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I sold all my real estate in 2016


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2016 Jun 15, 10:54am   28,415 views  79 comments

by Goran_K   ➕follow (4)   💰tip   ignore  

I know this isn't a real estate website any longer, but it was when I joined years ago and enjoyed the company of the "bears" and "bulls". I thought I'd drop by and let you guys know how my California housing foray went the past 4 years.

As you know in 2012 (by my post history), I purchased a home in Laguna Beach, my primary home. In 2013, I also purchased an investment property in Los Angeles (West LA). I paid $1.2 million for the Laguna Beach home, and $675,000 for the condo in West LA. The West LA condo was rented before I even closed escrow to a personal friend. He stayed in the place for 2 years paying $2700 a month. I also had a tenant afterwards who was paying $3100 a month until I sold the place.

In 2016 I sold my Laguna Beach home for $2.45 million and 3 weeks ago I sold the West LA condo for $1.3. The reason for my sell off is because I am relocating the family to Northern Nevada (Gardnerville). I'm sort of going full-time off-site consultant now, and don't need to be in California any longer.

So after a 4 year journey as a real estate owner in SoCal (I had been a renter for many years before), I came out of my real estate foray with about $1.6 million in profit. I'm not saying I'm some Nostradamus because I never expected to pocket so much cash from real estate, but I will say that I am immensely happy that I didn't stay on the sidelines the past 4 years.

Thanks for all the guys who I exchanged quips with over the years, the Apocalypse guy, the guy who had a duck avatar, and the numerous bears who despite their great advice and knowledge, seem to have been wrong about how real estate would crash immensely (don't worry I considered myself on the bears team for many years and also did not understand how the market could be as such).

#realestate #investing

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1   justme   2016 Jun 15, 10:59am  

Good timing on both 2012 and 2016, Goran. In 2012 I had no idea what level of depravity the FRB would sink to, with interest rates and QE3. Had I known I might have acted differently myself. Good luck, stop by from time to time. We still talk bubbles around here.

2   Goran_K   2016 Jun 15, 11:11am  

Thanks justme, I remember you from the old days. :)

I would have stayed on the sidelines as well but buying at the time just made sense for the growing family I was raising and the landlord at the time wanted to increase my rent enough that I had to seriously look at buying.

Who knows, if that landlord had not tried to increase my rent, I may never have bought.

3   Tenpoundbass   2016 Jun 15, 11:18am  

Wow you done squeezed lightening from a yam.

4   Shaman   2016 Jun 15, 11:28am  

Fantastic dealing Goran! I bought slightly later than you but have still seen good appreciation since then. The tipping point came when I realized that there was enough interested money out there to snap up every property available at whatever cost. Then I realized it wasn't a supply and demand market but a crony capitalist one, where big money controlled not only the laws and prices but also the housing availability. The choice then was clear: buy or watch the market rise without me. Still worked out pretty good. Not as good as you but I didn't have the resources to buy a Laguna beach home: wow!

5   missing   2016 Jun 15, 11:36am  

Goran, have you compared this outcome to how you'd have done had you invested in the stock market instead - with a similar leverage, in a balanced portfolio (e.g. using risk parity)? The 1.6 mil profit takes into account fees and cap gain taxes? Just curious.

6   Goran_K   2016 Jun 15, 11:43am  

FP says

Goran, have you compared this outcome to how you'd have done had you invested in the stock market instead - with a similar leverage, in a balanced portfolio (e.g. using risk parity)? The 1.6 mil profit takes into account fees and cap gain taxes? Just curious.

No I have not done a detailed comparison. My initial gut feeling just rolling the numbers around in my brain is that I would have done good, but probably not $1.6 million good. Most of my stock/bond/money market investments are not risky at all, and I tend to favor funds with less volatility.

7   Goran_K   2016 Jun 15, 11:44am  

Tenpoundbass says

Wow you done squeezed lightening from a yam.

I think you had a different screen name before...

8   BayArea   2016 Jun 15, 12:11pm  

I tried hard to get in the door between 2010-2012 and could not get a single above asking price offer accepted here in the Bay Area during that time with all the low inventories and investor sharks running around here. On more than one occasion I discovered that the houses I made offers on showed records of selling less than my offer price... Funny business going on.

