gumanow

The condo that I bought for investment purposes I bought for $260K cash and it has gone up in value to around $420K. Several units have sold recently for that without the view of the river that we've got. So it should probably sell for more. I could easily sell it, take $20-30K, but a p-car, and then purchase another property for cash. Hmmmm...

docmirror

Well, you don't mention the duration of the equity gain your seeing. If you paid $260k three years ago, and now have a $450k value, you would be smarter to simply rent the condo out, and continue to ride the equity curve. However, if you bought it 15 years ago, your equity increase is pretty marginal.

Don't forget that in all RE transactions there are fees involved. You may be able to shield yourself from many of them, but there are always fees involved in RE flips. In your example, you would actually be paying 2 transaction fees, one on the sale, and another on the new cash purchase. One of the reasons I avoid RE agents/brokers at all times.

gumanow

Bought it in 2014, about 4 years ago. Currently clearing about $1K per month. I don't think there is any other investment that will give me that rate of return.

Since I have all of this equity locked up in this condo right now, are there good ways to pull some out? What are the best methods?

Bash Hat

Why put another lien on your RE for a car? Just get a car loan. I'm not a fan of borrowing on RE for toys, or any other reason not directly related to buying RE. I don't know what your mortgage payment is but if you already clear $1K a month now, think how much more you'll clear when it's paid off!

jrdavid68

I'd visit https://www.bogleheads.org/ for $$ advice.

Otherwise, I suggest you by the car and spend the rest on hookers and blow. Life is short

docmirror

That is by far the best ROI I've ever heard of for a condo. I admit to knowing very little about the condo market. The downside is you still have the higher fees.

Ask around about a HELOC. It's a type of secured mortgage that is flexible, and doesn't need to be used for RE purchase. I'm not advocating, but a HELOC will allow you to take money out of your equity for purchase of a car, or boat, airplane, etc. Not sure if a condo would qualify, but if you are only looking at $25k, I don't see why they would have a problem writing a loan for that low of equity on the property.

Mike Murphy

gumanow

No mortgage payment. Paid cash for the condo. So I've got my equity locked up and not leveraged.

docmirror

Equity loans on RE can be deducted as investment/repair/maint for the real property if one is willing to be 'creative' in their deductions. Unless a car loan is structured for a business asset(sure, my 20YO 996 is actually used in 'business'. Monkey business maybe), it is a personal expense, and not at all deductible.

Again, I am not ADVOCATING this approach.

but I've heard from my ex-uncle, son-in-law's best cousin that it's been done before.

Rodabtin

Good afternoon, it would be interesting to know what you decided in the end. Of course, I express my point of view, but I think that in any case, it is much better to buy real estates such as apartments or houses, since this is a longer-term investment that will only increase in price, unlike a car. You can order a good layout from https://www.boutiquehomeplans.com/ to make your apartment even more comfortable since repairs are always a huge premium to the price when selling\buying.

gumanow

Hi Rodabtin - I did purchase a sports car, and am still in the process of finding another investment property. I picked up a 2018 MX-5 Club with 700 miles on it for $10K off list. I love driving it and in the end didn't want another hobby in spending a lot of time fixing up a 996. Maybe some day I will change my mind but right now I'm having a lot of fun with it.

Thanks for asking!
Gumanow

JC997

The correct answer to your question is real estate investments, but timing is most important. You cannot afford to buy investment properties at a premium or you will be guaranteed to lose it all. They key is to wait for the market to drop and then swoop in when no one wants the properties. These are the folks that make the most money. The folks that bought in 2010 and 2012, have values increasing 2 to 3 time the original price,

If you were to buy now there is no way to go up with rising interest rates.

Finally I do not think buying a 911 now is a good time,

I would save and keep your money until a good opportunity arises.

Mike Murphy

This is all great advice. While some cars also doubled or tripled in value, there are no deductions for cars unless you make a business out of it. And there’s no income to offset expenses. Not to mention risk. The fact that one can purchase an asset property, depreciate it from a tax perspective, and at the same time, the property appreciates over time is a rare thing.

