Hi Guys,
We got lucky and purchased an 8 unit apartment in a pretty nice area in Southern California for $2m back in 2009. We still have about $906k in mortgage on this property.
Our rental income is about $200k / year, but after expenses, our income (without depreciation) is about $60k. If we include depreciation, our reported net income is $6k.
If were to do a comp in our area, similar apartment units will now sell for about $5m - $6m.
While discussing this on another subreddit, /u/Richralph mentioned that (assuming $6m valuation) my rental yield is only 0.1%, which is rather stupid.
If we were to sell it and try to reinvest in a different asset class, we would have to pay a significant Federal and State taxes (50%+), which I don't really comprihend on the amounts involved...
My question is:
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Should I look at this investment differently? Judge the return by our original purchase price ($2m)? If we use this, our rental yield would be close to 10%, which is very respectable.
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Should we really bite the bullet and sell the property to reinvest and pay the tax man?
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Should we 1031 exchange into another property, but judging from the property in our area, there's nothing good that we can get that's below 20 GRM (Gross Rent Multiplier).
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Do nothing. And keep working at this apartment. Any repairs on this building would put us in the negatives for reportable income.
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Something else we're missing?
Any help would be greatly appreciated!
TL;DR: Got lucky on an apartment building. Yield is low now and need to decide what to do.
Submitted January 17, 2018 at 12:39PM by financeable http://ift.tt/2FP6tb1