Well done... it's a game of timing and luck

I must ask, where do you invest your money now with both real estate and the stock market as high as they are?

9   Goran_K   2016 Jun 15, 12:33pm  

BayArea says

I tried hard to get in the door between 2010-2012 and could not get a single above asking price offer accepted here in the Bay Area during that time with all the low inventories and investor sharks running around here.

Well done... it's a gaming of timing and luck

I must ask, where do you invest your money now with both real estate and the stock market as high as they are?

Well my personal investments aren't really impressive.

I have a SEP IRA, a few Vanguard money market funds, and a high yield checking account but I had all of that before I sold all of my real estate, that's literally all of my investments at the moment. Total value last time I checked was slightly under $380,000.

With the cash I have I'm going to buy a 5 acre property with a modest home in South of Carson City in NV, that will be all the real estate I own. That will set me back around $400,000.

So after all is said and done, I will probably have $1.4-$1.5 million of cash to invest someplace (my profit + recovered downpayment the West LA home), about $380,000 in current investment account value, and a $400,000 modest farm in Nevada.

The good thing is I will own free & clear in a state with friendly income tax laws. I will have zero debts (no more Credit card debt, no more car payments, etc). I live a pretty modest life style compared to your usual OC "upper class" type.

I think the only real big change is that I will be living without any debt at all for one of the first times in my life, and will have a large amount of cash to invest or play with (probably invest). I'm not sure where I will invest, I was thinking of maybe buying a rental property somewhere closer to Reno. But as of now I haven't really thought of where I will park the money.

Sorry if that seems disorganized and scatter brained, I'm not a meticulous planner when it comes to investments.

10   Tenpoundbass   2016 Jun 15, 12:38pm  

Goran_K says

Tenpoundbass says

Wow you done squeezed lightening from a yam.

I dye my hair every now and then just so stand out from all of the other RESJW.

11   RC2006   2016 Jun 15, 1:37pm  

Bought around same time 2011, this site more than any other saved me from buying in 2006.

12   Strategist   2016 Jun 15, 2:03pm  

Goran_K says

So after all is said and done, I will probably have $1.4-$1.5 million of cash to invest someplace (my profit + recovered downpayment), about $380,000 in current investment account value, and a $400,000 modest farm in Nevada.

Don't forget capital gains tax.

13   freespeechforever   2016 Jun 15, 2:07pm  

So you only purchased your ex-primary residence because your then landlord was raising your rent, but you just on a whim, decided to buy a $675,000 condominium to rent out, also, at that same time?

And both of those purchased properties nearly predisely doubled in the intervening 4 years?

ALSO -

"[A friend] stayed in the [west LA condo] for 2 years paying $2700 a month. I also had a tenant afterwards who was paying $3100 a month until I sold the place."

So, let's just call that $2,900/month for 4 years.

48 x $2,900 = $139,200.00

(minus property taxes, maintenance, etc.)

Your alleged gain alone on your principal residence purchase was 1.25 million USD

Assuming that you're married, you can roll over $250,000 per spouse ($500,00 total) of gain, tax-free, into a new PRIMARY (not investment) home/residence.

Assuming that your new home in NV is your primary residence, and you took full advantage of the max $500,000 per married couple rollover, you'd pay capital gains tax of 15% + California state income tax (California has among the highest taxes in the nation, with the highest marginal rate of 13.3%), on the difference between the $500,000 exempt amount and the $1,250,000 gain.

That's 1'250'000 - 500'000 = $750,000.00 you'd have to pay tax on regarding your primary residence gain, plus tax on $100,000, because your new primary residence was $100,000 less than $500,000 of the dual-spouse rollover amount tax exemption.

Let's just say you're a $100,000 earner - your CA state income tax rate would equal approx 7.8%.

So 15% plus 7.8% = 22.8%

22.8% x $760,000 (remember, you allegedly rolled $400k not $500k into your new NV home) = $172,380 in tax due on gain on primary residence.

Your net gain would be less than what you're stating based on your "1.6 million" figure.

