The median mortgage payment is today around $2,800, which leaves a lot of houses for sale and few people able to buy them. Sellers now outnumber buyers by the biggest margin ever.
Never planned on selling my CA rental properties, hoped to pass them on as a legacy to my children and grandchildren. Being a landlord takes up a lot of time and is a lot of work. Unfortunately, the state of CA has now also made being a landlord a very high-risk business due to crazier and crazier tenant laws. WE NO LONGER OWN OUR REAL ESATATE, THE TENANTS AND THE STATE OF CA OWN IT. They still allow me to pay the taxes. They also have made it impossible to pass my assets to my children without them paying very high taxes after my death, which will force them to sell. If I sell now and pay the Fed Cap gains tax (A horrible tax on inflation) I lose 20% of my principle in real terms! Trapped in CA, the no longer "Golden state". God Help Us.
I feel your pain. I was born, raised, educated, built two business (which are still operating there 40 years later) and raised a family in So. Cal. We left CA over 8 years ago and only go back to visit family. We started liquidating CA real estate a couple years ago and have only two more to go as we tired of being a landlord for all the reasons you articulately described. CA is gone beyond return and so are we.
We used a 1031 exchange to defer capital gains trading rental properties for farmland. The yield on farmland is less than rental properties but tenant does all the work allowing us to enjoy retirement.
Very interesting. I've done that many ten thirty ones , but not like you have. I've never considered turning rental properties into rental farm land despite the family history of renting large tracks of farmland. Thanks
Make sure you understand that if you sell a property in a capital gains state and buy the other in a capital gains free state you'll still owe the capital gains to the state where you sold the first property. You're simply deferring the tax you would have paid if you didn't do the 1031 exchange. I'm guessing you know all this, but I didn't and had to be disabused of my false notion by a professional.
It sure is nice reading Bill on money and business. Coming from a family of modest employment incomes, my parents chose real estate to get ahead. I used to hate weekends as a kid because while all my peers where riding bikes and screwing around with their friends I was scraping wall paper, pulling up linoleum floors, and cleaning up yards and gardens. My favorite day was Monday.
The rents were never the prize. Even when they fetched a solid return, those profits could and did vanish when people moved out and money had to be spent renovating; even a short term vacancy would cut deeply into the net revenue stream. But, in Southern California during the 60's, 70's and 80's if you could cover your costs and keep the property maintained there was always a "seller's market" just around the corner that made the whole enterprise worthwhile. My point with all this is that there was no get rich quick about it. One had to be patient and learn the lesson of delayed gratification. IMHO, that's the real beauty of investing in real estate.
Going to be an interesting ride ahead. The US$ is losing value as the World turns to other fiat currencies including the Euro (that confuses me). Then there are the PMs (gold and silver) along with the new BRICS currency somewhat backed by gold. The World is fast becoming multi-polar and projecting the past into the future here in the good ol' USofA may not work out so well going forward. Keeping all your eggs in the U.S. basket may not bear fruit ahead.
Fiat currencies will continue the path they also follows. Gold backed currencies like the U.S. had at one time, don't. But politicians just can't help themselves. Printing money is so enjoyable initially. The World will see what happens with the International Yuan as it appears to initially be backed by 40% (or so) in gold. Government will always mis-manage money given any chance.
RE: MY PREVIOUS POST. Thanking those who have commented on 1031 exchanges. If that has worked for those of you who have done so I am very happy for you. I have thoroughly researched this option hoping to buy a single tenant commercial property like a McDonalds or 7/11 gas station. Unfortunately, you wind up selling your residential property for a stupidly high price, then being rushed into buying another property for a an even more stupid high price.
Then you are locked in at 3.5%-5% (Now finally sometimes a bit more like 6%) into a 30-60 year lease priced in today's USD value! 30 or 60 years from now what will one 2025 dollar be worth? GOD ONLY KNOWS! It is worse than a 30 year treasury bond, which I would not touch with a 100 foot pole. At least now I can still raise my residential rents to cover some of the inflation, but the state of CA is bound and determined to put a stop to that too with all their insane socialist rent control and tenant protection laws.
I FEEL AS IF I HAVE BEEN IN A NO WIN TRAP FOR DECADES! Still grateful to God for all our blessings, just trying to make the best of a bad situation. It is not going to make our retirement an easy one.
The Euro, it too is on the chopping block. Confuses me as well perhaps one day there will be a rush for the exit. A close friend informed he s been working on moving a clients pension from the UK more than
6 months later and still hasn t completed. They have PSAG- Pension Scams Action Group.
The next 20 years won’t be like the last 50 in real estate. But land is still real.
All those high credit scores that bought 4 years ago are going to sit tight with low interest rates and mortgage payments; those houses will be off market. Prices will go down. But it will be an interesting skewed market. Be interesting to see how McMansions fair; there will be a lot of excess, unwonted dollars swilling back to North America. Currency collapse will always look like Germany, 1920.
I was invested in very small ways in rental real estate here in Toronto in the 1970's and 1980's, and decided against it after about 15 years or so.. The reason? I found that instead of it being an "investment", I was getting involved in a "business" ! BIG difference.
Never planned on selling my CA rental properties, hoped to pass them on as a legacy to my children and grandchildren. Being a landlord takes up a lot of time and is a lot of work. Unfortunately, the state of CA has now also made being a landlord a very high-risk business due to crazier and crazier tenant laws. WE NO LONGER OWN OUR REAL ESATATE, THE TENANTS AND THE STATE OF CA OWN IT. They still allow me to pay the taxes. They also have made it impossible to pass my assets to my children without them paying very high taxes after my death, which will force them to sell. If I sell now and pay the Fed Cap gains tax (A horrible tax on inflation) I lose 20% of my principle in real terms! Trapped in CA, the no longer "Golden state". God Help Us.
