Real Estate Rental Property SH #2 Update – Sale Completed (May 12, 2017)

by FI Fighter on May 17, 2017

in Precious Metals Updates, Real Estate Updates

Hey everyone! Sorry for the long hiatus away from posting, but to be honest, I’m kind of feeling the funk of the summer doldrums right now and haven’t felt motivated to write these past few weeks… I’m sure this feeling will pass, but for whatever the reason, I just have been trying to get away from the computer as much as possible. Actually, I’ve been spending much of my days hanging out with a younger cousin who I’m getting a good chance to re-connect with, after being away from the country for so long…

So, that’s been really nice…

Here’s a quick update for you all — Rental Property SH #2 closed most recently and funds were wired to my checking account last Friday. Yup, I got a fresh injection of over $60,000 now just chilling out in my account…

And the sad part is I don’t really know what to do with it…

As readers are well aware, I’m still very much interested in the mining sector, particularly precious metals mining stocks… With that said, the recent carnage in many of these companies has had a profound effect on my investment thesis and caused me to really step back and re-assess things… For the most part, I try and do my best to chase after deep value, but it’s become quite apparent to me that over these past few months, I’ve kind of become undisciplined and a little reckless with my purchases… I mean in the long-run, I think I’ll be ok, but after seeing my portfolio lose a few $100k (not fun at all!), well, you know, it just kinda sucks…

Yeah, I do have some regrets with some “stupid” purchases… I’m trying not to beat myself up too much with these decisions, but I think the impulse to always feel the urge to have to do something led to these kinda rash decisions…

Long story short — I know what works best for me and I get the results I’m after when I’m buying into immense fear and despair… So many investors hate to chase assets down into the ground…

I don’t!

You all know very well what this type of style of investing is — Gobbling up mining stocks in late 2015/early 2016 when almost nobody else wanted anything to do with the sector… In other words, when people are telling me why I’m a moron for buying, it’s a good sign that I’m doing the right thing!

That certainly wasn’t the case these past few months with many of my purchases… Well, last week we were getting pretty close to despair territory, so I’ll need to see that type of environment/negative sentiment again before I “back up the truck” with full conviction.

Live and learn… I just gotta be more selective with my entry points (timing is so important in the mining sector!) and you know what, if I can’t locate a really good deal, I should have no qualms with just passing it by and remaining on the sidelines…

I’ve been nibbling here and there, re-shuffling the portfolio (which I’ll update in a separate post soon)… but I haven’t been making any meaningful moves as of late… or injected a significant amount of new capital.

Sure, nobody likes to see the cash just pile up and earn 0% yield, but damn, the markets are just so absolutely crazy right now… You tell me where the killer deals are at? I can’t seem to locate them…

When in doubt, do NOTHING!

Or very little…

Obviously, my approach to investing and early FI will never resonate with the masses or be popular, but again, I know what’s gotten me to this point, and it’s the tried-and-true approach of, “buying low and selling high.

Dissolving this partnership and booking near 100% returns in less than 3 years on Rental Property SH #2 is plenty good enough for me! I made decent money, so I don’t feel the need to over-analyze things… All things considered, I’m very happy to be selling a property closer to the top than the bottom… Nobody knows where the market top will be exactly, but my belief is you don’t need to nail the exact apex to come out a mile ahead…

That’s just how I invest, and I’m cool with that…

I’ve now got closer to ~$200k in cash and ~$750k in mining stocks earning me zip each and every month in early FI…

Yeah, close to ~$1 million doing… nothing.

Would I LOVE more cash flow?

Absolutely!

But I ain’t going to press and force the issue… I refuse to do so.

All good things come to those who can wait patiently, goshdarnit!

Eventually…

To pass the time (I’m still tidying up some remaining loose errands before I can hit the road again), I’ve been playing a lot of guitar…

I watched Kimi no Na wa in Hong Kong and Vietnam, and the soundtrack was awesome… I found this video on YouTube and hearing the melody on an acoustic guitar just blew my mind, so I was like, “I gotta try and learn that!

I wish I could play this good!