As to your "investment condo," that you allegedly purchased, the full alleged gain over initial purchase price would be subject to a 22.8% tax on the full gain of $625,000.

$625,000 x .228 = $142,500

$625,000 - $142,500 = $482,500 in the best case scenario.

You're total tax, in the very best scenario, is $314,880.00

So that alleged 1.6 million is now $1,285,120.

You put $400k of that into your new NV residence.

Notice that I didn't even get I to carrying costs, property taxes, maintenance costs, closing costs, commissions, deed transfer taxes, etc.

You have impeccable timing perfectly timing the bottom on both your now ex-California purchases.

You fail to break down specific additional tax liabilities and carrying costs.

You smell of some bullshit.

14   Sharingmyintelligencewiththedumbasses   2016 Jun 15, 2:18pm  

freespeechforever says

Assuming that you're married, you can roll over $250,000 per spouse ($500,00 total) of gain, tax-free, into a new PRIMARY (not investment) home/residence

you don't know what you are talking about, and you criticize someone else???

You don't have to "roll over" gains of personal residence, and haven't had since 1997.

He can just flat out keep 250K single or $500K married in gains on the primary residence.

On the investment condo, the entire net profit (i.e. minus all expenses to sell) would be taxable income. Likely taxed quite a bit in his case, since his income is and will be high for the year, plus depreciation recapture.

In any case, he posted his purchases years ago and those numbers aren't out of line for what the market has done in the meantime, so your doubting him is more likely based on pathetic jealousy than any reason.

15   freespeechforever   2016 Jun 15, 2:19pm  

Might I add, assuming your alleged purchased and sales happened as/when you claim, you were magical in securing two mortgages without 20%+ down at a time when few were lending, and especially on "investment/rental" properties. So congrats on that, too.

Or did you pay cash for both?

Your alleged 1.6 million in gains is no more than a theoretical 1.28 million under the ideal/best case (minus other expenses I didn't break down).

You now allegedly have $880,000, at most, after purchasing your NV property/residence, with which to play/invest, so there's that, assuming you, one of the best property timers I've heard of, maxed out all tax benefits (married spouse double x $250k principal residence purchase gain rollover), etc.

16   Goran_K   2016 Jun 15, 2:21pm  

Strategist says

Don't forget capital gains tax.

Yes, my tax situation will need to be settled for sure.

17   Goran_K   2016 Jun 15, 2:26pm  

freespeechforever says

You smell of some bullshit.

I posted about my purchase at the beginning of 2013 when I closed (I offered in the fall of 2012). You can search my post history, it's there clear as day and I described exactly where I bought, and why I bought at that time.

I know a lot of people tend to "make shit up" on the internet, but you have to admit, posting about something 4 years ago, then coming back 4 years later just to "make something up" seems like an awful lot of effort just to make it all up. Don't you think?

edit: Here I saved you the effort of having to look, here is my post, http://patrick.net/Goran%3A+Joining+the+debt+slaves%3F

Notice the posting date "January 13th, 2013, on a Wednesday". I remember that day clearly, my neighbor (who has also since sold and moved) left a good wine on my porch to welcome me to the neighborhood. I took a picture of that bottle if you'd like more proof. :)

18   freespeechforever   2016 Jun 15, 2:35pm  

"You don't have to "roll over" gains of personal residence, and haven't had since 1997.

He can just flat out keep 250K single or $500K married in gains on the primary residence."

Has no effect whatsoever on numbers I put up as I'd given him the full benefit of the doubt that he had rolled entire $500,000 principle residence (owned for minimum of 2 years) gain-on-sale exemption from capital gains taxation.

19   Goran_K   2016 Jun 15, 2:35pm  

freespeechforever says

Might I add, assuming your alleged purchased and sales happened as/when you claim, you were magical in securing two mortgages without 20%+ down at a time when few were lending, and especially on "investment/rental" properties. So congrats on that, too.

Or did you pay cash for both?

Your alleged 1.6 million in gains is no more than a theoretical 1.28 million under the ideal/best case (minus other expenses I didn't break down).

