Sailing Landlords

[Nucopia]

Originally Posted by Qismat

We live aboard our boat full time and rent out our SFH with a basement suite that nets us around $1,600 a month from both sets of tenants after mortgage and taxes. That does include repairs/maintenance which is fairly minor.

I've thought about selling but the cash flow generated monthly from the rentals is too good to give up. We plan on keeping the rental while we cruise so we'll need a PM as I handle the tenants myself.

Thanks Qismat
Since reading this thread a few weeks back and joining the bigger pockets forum, I have gotten much more interested in finding an investment property in the states. The wife and I may spend a few months there this year ,visiting relatives and friends and searching for property. If things go to plan, we may even be able to look for a boat to purchase while we are there’s ,who knows.

[fschaefer4]

This is definitely an interesting topic to me. @belizesailor, I'm in Austin as well. I have 2 SFH and 1 duplex. All right in the center of Austin.

I've considered a 1031 exchange on my big house. I would net close to $500K. But like has been said on here, feels like we're at the top of the market. Would love to sell and but a 4-plex that needs a remodel, but right now even those are expensive.

If I move out of my homestead, I think I could rent that and get close to $2,500/month after PITI, vacancy and repairs.

Conundrum: Sell the big house ($148K cap gains tax hit), buy a boat and leave vs. figure out a 1031 exchange that provides higher monthly income vs. keep it, build up my kitty over the next year or two, then leave and maintain the monthly cashflow and appreciation.

So if anyone has a residential multi-family they'd like to sell, let me know- especially if it will cashflow more than $1,500/mo.

I'm lucky to have the conundrum. I've been on bigger pockets, but work takes so much bandwidth, a side hustle is tough... which may speak to my limited brain power or lack of resolve.

[ol1970]

fschaefer4, I’m not an expert, but I’m fairly certain when you do a 1031 exchange it has to be for a “like kind” property. Meaning you can’t take a personal residence that has no history of rental income and avoid taxes by purchasing a rental property.

The other question/point would be there is a $250k for singles and $500k for married couples single time deduction for capital gains on the sale of your primary residence. You can also deduct improvements you’ve made along the way. So if your gain on the property is $500k as you say, and you are single and made no improvements, your tax bill is going to be under $50k (depends on the state you live in).

If you can only get $2500/month i wouldn’t rent it unless you plan on coming back to it. Terrible CAP rate vs value of the property.

In summary one of the best advice a mentor once told me is “some of the worst financial decisions I ever made were due to trying to avoid paying taxes”. Meaning sell your place, pay your appropriate amount of capital gains, simplify your life and move on. But this is just some random guys advice on the internet so it’s worth about as much as you paid for it : )

[belizesailor]

Originally Posted by fschaefer4

This is definitely an interesting topic to me. @belizesailor, I'm in Austin as well. I have 2 SFH and 1 duplex. All right in the center of Austin.

I've considered a 1031 exchange on my big house. I would net close to $500K. But like has been said on here, feels like we're at the top of the market. Would love to sell and but a 4-plex that needs a remodel, but right now even those are expensive.

If I move out of my homestead, I think I could rent that and get close to $2,500/month after PITI, vacancy and repairs.

Conundrum: Sell the big house ($148K cap gains tax hit), buy a boat and leave vs. figure out a 1031 exchange that provides higher monthly income vs. keep it, build up my kitty over the next year or two, then leave and maintain the monthly cashflow and appreciation.

So if anyone has a residential multi-family they'd like to sell, let me know- especially if it will cashflow more than $1,500/mo.

I'm lucky to have the conundrum. I've been on bigger pockets, but work takes so much bandwidth, a side hustle is tough... which may speak to my limited brain power or lack of resolve.

First I suggest consulting a pro on the financial/tax/exchange issues specific to your situation. I know a very good accounting firm in Austin who can help with this (not cheap, but very good). Do you want their contact info?

You dont have to exchange the entire amount on a 1031 exchange, but you will take a hit on the portion that you dont.

There are lots of MF properties in the $500K or less range that have good cash flow potential in Austin (I just bought one 2 years ago that grosses $4K per month, nets about $2,500).

I dont like SF as an income producing property. The net cash flow per $ invested is way better on MF. And, with SF the property is either 100% occuppied or 100% vacant. With MF you can float over a vacancy or two and still have positive cash flow if you keep the LTV low. The LTV on my most recent MF is 40%. This also means the property can ride out economic down turns better...who knows what the Corona Virus will bring! Over leveraged properties could be in real trouble if occupancy rates drop.

Always hire a good pro PM Company (not an individual), they will save you money in the long run and dramatically decrease the hassle factor. You cannot effectively manage a property remotely, there are too many things that require an on site precense. Ive not lived in the USA in 15 years, but Ive onwed/bought/sold properties there continuously over that entire time. Yes, big "oh sh!t" events can still be disruptive, but with a good PM those are less likely to happen in the first place. I can recommend a PM company in the Austin area too.

Alternatively, you could exchange all the properties into MF, finance the boat (geez, it makes me cringe to even say that!), and let the cash flow pay the boat mortgage.

In the end, these are just my perspectives not knowing the specifics of your situation. Engage a pro before taking any action.