It’s quite relaxing and a therapeutic reprieve from all the hustle and bustle of investing…

 

Anyway…

 

Till next time…

 

Fight On!

{ 15 comments… read them below or add one }

1 FundamentalAnalysisNo Gravatar May 18, 2017 at 7:02 am

Awesome update and new approach based on learning from mistakes . Cash represents the option to do something, ignore the naysayers who go on about cash earning nothing blah blah, that is the consensus view, and the consensus almost always does not fully understand the scope of what they are talking about. There is never a need to go all in unless you have ultra high no brainer conviction which is cheap and works at current conditions based on facts not feelings. (Those opportunities don’t occur often, and unfortunately the mining sector doesn’t have much of them either in my opinion despite what “appears” as low prices based on where things were in 2011/12 , but the fact is commodity prices are lower hence why the fundamentals of these companies have taken valuations down 80-90% so they are not 80-90% cheaper as some would say… and despite the exciting narrative to aid us in believing in our own bull, I’ve seen no strong case to convince me that some of these commodities have to go straight back up (although lets “hope” it does – makes life easier).

Reply

2 FI FighterNo Gravatar May 18, 2017 at 12:03 pm

FA,

Thanks for stopping by! Yeah, I’m quite a big fan of cash so no problems holding there. Just gotta be patient and wait for the fat pitches to emerge.

I agree with you that many miners aren’t exactly 80-90% cheaper just b/c the share price is down so much… The commodities boom that peaked with gold at $1,900 was excessive like the dot-com boom and the current stock market boom… But that large of a drop was just an indicator that the overall sector had been massacred, which was true.

In general, I think there’s far more value in mining stocks than just about anything else out there, but we certainly have come a long ways off the 2015/2016 lows.

I like the attitude of conservatively optimistic… Try and pick and choose companies that can succeed at the current market prices and if you get that big boost, all the better.

Best wishes!

Reply

3 JoeNo Gravatar May 18, 2017 at 10:28 am

I know where you’re coming from, since I have 25% of my portfolio in cash doing absolutely nothing for me. There is no value in any sector right now. The entire world is flooded with money and has been for a long time.

But dislocations are few and far between and not predictable, and inflation as evidenced by the unrelenting increases in real property prices (and restaurant prices!) is eating away at the cash. This could go on for another 5 years or more unless there are large interest rate increases or a major crisis, so what is one to do?

Are you going to 1031 the proceeds from your real estate sales? I can’t bring myself to sell real estate or significant assets anymore, seeing as a huge chunk of the gains go to taxes. They are all long-term holdings but tax rate is much higher than LT cap gains rate, due to Obamacare tax, CA state tax, high income added tax, AMT considerations, etc etc etc. Aren’t you going to be hit with a huge tax bill from all the sales?

Reply

4 FI FighterNo Gravatar May 18, 2017 at 12:06 pm

Joe,

Yeah, it’s interesting times for sure… In terms of holding cash, I should have probably stated “cash and cash equivalents”. I own a good amount of physical precious metals which are inflation hedges so I’m not worried there… Also, if the cash erodes, my rental properties should rise with inflation and the rent increases should help me offset some of those losses…

Paying taxes certainly is no fun… I’m not a fan of selling real estate either… In my eyes, those are buy and hold forever type of assets… In this situation, it was a partnership though, so we thought it was best to just book ~100% gains and go our own separate ways… There is peace of mind in not having that complication hanging over my head, so I’m fine with selling in this instance.

I don’t plan on liquidating any more properties anytime soon. If I ever do, yup 1031 exchange is the way to go.

All the best!

Reply

5 JoeNo Gravatar May 18, 2017 at 10:19 pm

I am holding some physical gold as well, but it doesn’t seem like an inflation hedge anymore, more like a trading vehicle. Maybe because of the incredible run it had during the 00’s. I think real inflation has been very high (look at Bay Area housing prices and rents) the past few years, but gold steadily trended down until 2016.

I thought you had mentioned cashing out on some mining stock gains this year as well. It might be helpful for you to estimate your taxes early so you don’t get surprised at the end of the year… maybe do some tax loss harvesting. Early tax planning usually gives me some extra insight.