You now allegedly have $880,000, at most, after purchasing your NV property/residence, with which to play/invest, so there's that, assuming you, one of the best property timers I've heard of, maxed out all tax benefits (married spouse double x $250k principal residence purchase gain rollover), etc.

I only had a mortgage on the West LA property. Securing that mortgage was not hard for me at the time, I had plenty of cash sitting around (remember I live a pretty modest life).

I'll let my accountant sort out the numbers. :)

20   Goran_K   2016 Jun 15, 2:43pm  

Does anyone remember Roberto or the Duck avatar guy? Did they end up selling all of their stuff too? If I remember correctly, Roberto was pretty well invested in Arizona, and duck guy was invested heavily in Concord.

21   freespeechforever   2016 Jun 15, 2:50pm  

Goran - My numbers above stand, but I believe you now that you directed me to that much earlier posting.

Moreover, I need to sincerely apologize for being prickish, particularly since you genuinely seem to be a very polite, decent and NICE fellow human (the world needs moreAN

Congratulations on your gains. Seek competent tax advice from an ethical, sharp CPA on how to minimize your taxes on those gains.

Free advice - You may want to hold off investing in INVESTMENT real estate for a while as institutional money is creating massive imbalances as it flows into all segments of real estate now, having already inflating another massive bubble, only to leave pension funds, insurance company shareholders, REIT limited partners, etc., holdng the bag in the aftermath of what's about to happen (again).

The bears have been wrong for 5 long years in property, equity and bonds, but they failed to appreciate the full measure of the "awesome wicked set of tools" the world's central banks would deploy in the prior years.

Alas, those tools are becoming increasingly and massively less effective, bordering on impotent, and have now actually become market-distorting and investment-seeker weapons of mass destruction in and of themselves (see Japan).

As I've heard from the brightest person I know and now share in his belief, 2008 to 2009 was an appetizer for what lay ahead.

22   freespeechforever   2016 Jun 15, 2:59pm  

p.s. - Congrats on getting out of residential real estate within a year or 18 months (at most) of what I believe the top will be, before capital controls and other factors counter-act the cocaine-like effects of NIRP/ZIRP and yet-again silly lending standards (3% down FHA mortgages to sub-700 FICO score buyers now comprise 80%+ of existing/new home mortgage originations again).

Central banks did reflate the financial sector, asset values, with only tepid (relatively) ancillary benefits to labor markets and even the "booming" manufacturing sector (just wait until you all see how quickly large corporations can lay off heads as a 1st response to slowing sales/revenue and in attempts to preserve cash during the consumption downturn that's already begun).

23   Goran_K   2016 Jun 15, 3:03pm  

It's alright man. I used to be a "regular" on Pat net, I'd say the "golden age" of the Bear vs Bull battle. But that was years ago, and internet communities always change so I'm not surprised you didn't know of my history here. I learned a lot from the people here and miss the verbal tete-a-tetes between the opposing sides.

Believe it or not, buying a house at the time felt like "settling". I felt that I had betrayed the "bear cause" by caving in to my more base desires (which were to have a bigger place for the family). But it ends up, if you just buy when you are ready and don't think about it too hard as long as you're not absolutely buying way above rental parity (which I wasn't at the time), you'll be alright.

Now I'll be some red neck who lives on a small farm, raising a few sheep, chickens, and maybe I'll have a rifle range in the back. Kind of tired of living where there are too many people...

24   anotheraccount   2016 Jun 15, 3:13pm  

Goran_K says

It's alright man

I remember you well. Good job. I have not sold my place yet as it did not appreciate quite as dramatically as "prime" area like Laguna Beach.

I am curious, who were the buyers for you Laguna house, just general description.

25   BayArea   2016 Jun 15, 3:16pm  

tr6 says

I am curious, who were the buyers for you Laguna house, just general description.

curious myself...

26   Goran_K   2016 Jun 15, 3:18pm  

tr6 says

I remember you well. Good job. I have not sold my place yet as it did not appreciate quite as dramatically as "prime" area like Laguna Beach.

I am curious, who were the buyers for you Laguna house, just general description.

