IRR target?

No, I would not sell.  In this market currently, it's very unlikely you'll find anything equivalent for the price you paid previously, plus you're going to get hit with taxes.  Avoid taxes like the plague!

If you are looking to "develop long-term wealth" ask yourself.  How can I improve my currently financial position?  The best answer sounds like obtaining a cash-out refi and taking that money and acquiring another rental property. 

Investors develop long-term wealth by being invested in property.  Not by selling property.

It depends on your specific investment goal. What is it?

If it is to generate long-term wealth...no, never sell!  Learn how to self-manage remotely or hire an experienced reputable property manager.

Then, cash out refinance and take that cash and buy another...and do it again, and again, and again!

I never sell, unless my original investment thesis or assumptions end up being wrong OR the neighborhood changes and I'm unable to attract quality tenants.

And, more often than not, unless the fees are super high...HOAs are a good thing. They'll keep the neighborhood property values up.