Reply

6 FI FighterNo Gravatar May 18, 2017 at 11:06 pm

Joe,

Gold has been weak over the last 4-5 years or so but I’m certain the tide will turn… It’s all about macro cycles and the USD won’t stay elevated and at these levels for perpetuity… One day, it will roll over and gold will start its next bull market.

Yeah, I’m gonna have another hefty tax bill next year… So, I’m going to have to book any short-term trading and long-term gains via retirement accounts.

Lots of things to consider as always…

Take care!

Reply

7 Financial SamuraiNo Gravatar May 18, 2017 at 10:40 pm

Congratulations on the sale! I’m strong is considering selling one of my rental properties that I bought in early 2005 as well. Every time I think about selling, Ibach at the $125000 in selling commission, $19,000 in transfer property tax, and another $180,000-$200,000 in capital gains tax.

Does the high transaction cost bother you at all? I’m thinking about just buying and holding forever and just gifting the property to my son in 20 years.

Sam

Reply

8 FI FighterNo Gravatar May 18, 2017 at 11:04 pm

Sam,

Congrats on the big gains… In my case, it was a 4 way partnership so everything is divided by 4 and the gains weren’t that much to begin with… So, yes transaction costs aren’t ideal but we knew all this going in.

Still a good return in ~3 years, I guess… Well for someone like me anyway.

CHeers!

Reply

9 Financial SamuraiNo Gravatar May 20, 2017 at 8:57 pm

I guess by splitting it four ways it makes the transaction cost more digestible.

I’m in contract now, and secretly hoping the financing doesn’t go through and I find an amazing tenant.

With Uber and Airbnb going public over the next several years, I really think the San Francisco real estate market is going to continue to go up.

I just have too many properties and need to simplify. After selling this one, I will still have three more properties in the bay area. Need to diversify!

Reply

10 Allen CNo Gravatar May 19, 2017 at 8:14 am

Hi Sam,

Have you ever considered lease-option exits (aka rent-to-own) for your rental properties? This is a great way to exit your real estate assets (especially in fast appreciating markets like CA) without having to give away huge chunks to agent commissions. Here in Colorado where we’ve seen fast appreciation, lease-options are quite popular amongst sellers and buyers. When structured right, these can be a win-win for both parties.

Reply

11 Financial SamuraiNo Gravatar May 20, 2017 at 8:55 pm

It’s a good idea, and something I’ve offered the buyer, but he declined. I wish I could I just found the buyer on my own and saved $120,000 in commissions.

The only good thing about my agent is that she found a buyer, which is huge, and she told me to hold strong and raise my counter offer by $40,000 which the buyers accepted.

Reply

12 JoeNo Gravatar May 19, 2017 at 8:47 am

Sam, you are both considering selling as well as buying another SF property?

Regarding taxes, you can sell your 2005 rental, 1031 over to a luxury rental in Hawaii, and then move into it a few years down the road… tax problem solved! 🙂

Reply

13 Financial SamuraiNo Gravatar May 20, 2017 at 8:54 pm

You are right, and that’s exactly what I plan to do. Hawaii is 2 to 3 years away. But I’ve got to find the property within 180 days or a 1031 exchange.

Reply

14 Jay GNo Gravatar May 20, 2017 at 11:10 pm

“And the sad part is I don’t really know what to do with it…”

In my absolute non-expert on anything opinion, I’d say put at least 5k into ethereum and forget about it. Even after ~600% gains in the last 2 months, I still believe it’s the best lottery ticket out there. Very real chance to ~50x over the next 10 years.

Reply

15 ChristianNo Gravatar May 25, 2017 at 9:39 pm

Congrats on the sale, Jay. Ive been in that situation before, being in partnership on a property (in Sydney). I went the other way and bought out the other party, but at the time it was a white knuckle event , using up a lot of cash and shares to fund. as for mining stocks, buckle up and sit tight!

Reply

Leave a Comment

 

Previous post:

Next post:

Copyright © 2012 FI Fighter