Thoughts on my RE portfolio

[GetRichODT]

I own several properties and am trying to determine my plan for the next 5 years.

I owe about $800,000 in mortgages.

I net about $2100/month total on the portfolio after all expenses.

I'm still working and can put away about $10,000 per month in after tax.

I have after tax assets of about $300,000.

Right now I'm not too comfortable with the amount of mortgage loans I have with total mortgages being more than twice my cash mortgage position.

Paying no extra on the mortgages I reduce my mortgage by about $1,050 each month. That amount increases about $5 / month with each passing month.

What am I doing well?

Wrong?

What would you do differently?

 

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[biophase]

I own several properties and am trying to determine my plan for the next 5 years.

I owe about $800,000 in mortgages.

I net about $2100/month total on the portfolio after all expenses.

I'm still working and can put away about $10,000 per month in after tax.

I have after tax assets of about $300,000.

Right now I'm not too comfortable with the amount of mortgage loans I have with total mortgages being more than twice my cash mortgage position.

Paying no extra on the mortgages I reduce my mortgage by about $1,050 each month. That amount increases about $5 / month with each passing month.

What am I doing well?

Wrong?

What would you do differently?

If you aren't comfortable you can:
1) Start to pay down your highest interest rate mortgage
2) Sell one property and use the proceeds to pay down/off a mortgage

I don't think you are way out of line. But if you feel that property values might go down or you will have more vacancies or maintenance expenses coming up, then maybe it is time to sell one.

 

[Real Deal Denver]

I own several properties and am trying to determine my plan for the next 5 years.

I owe about $800,000 in mortgages.

I net about $2100/month total on the portfolio after all expenses.

I'm still working and can put away about $10,000 per month in after tax.

I have after tax assets of about $300,000.

Right now I'm not too comfortable with the amount of mortgage loans I have with total mortgages being more than twice my cash mortgage position.

Paying no extra on the mortgages I reduce my mortgage by about $1,050 each month. That amount increases about $5 / month with each passing month.

What am I doing well?

Wrong?

What would you do differently?

Why are you in real estate to start with?

I am too, and I'll give you my reasons. I can leverage. If I have 20K, how much can I buy in stocks or bonds? 20K. How much can I buy in real estate? 200K. Ten times more.

With leverage, comes multiplying factors of gain. I do very well with my 20K of stocks, and they go up 12%. That beats the market, as MJ so well puts in his Fastlane book (which is reason enough to NOT go into stocks, but he said it so well so I won't repeat it here). I make $2,400. Wow. I can now buy that nice set of tires for my Lambo. I sure can't buy the Lambo, but hey - one step at a time...

My real estate does fairly well too. It goes up half that amount in market appreciation. I now have 6% of 200K, which is $12,000. Or put another way, about FIVE times more than I luckily made in the stock market getting TWICE the returns.

In real estate, it is all real. Nobody is going to merge, dissolve, or declare bankruptcy - unlike the directors of the companies that I invest in that I know nothing about. You want to put your fate in the hands of people that you know nothing about? Fine - call ME - I'll do it for you and pay you much better than they will!

Now, let's factor inflation. Let's say you are getting $2,100 a month, after expenses. Oh, you did say that - good. Your rents increase 5%. Whoa - that's what the stock market people HOPE they can get. Anything beyond that is gravy. You already have that with your rent alone. Sure it's not a lot, but it's $105 off your house payment, which is a start. Next year, it could be another $105 a month. In a million years, it will big money - too bad you won't be here to enjoy it... You get the point. I said that to counter you saying that it's nothing. Yes, it is something. Add in your market appreciation of 5 or 6% (getting that here in Denver for the past several years), and you have the market appreciation of which I spoke of ealier, of $12K or so.

So, what to do? Invest in stocks, or even worse, park it in your 401K? You said you could put away $10K a month. For what? For a pissy 2% gain, if even that much? You should pray that you can keep up with inflation if you're in that game.

No.

Pay off your real estate as fast as you can. Everything I've said so far explains why. Or, plan B - get more real estate. I'd concentrate on paying it off, while sitting on the sidelines for the great property you may encounter here and there with the golden ROI. For a super shot of income, go the flipper route. Or combine them. Fix but don't flip: rent. Any way you cut it, it's like shooting fish in a barrel. You can't lose. Well, you can, but it takes a lot of skill to do that, actually. Some manage, though.

There you go. If you find something - anything - better than real estate, let me know. I sure don't know what that is, other than the possible home run from launching my own Fast Lane business venture. And that's, exactly, why I'm here. But that, whatever it may be, is not going to withstand the test of time like real estate will. My next great thing will be copied, lose its luster, and eventually just fade away. Real estate will be here a hundred years from now, still an ATM machine, cranking out money, month after month.

I didn't even TOUCH on the two year no capital gains rule. That alone is how some savvy people pay off their homes in eight years or less!