The buyers weren't strange IMO. Middle eastern couple, two boys in their teens, they had 50% down, and financed the rest through Chase. The father works in Los Angeles as a property developer. They moved from Toronto, and the oldest boy wants to attend USC. No fancy cars either, I think the father's main car is a Honda accord.

27   freespeechforever   2016 Jun 15, 3:21pm  

Goran, I'm in my early 40s, am an attorney (hence the prickish first response to you; stereotypes often ring true, unfortunately) in the Midwest, and I both develop commercial real estate and counsel other developers that do.

After MY ignoble first interaction with you, I understand the needs to obtain a DOMICILE at the time you did and for the reasons you fire, having a your daughter of my own.

Anyways, the next time I'm out in LV, Reno or Henderson (about 3x per year), I'd buy you a few rounds if you'd accept, as a small peace offering.

You seem to be a righteous dude, and it sounds like we my have a lot in common.

28   Goran_K   2016 Jun 15, 3:31pm  

haha, I'd be cool with that.

I remember when Patrick used to have meetups in the Bay Area. Too bad I never got out to the South Bay during that time to see all the screen names in person.

29   BayArea   2016 Jun 15, 3:36pm  

Goran_K says

I remember when Patrick used to have meetups in the Bay Area.

Are these meet-ups still happening?

What does a partick.net meet-up look like?

30   Strategist   2016 Jun 15, 4:36pm  

jazz music says

Wow, sounds like you really stuck your neck out and won.

It was a guaranteed win. Still is.

31   Strategist   2016 Jun 15, 4:46pm  

jazz music says

Strategist says

It was a guaranteed win

How is that different from what they said in 2002?

We had no stated income and sub prime in 2012.
The next phase of a real estate boom has just started. 2016 will go down in history as another buying opportunity. Remember......"fortune favors the brave."

32   Patrick   2016 Jun 15, 4:47pm  

BayArea says

Are these meet-ups still happening?

What does a partick.net meet-up look like?

haven't had one in a couple of years. is it time to do it again?

33   missing   2016 Jun 15, 7:02pm  

Goran_K says

Now I'll be some red neck who lives on a small farm, raising a few sheep, chickens

My father decided to raise chickens a few years ago. At first everything was OK. Then one day he decided to kill one of them for some reason (soup or it was sick, I don't know) and figured out he can't do it. Now whenever this has to be done, he summons my (very old) grandmother. Hope you have thought out this part carefully.

34   _   2016 Jun 15, 7:22pm  

rando says

What does a partick.net meet-up look like?

This is a great idea.. we should have a patrick.net meet up!

35   turtledove   2016 Jun 15, 7:26pm  

rando says

haven't had one in a couple of years. is it time to do it again?

What a coinkidink! With me planning a trip up there this summer, and all.

36   turtledove   2016 Jun 15, 8:17pm  

BayArea says

What does a partick.net meet-up look like?

37   RC2006   2016 Jun 15, 10:33pm  

YesYNot says

With a dildo, MRA pamphlet, or hand gun?

More likely a consent form and video camera, especially if a dildo and alcohol are involved.

38   Goran_K   2016 Jun 16, 8:24am  

rando says

haven't had one in a couple of years. is it time to do it again?

Patrick, where do you usually have these meetups?

39   junkmail   2016 Jun 16, 10:26am  

Goran_K says

It's alright man. I used to be a "regular" on Pat net, I'd say the "golden age" of the Bear vs Bull battle.

I remember you. Good job on 'cashing out. Couldn't have happened to a nicer guy. Shoot me a msg if there's an empty farm next to yours when you find it.

40   Goran_K   2016 Jun 16, 12:23pm  

junkmail says

I remember you. Good job on 'cashing out. Couldn't have happened to a nicer guy. Shoot me a msg if there's an empty farm next to yours when you find it.

Are you sure you're ready for the Northern Nevada lifestyle?

- No more done up plastic Cali babes
- Not a lot of night life
- No Oceans (but there is Lake Tahoe)
- Rural
- Cold winters

I tried it for a few weeks during the extremes of the Summer and Winter, and I'm okay with it. It's definitely not "Cali" weather though.

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