I feel your pain. I was born, raised, educated, built two business (which are still operating there 40 years later) and raised a family in So. Cal. We left CA over 8 years ago and only go back to visit family. We started liquidating CA real estate a couple years ago and have only two more to go as we tired of being a landlord for all the reasons you articulately described. CA is gone beyond return and so are we.
We used a 1031 exchange to defer capital gains trading rental properties for farmland. The yield on farmland is less than rental properties but tenant does all the work allowing us to enjoy retirement.
Very interesting. I've done that many ten thirty ones , but not like you have. I've never considered turning rental properties into rental farm land despite the family history of renting large tracks of farmland. Thanks
I am in the same boat. I’m thinking of doing a 1031 and moving the investment to another state. Doing this you won’t lose anything on capital gains.
Make sure you understand that if you sell a property in a capital gains state and buy the other in a capital gains free state you'll still owe the capital gains to the state where you sold the first property. You're simply deferring the tax you would have paid if you didn't do the 1031 exchange. I'm guessing you know all this, but I didn't and had to be disabused of my false notion by a professional.
Try doing a 1031 exchange or DST exchange - you will be much happier!!
It sure is nice reading Bill on money and business. Coming from a family of modest employment incomes, my parents chose real estate to get ahead. I used to hate weekends as a kid because while all my peers where riding bikes and screwing around with their friends I was scraping wall paper, pulling up linoleum floors, and cleaning up yards and gardens. My favorite day was Monday.
The rents were never the prize. Even when they fetched a solid return, those profits could and did vanish when people moved out and money had to be spent renovating; even a short term vacancy would cut deeply into the net revenue stream. But, in Southern California during the 60's, 70's and 80's if you could cover your costs and keep the property maintained there was always a "seller's market" just around the corner that made the whole enterprise worthwhile. My point with all this is that there was no get rich quick about it. One had to be patient and learn the lesson of delayed gratification. IMHO, that's the real beauty of investing in real estate.
Going to be an interesting ride ahead. The US$ is losing value as the World turns to other fiat currencies including the Euro (that confuses me). Then there are the PMs (gold and silver) along with the new BRICS currency somewhat backed by gold. The World is fast becoming multi-polar and projecting the past into the future here in the good ol' USofA may not work out so well going forward. Keeping all your eggs in the U.S. basket may not bear fruit ahead.
I agree. But does anybody really believe that the other currencies will be better managed than the dollar?
Fiat currencies will continue the path they also follows. Gold backed currencies like the U.S. had at one time, don't. But politicians just can't help themselves. Printing money is so enjoyable initially. The World will see what happens with the International Yuan as it appears to initially be backed by 40% (or so) in gold. Government will always mis-manage money given any chance.
Phil Anderson wrote a book "The Secret Life of Banking and Real Estate.
(interesting read for economic historical context too...)
Phil is adamant about the 18.5 year land-value cycle which has repeated with surprising regularity since the 1700's.
If Phil is correct, the next low in land-value would be around 2026-2027.
Elizabeth must love what she does. Sounds like a lot of work for 5%.
RE: MY PREVIOUS POST. Thanking those who have commented on 1031 exchanges. If that has worked for those of you who have done so I am very happy for you. I have thoroughly researched this option hoping to buy a single tenant commercial property like a McDonalds or 7/11 gas station. Unfortunately, you wind up selling your residential property for a stupidly high price, then being rushed into buying another property for a an even more stupid high price.
Then you are locked in at 3.5%-5% (Now finally sometimes a bit more like 6%) into a 30-60 year lease priced in today's USD value! 30 or 60 years from now what will one 2025 dollar be worth? GOD ONLY KNOWS! It is worse than a 30 year treasury bond, which I would not touch with a 100 foot pole. At least now I can still raise my residential rents to cover some of the inflation, but the state of CA is bound and determined to put a stop to that too with all their insane socialist rent control and tenant protection laws.
I FEEL AS IF I HAVE BEEN IN A NO WIN TRAP FOR DECADES! Still grateful to God for all our blessings, just trying to make the best of a bad situation. It is not going to make our retirement an easy one.
The Euro, it too is on the chopping block. Confuses me as well perhaps one day there will be a rush for the exit. A close friend informed he s been working on moving a clients pension from the UK more than
6 months later and still hasn t completed. They have PSAG- Pension Scams Action Group.
My close friend lives in Vanc,BC
Yes We all have to live somewhere , even in Vancouver! LOL
As usual government fingers in every bodies pie. When will it stop?
Interesting analysis, Dan.
Recall Mark Ford advocating the “Rule of 8” many years ago. Still a good one to abide by, especially now.
The next 20 years won’t be like the last 50 in real estate. But land is still real.
All those high credit scores that bought 4 years ago are going to sit tight with low interest rates and mortgage payments; those houses will be off market. Prices will go down. But it will be an interesting skewed market. Be interesting to see how McMansions fair; there will be a lot of excess, unwonted dollars swilling back to North America. Currency collapse will always look like Germany, 1920.
I’m not able to access my subscription? Ideas?💡 Thanks
Good to know, Bill, thank you.
I was invested in very small ways in rental real estate here in Toronto in the 1970's and 1980's, and decided against it after about 15 years or so.. The reason? I found that instead of it being an "investment", I was getting involved in a "business" ! BIG difference.
Bill: WOW. It will snow in Southern California beaches. I agree. AP
There are other choices for financing retirement….pensions and real estate income. Selling nothing to finance our retirement.