[Scottt]

Howdy All!
I am in Texas. Have a 50' Ketch in San Juan Islands, Wa. Itching to GO. Degrees, MBA, Business ventures, real-estate (commercial)...All paid for. Owe the bank nothing.
Rental Income: Houston 5100.00/ month Two other counties in Texas - 3500/ mo and 1200/ mo for a total of 9800 / month gross... To me it still seems low. Taxes are 18000/ year, maintenance and repair (triple net leases-5yr terms). After taxes - 99K/yr

I am skeptical but the most optimistic skeptic you ever met, wanting to put in a 98 spot RV Park on major route between two cities. Will run 700K but will gross 588K/ yr when full - but whos is so blind to fall for that ROI... lets figure 1/2 full or better 1/2 of 1/2 or 1/4 Capacity - 147K per year. Average 60% Mgmt fees (our own employees), so another 60K/ yr. Now that is doable - 150K/ yr.... But 1 yr to put Park into working condition....We are approaching 60.... What are thoughts on our age and sailing? There's a can or worms...I will be on boat next month for maintenance. Hope to head toward Hawaii, Galapagos, then Panama in 2021. Then Caribbean and back to Florida and then Texas.

[Nucopia]

Originally Posted by Scottt

Howdy All!
I am in Texas. Have a 50' Ketch in San Juan Islands, Wa. Itching to GO.

We are approaching 60.... What are thoughts on our age and sailing? There's a can or worms...I will be on boat next month for maintenance. Hope to head toward Hawaii, Galapagos, then Panama in 2021. Then Caribbean and back to Florida and then Texas.

Scott
I just turned 60 and was thinking, if I don’t do this in the next couple of years , I may not ever do it.
Set a date to go and work towards getting every thing sorted between then and now ..

[fschaefer4]

this fall sunder the category of "and then life happened"

I work for SXSW, a large music/tech/movie conference here in Austin. We just got cancelled. All of a sudden, my rental properties seem like a lifeline. I survived the first round of layoffs and doubt there will be a second round, but it really makes you appreciate the extra income stream.

Sailing or weathering downturns on land, it's good to put your eggs in a few baskets.

[belizesailor]

Yes, diversity is a good thing.

I have a building full of Section 8 tenants...government paid rents is a good thing in bad economic times.

The spreading plume from Corona Virus is going to have a big ugly economic impact. Panama just canceled a major fair and banned similar events in the near future.

[Hermes]

How are your rentals holding up? Obliviously a tough time...hearing non-payments are up to 50% or higher in some markets and a hold on evictions.

[belizesailor]

No problem for me collecting rents on any properties in the USA yet. However, some municipalities have issued restrictions on evictions. In that case, getting rid of a problem tenant during the CV crisis is difficult. Im dealing w that issue right now. In Austin, TX you must now prove the tenant is a threat to the well being of other tenants.

[Chotu]

You know, I was thinking about this thread. I was so glad I did not try to move in this direction. It’s going to be very difficult collecting rent from people who have regular jobs. Especially when those regular jobs are gone.

[keepondancin]

I have a mix of tenants. The residential have been good. I keep their rents slightly below market, so I have less turn over, which actually equals to holding off for higher rent. I have one commercial tenant, who I offered a temporary rent reduction due to closing, and a deferred payment of part of the rent. She jumped at it and has been paying. Offered it to another, she didn't respond until the last day before going into default, and said she is not paying the rent, and she isn't leaving, and when she reopens she may not pay the back rent, and the Govenor said I can't do anything about it. Wrong! There are no evictions for 90 days in NY State, but there isn't mandatory rent forgiveness. Meantime she facetimes about all she is doing while closed. The lawyer will probably become involved. It does demonstrate how people try to take advantage of a situation. In her case, she is just stupid about it. Still have the income I need.

[Hermes]

Originally Posted by belizesailor

No problem for me collecting rents on any properties in the USA yet. However, some municipalities have issued restrictions on evictions. In that case, getting rid of a problem tenant during the CV crisis is difficult. Im dealing w that issue right now. In Austin, TX you must now prove the tenant is a threat to the well being of other tenants.

I am a resident of NW Austin and my house value has doubled in the last 5 years...boom times for sure. It will be interesting to see how the market holds up over the next 2 years. I don’t expect much of a material change but who knows.

[Chotu]

https://nypost.com/2020/04/09/more-t...o-coronavirus/

Highlights - get ready sailing landlords. Maybe you can get proactive somehow.

The National Multifamily Housing Council tracked data from 13.4 million apartment units and found that 31 percent of renters had not paid their rent in the first week of April, up from 19 percent for the same period in the previous month, according to a report released this week.

“The COVID-19 outbreak has resulted in significant health and financial challenges for apartment residents and multifamily owners, operators and employees in communities across the country,” said Doug Bibby, the president of the National Multifamily Housing Council.

Almost half (46 percent) of renters say they have less than $500 in emergency funds, while 22 percent of homeowners say they don’t have enough saved to cover their mortgage payment for a month, according to a separate poll of 1,000 renters and homeowners from Clever, an online service connecting house hunters with real-estate agents

[Boatguy30]

I also was lucky to have collected 4/5 of my rent so far the other tenant pays as they can normally, guess they can't right now. Everything is paid for so no worries.