Last Updated on
My memetic is to do everything DIY. I got this. I can do it! Frankly, it’s exhausting and it’s the reason I’m selling the rental property. I share the details in this week’s episode.
Click here to listen on iTunes.
Click the Big Green Play Button to Listen to the Podcast
Join our Facebook Group of over 10,000 landlords and property managers
Can you do us a solid?
Our podcast has grown over the years because of listeners like yourself. One way you can help us grow further is by leaving us a review of our podcast. It will only take a minute and you can find detailed instructions by clicking here.
Hey everybody. Welcome back to another episode of RentPrep for Landlords. I’m your host, Eric Worral and this is episode 269 and I’m going to be giving you an update on the rental property that I’ve been working on and what I’ve got going on there. And uh, and apology if you’re hearing this one late because it was supposed to air Thursday morning, but I’ve been pretty busy and I slipped up on this one so we’ll get back to that right after this [inaudible] landlords podcast and now your host, Steven White and Eric Worral. So to give you some insights on where my head has been at over the past week, I was actually driving over to the rental property yesterday. I’m cleaning out some stuff out of the basement, old paint cans, stuff like that. Uh, and to be honest, some of my stuff that I never moved out of there when I moved into our current house and as I was driving there, all of a sudden I had one of those moments where I was driving and I went, where am I?
Like, holy crap, where did, where did that extend out? So I took the wrong exit on the way over there. I meant to get off to the next exit going to home depot and ended up going down what’s called the nine 90 here in Buffalo. Uh, if you’re not from the buffalo area, for some reason we put the word the in front of our highways. I don’t know why we saved the two 90, that 99 90. I’m taking the 92, the two 19 a somebody who is from Arizona asked me that. They were like, why do you say that? And I’m like, what are you talking about? I don’t know why we do it, but we do. So I was driving and I was like, oh my God, you know, how do they end up here? Like my brain was just going a million different directions.
So I kind of touched upon this on some recent podcasts and we were talking about on a previous podcast, the decision to sell or continue to run out the property. And I was kinda going back and forth on the too and I’ve gotten a few emails from people saying, you know what, you kinda hit the spot on this. Uh, this is something that I’ve been dealing with too. Like should I hire property managers? Should I itself, should I continue to self manage? So I’m on the way over to the rental property and took the wrong way. I ended up going where I went earlier that day. So, um, obviously our minds in a different place and I started think about that a little bit, you know, as far as the impact and how what your mental space is worth. And for me, I’ve never had a dream of owning 10 rental properties.
I’m sure a lot of listeners, you know, you’ve got a dream to own 10, 20, 50. For me, I always did it as a way to house hack. I when I was a, I didn’t want to go and leave my parents’ house when I was 22, 23 and go right into renting and then just pouring money into somebody else’s pocket renting. I knew I wanted to get a two unit live in it, move out of it, and then use that as income to help support the mortgage on the next property. So where I found myself at now is the things that you want when you’re 22, 23, which is when I purchased that rental property or different when you’re 33. So it’s 10 years later. And when I was 23, it was cashflow. I wanted that money to be able to support my lifestyle now and in the future.
Make things easier for myself. Again, a just kind of repeat what I just, but instead of putting money into somebody else’s pocket, why not build equity into something I’m owning while I can also build this thing up and make it more valuable? I bought the property at $114,500. Buffalo’s a pretty cheap market. So you know, a lot of appreciation happened over the years in this area. And uh, the property is probably worth around $250,000 now. Uh, so probably about half of that is sweat equity. Half of that is appreciation. So it’s appreciated nicely. But really the thing I keep going back to is like, what do I really want right now in life? And I don’t want to be like short, you know, short focused and I just kind of looking at the next six months, two years, and maybe, you know, end up doing something that I’ll regret.
And that’s kind of, you know, the thing that’s tough when you’re running these decisions, right? Uh, you’re thinking about solid property and you go, you know, what am I, am I just frustrated today to have I slept on this? Have I thought about this enough? You know, am I going to regret this if I do this? Because you can’t Ansel a property in two years, right? So what I keep going back to is, uh, principles that I’ve kind of defined for myself. And I know I brought this up in a previous episode as well, but really understanding what are your principles right now? And I had somebody email me, his name’s rob and I replied to him and I told him, you know, the reason I’m, I’ve decided to sell the rental property is principles that I put a high value on are simplicity, control, freedom of time.
