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Real estate ideas... 3rd property or something else? Help?

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plush
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Real estate ideas... 3rd property or something else? Help?  Reply with quote  

I am a 33 year old realtor with two homes (one primary worth $320k, one single family rental worth $300k). My wife and I are contemplating a 1031 exchange on our rental property to pick up a fourplex. We have about $120k in equity in it.

Exchanging for a fourplex would increase our cash flow to about $1500 per month. Rent control was just enacted via emergency declaration in my state, and my rental is currently under rented by a couple hundred bucks. I currently cash flow about $290 a month and can’t raise rents again for another year.

I know adding additional taxable income is frowned upon by some of you, but hear me out. Since it wouldn’t cost anything out of pocket to do this exchange, and since it would increase our cash flow so substantially, it seems like a good way to both increase the value of our rental property holding while also spinning off nice income that we could then invest into more traditional retirement accounts/stocks/etc. I could also afford to match that contribution, for $36000 per year put into retirement accounts/stock. I ashamedly have no retirement funds or anything invested in the stock market. I know the HELOC idea is popular for accessing equity for purposes of investing in stock, but we're not keen on that for our primary, and can't find any lender who would do it for a non owner occupied. Just not an idea we're crazy about in general.

Does this sound like a good idea? Since the cash flow would provide funds to make regular monthly investments (that we could also afford to match), this seems like a pretty good way to make up for lost time and finally get started on our retirement accounts.

Alternatively we'd be able to buy a new primary for 5% down after the exchange and have the rents subsidize the newer (larger) mortgage. If we did that, we'd go from having one rented door to 5 (fourplex and our current primary), and would have a monthly cash flow of about $2000, but we wouldn't have the benefit of passive cash flow for stock investment.

Or should I just hold onto what I've got and start the slow process of investing in stock via my own active income generating efforts and let everything else ride?
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Post Wed Aug 28, 2019 3:16 pm
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Hoelet
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Where do you think it is worth it to invest in real estate? I like FSJ Real Estate a lot, I have to say, and I am thinking about it these days. Maybe you will like it for you too, have a look there Smile
Post Thu Sep 05, 2019 7:58 am
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