It’s still possible to not make much money on a real estate investment. I purchased a condo, not really a true investment property, in a city for $244k back in 2005, lived in it for 5 years and rented it out for 12 years. It’s only worth maybe $330k today. I owe about $135k on the mortgage and always would break even on it year to year. I was able to accumulate about $100k in equity (good ol’ 5% down back then) over time. Most of that equity was from tenants. Free money. Compared to stock market investment funds, I possibly would have made more in the market, except my out of pocket equity for the condo was only $12,200, not $244k. I need to sell the condo at the right time. It ‘should’ increase in value after having been decimated during COVID, but that assumes the city will bounce back, which it may struggle to do so.

SSDVC

I know this is an old thread, but just some mindless two cents worth of input from some random old guy.

Snatching up that investment Real Estate property back in 2019 would have definitely been the far wiser choice. Given the current market and the escalation in prices and rent, it is possible you could have made a major score. You would have had a positive cash flow income for 2+ years and, depending on your market, your property value could have shot through the roof. You could have turned around this year and sold it, and again, depending on where your home market is, you could have probably made some serious cash from the sale, all the while taking the positive cash flow you made from the property to pay down the principal on your mortgage.

A friend of mine asked me this question back in 2017, and this is the condensed version of what I told him I would do. He was in his early 40's, a lovely wife and 2 really good kids. They both had very nice incomes, they both had nice cash reserves (they were good savers) and he wanted an exotic car to get around in. He always talked about retiring before he hit 60. I asked him about where his finances stood and what income streams he had to provide for him and the wife in retirement, and also college for the kids. My advise was skip the car, for now, and to check out some rental properties in the burbs, with decent commuting distance to major employers in the area. I also told him to keep an eye out for areas that are experiencing rental shortages, as that market would be easier to get good rent in, not to mention the ability to get good tenants. I also told him to keep some distance from lower income rental properties, as having personal dealings with them, I could honestly say that it is far tougher market to deal with and make money in (and during the plague he would have probably lost out big time). To shorten the story, they skipped buying the car and found and purchased two very nice duplexes in a decent area. All his tenants have been great, and 2 of the rentals still have the original tenants still living there. They newer tenants moved in pre-plague. And, as an aside, all during this plague, all of them managed to pay their rent, in full and on time (huge issue for the rental market during the plague). In fact, things went so well, that they paid for all the oil bills for last winter, for all of his tenants, as a thank you for keeping up with the rent. I doubt any of them will move out, but if they do, he could raise the rent by 50% and still be under market right now.

Anyway, he decided he really did "need" some sort of middle age crisis machine, so they decided (actually, his wife told him what he could do) to sell one of the duplexes. It was on the market for a total of 4 days. All of the offers were way above asking (and asking was way above what they paid for it back in 2017). They chose a cash offer which was slightly under the highest offer and they closed in two weeks. Oh, they made around $300,000+ (net) on the sale. So not only did he buy it right, he got lucky and sold it right. He had a positive income stream for the 4 years they owned. They also dumped their positive cash flow back into the property all these years to lower the principle amount of the mortgage. AND they decided to keep the 2nd duplex, as rents in the area have risen substantially and their property is definitely making them money. He is still looking for the right car, but they decided to take 3/4's of the profit and pay down the principle on the second property. They now have a few years left on that mortgage and will shortly have that paid off for an ever bigger income stream. If all goes right, they will be debt free by the time they reach in to their mid to late 50's. A nice place to be (and where they want to be), and smart choices can get you there.

Sometimes it pays to put your wants on hold. Fun things are great to have, but not being prepared for retirement sucks, as does working beyond what you want. Preparing for retirement as early as possible and having some positive income streams from various sources should be an early in life priority. The cars will always be there, in some form or another.

Mike Murphy

Ancient wisdom built into biological life for millions, billions, of years.