So those things are all right now in direct conflict with self managing the property. And when I looked at the numbers on hiring out a property manager, I liked my numbers better selling and being able to put things into other investments for now that are more passive and give me more freedom of time and control, uh, as far as control of my time. So what I’ve decided, and I’ve kind of worked through some spreadsheets on this as well as I’m planning on selling the property and it’s a pretty good market for selling. It usually takes about 10 days to get an offer and to get an offer in a contract. And, uh, I decided to earmark that money and I’m going to talk with like a fee based advisor to run all this through with me and my wife. Uh, but essentially what I can do is I can take the proceeds, I can put some of them into five 29 plans.
Uh, so a little ones are set up for college, uh, in New York state, uh, if you’re setting up a five 29 plan, you can deduct up to $10,000 each year off of your, uh, state taxes. So what I’ll be able to do is this year and next year, uh, put in that kind of money to, uh, put towards the five 29 plans and I’ll have 16, 18 years, uh, to mature so that that’ll have some time for compounding interest to take effect in the markets. Uh, what also I’m doing is for our situation. Um, my wife is in a school system, so she has a four o three B plan option and she also has a four 57 state, uh, uh, pension plan option as well that she can contribute on top of her state pension that teachers get. So basically we can do is I’m going to take a tax hit this year.
Um, my accountant did say, you know, you’re gonna end up paying $35,000 on capital gains on this project and then there’s going to be your fees and over to your realtor. Uh, and so I’m going to take a hit on those. But what I’m going to be able to do is in the future years, if this plan goes according to plan and you know, I’ll run it by my advisor, uh, essentially we’ll be able to do is take my wife’s income and just almost zero it out. So on the taxes it will say, you know what, like this person made almost no income because all of it was going into tax advantage accounts, uh, before you’d ever even hit your paycheck. So it’s Kinda weird because you’re not going to be getting any money off of her paycheck, but we’re doing this as a team and because of the money that I would be making from the rental property, I’ll be able to redistribute it into tax advantage to retirement accounts and Max them out, uh, and be able to do this for about three years between my accounts and her accounts based in the proceeds.
So really what I’m doing is a really poor 10 31 exchange, right? So the 10 31 exchange, the, the appeal of that is you can not have to pay your capital gains tax and you can roll that, the proceeds of that property. So let’s say it sells for 250,000, as long as I put a buy something that’s over that price and do it within a year, and there’s a few other stipulations, I don’t have to pay the capital gains while I’ve decided that I’m okay with paying the capital gains because what it’s going to allow me to do is Max out some retirement accounts. And the advantage to that is that all of the, um, earnings, all of those, uh, uh, the earnings on those accounts are going to, uh, earn tax free. And since we are in our early mid thirties, uh, we are looking at 30, 35 years of, uh, gains that are all going to roll tax-free, uh, until we start actually taking our, uh, earnings back out on the backend.
Uh, this may not be the best financial decision for someone else because he might look at it and say, Hey, I have no problem self managing, but really what I’m looking at is where I’m at in life, right? I’m 33, so I’ve got a lot of time for money in the markets to do their thing. Um, and then on top of that, uh, the property has appreciated quite a bit. I’m expecting that it’s not going to appreciate at this level that it has the last five years in our market. And then you throw in where you are personally. So if I had kids leaving in a, I was empty nesting and you know, or I was retired, I may actually have more interest maybe in doing this, cause I’d say, you know what, this is going to be my retirement nest egg. Uh, I’ll, I’ll make sure these properties are up, uh, up to code and in good shape and we’ve got good tenants.
Uh, but right now where we’re at, uh, with the second one on the way and, uh, you know, life about to get pretty busy. You know, everyone always says when you have one, you know, like, oh, that’s fine, but to, that’s where it gets tricky. But you know what, everyone’s got an opinion on kids like that, I feel like. But, uh, what we’re looking to do is simplify, make things easy a and put it into passive investments at this point. And what I’d like to do is eventually be able to get back into it, uh, when, uh, I feel like time is a little bit, uh, more on my side. So, uh, that’s what we’re thinking right now. But it’s such a ridiculous thing, you know, I think sometimes we fall into this pattern of thinking and we think, well, I have to do this.
And then when somebody says, well, why? And you can’t really come up with an answer to them. And that was kind of happening to me over the last month where I was renovating this property. I’m doing all this stuff and I’m like talking to my wife about it where I’m like, you know what, I’m just kind of exhausted. Um, I’m done. You know, I, I, I’ve missed a few weekends, um, at least a few days, uh, over the past six months dealing with random stuff over the property. Uh, I’m just kind of, I’m tired of doing it and it’s ridiculous for me to keep this property because I run a podcast or I work for a, uh, a company that helps landlords a, I’ve got the 10 years of experience. And really it’s about assessing where I’m at in my life right now, doing the best thing for me, for my family.
And then leaving the door open to come back into rental properties and managing them. And building wealth through that way. And a, I think right now that I’m making the right decision, uh, you know, I’m going to live with it and, uh, yeah, the goal is to within a couple of weeks to get the property listed. Um, I’ve already got my realtor picked out, I already talked with him, already, talked with my tenants, uh, and, uh, we’re good there and I’ve got some work to do. Uh, I’ve got, uh, probably about three more trips. Uh, just making sure stuff’s cleaned up, cleaned out on the properties and good showing condition. Um, but yeah, I’ll be honest, I’m a little bit nervous. Uh, I definitely got some anxiety thinking about selling it. I’ve never sold any, uh, property of just bought two. Um, but, uh, I’m looking forward to, uh, closing this chapter, starting a new chapter, simplifying and kind of live in more about my principles, uh, that I’ve kind of developed for myself.
And, uh, I don’t want to become, I, I’ve talked with Mike Sims who was been on a few podcasts and he called it your memetic. Um, that thing that has just become your learned behavior. So for me, I feel like I’ve kind of gotten into rental properties because that’s what my parents did. That’s what my dad’s really good at. Like, he’s really great with working with his hands. He loves working with his hands. He loves physical Labor. Me, I really liked making videos on youtube and I know that sounds weird, but like that’s a way that I’ve been able to make income on the side as well. And I’m like, why would I spend all this time and energy doing something that I don’t like doing that nobody says that I have to be doing? And then I can actually sell and set myself up in other areas of life for the next few years.
And then also we get to spend more time doing the things I love and being able to control my time and having more passive investments that maybe won’t return quite the return that I would have on the rental. But I’ll be doing the things I love doing and I follow a lot of these, um, financial independence blogs and, uh, choose fi as one and they kinda describe financial independence as you just being able to live your life the way you want to live it. So this isn’t an example of me reaching financial independence, but it’s getting closer in that, you know what I feel okay. Making the sale. I feel okay selling this property at this point, even if financially it’s not the best thing. But I think from a lifestyle standpoint, it is the best thing for me and my family. Uh, and I do come across landlords once in awhile that are in a similar place that I am right now where they feel like they’re forced into this situation or they feel like there’s no way out.
Then I was emailing with somebody who said they’re in Reno, they can’t find good tenants. They’re only getting like druggies responding to this. Uh, this particular rental. They said it’s in a real tough, uh, part of town and all this stuff, and they’re telling me that they’re essentially trapped. They’re in this prison. I’m like, well, you’re not like, you can still sell. You can still live a really, really, um, skilled down lifestyle somewhere else and rent and um, yeah, you might take a bath on the property, but if it’s ruining your, your mental state and it’s just, you know, it’s consuming you I guess is the best way to say it. You’ve got to move on. Um, I wouldn’t say that the rental that I have is consuming me by any means. Um, but it does occupied too much real estate in my mind and, and that spaced my mind.
I want to be able to use on other projects coming up. So that’s why I’ve decided to sell the property. And I know I’m rambling a little bit, but I know from the response I’ve been getting from listeners that there’s a lot of them that have thought about this stuff too. And sometimes, you know, maybe it’s just selling one of them, you know, maybe it’s a, the one that’s a, it’s given you more problems or concerns or what, what have you, or maybe the clientele that you’ve gotten out of that particular location isn’t as good and favorable as other locations. Sell it, it’s fine. You know, give yourself permission to do that, to live the life you want to live, to give yourself the freedom and flexibility to control your destiny. And that’s kind of what I’m doing here. Uh, so that’s why I’ve decided to sell the rental property.
So I’ll probably get away from this topic for the next couple of weeks, uh, but I will be a filling you guys in as I get more details and let you know how that’s going for first time a sale for myself cause that’ll be an exciting thing to go through. So until next week, guys, thanks for listening and following along. Uh, really appreciate the emails that I’ve received from some you as well. And the feedback that I’m getting from you is good to know that other people are in the same boat, same kind of thought process, and it’s okay. You know, it’s a, it’s a journey and, uh, figuring this stuff out as half the fun. Right. All right guys, until next week, take care.