Stocks I'm Selling to Pay Off Investment Property

GA

First, I’d like to say I sell these stocks not because I don’t believe in their dividend growth potential or they are being bad stocks, I sell them because I have to fund my $60k rental investment property.

Little house on the prairie: I found home historical picture from the assessor office


Clearly, it’s nothing fancy, but I like it. ๐Ÿ™‚ Down sizing from 4300+ sqft to 1593 sqft will be a change. But I’ve lived in smaller apartment than this. So it’s not a problem.ย 

This is the image from google map from the front lawn of the house. It was from 2011. Since then, there has been million of dollars into development for the this park and the park adjacent to this park. It will be cool visiting home again.ย 

FrontLawn view

The property is a good fit for us once we move back in 7 years. You say “why is 7 years?” Well, we’ll be here to be close to Mister’s mom. Both of our parents are in the late 80s, Mister’s Mom health is not as good.

“Still, it doesn’t make any sense to pay $60K for a house you won’t be living in while you’d use the money to invest in dividend growth stocks”. That, my friend, the house in the area can be rented $1200-$1500/month in rental income. $60k only generate $200-300/month at best. By making this financial move, I inadvertently give myself another $10k raise. ***it will require a lot of work and additional investments to fix it up for rent. My brother estimate $10k for part and labor** despite the fact the the city assessor has good rating on the condition of the house.

Finally, what are the stocks on my chopping block?

I ran out of free trades. So I opted to use the capital gain to pay for the trades. My priority would be stocks at that are >5% gain, excluding 3-10% dividend earning the last year. These are very great companies. I’m sad to say goodbye, but I’ll add as soon as I have some more fresh capital.

EMR, TD, RY, BAX, IBM, CMI, CM, GILD, VZ, T, CAT, DOV

I will continue to update this list as I make more sales until I have enough to buy. The selling has been taking place.

What do you thing about my sells?

*P.S.: financing is not an option as the seller wanted cash. Mister doesn’t want to contribute to this buy as he still wants to remain his cash position, awaiting for a real 50-75% market correction :).

GA

16 Comments

  1. I’m a huge fan of rental properties, especially one you may need to use at some point. I’ve had a rental for several years and it’s a good source of ‘passive’ income, for the most part. It’s not as hands off as DGI investing, but you can certainly build a nice positive cash flow once it’s up and running. Best wishes!

    • Thanks for the words of encouragement. Do you have a link on your investment property write up that you’d like to share?

      Since it’s an out of state investment, I’ll be hiring my siblings to do the managing. I’ll probably end up paying the, 10% managing fee to make this a “hand-off”, “true-passive” investment. In the meanwhile, most traveling expense visiting family will be taxes write off.

      Then if we move there, live for 2 years on the property, if we don’t like it, sell it, all the capital gain of less than $250k will be tax free.

      It will, no doubt, require a lot of patience. It’s not a lottery ticket, it will need work, and possibly some added stress.

  2. Looks like you should be able to generate some really nice cash flow from the property until y’all are ready to move in. $1200-1500 per month less even 50% for expenses/upkeep still provides $600-$750 in monthly cash flow. I’m kind of surprised the seller will only accept cash. They must really need to unload the property quick.

    • JC,
      From my previous post, I made a big on auction.com (if you search online, there are a bunch of bad reviews), anyhow, it’s a bank foreclosure property. They don’t want to mess with financing, so they only accept cash offer.

      My brother has bought a bunch from auction.com, he’s VIP on auction.com now, he told me just be patience with the process, and I’ll get the property.

      Auction.com gives me an estimate of 40 days. So, I’m still waiting for my deposit to clear.

      $600-750/mo is no joke. That is equivalent to an account of $200K with dividend route.

  3. I bet it was a tough decision to sell stocks to pay for real estate. I like this move. It should help you not be too invested in area (stocks). I’m not looking to buy a home to live in, I like renting. But, next year, I’m going to start looking for rental properties to buy. I might be selling stocks to do so as well. Best of luck.

  4. WRI,
    Thanks for sharing! It looks nice! Selling stocks to buy an investment property seems like a great idea. It balances out your portfolio. I was looking at some investment properties not to long ago. For a 40K investment, I would have been netting like 400 a month. You surely can’t do that in the market over the short term. Another idea is to buy foreclosures, quick fix and flip for a profit.
    Keep in touch
    LOMD

  5. Hello Vivianne,
    Here’s a thought for you: You could buy the house for 60K, put 10K in it to make it look great and then, the house will probably be valued around 100K by any banks, right? Why don’t you finance 70% of your house value at a very low rate and invest this money back into your portfolio? Dividend payments will be higher than interest paid + you will benefit from capital appreciation (not considering the money you will be making renting it).

    What do you think?

    Cheers,

    Mike.

    • Hi Bro, it’s a great idea and I did thought about it. It’s always better to leverage. However, I’m already achieved Financial Independence. My risk tolerance is a little bit lower than the average 34 years old. I don’t want to have another mortgage looming.

      My simple math is like this:
      My 3-plex provide me free housing.
      My 4-plex cover all expenses
      My portfolio provide extravagant spending or unforeseen spending
      This house will provide $600-1200/mo, will finance my 3-4 international trips.

      Mr.WRI can keep all of his cash as he doesn’t want to invest on anything, waiting for a 50-70% market drop. Heheh, if that’s the case, then he’ll rescue me. ๐Ÿ™‚

      • hahaha! good one! but Mr. WRI will have to live another 100 years to see that happens… if it happens! and 50-70% of what? that is the great question ๐Ÿ˜‰ if he’s been waiting to see the market drop by 50% since 2012… well… he will never see it as going 50% under the level of 2012 is mathematically impossible. In fact, even 30% below 2012 is impossible ;-). gotta love losing money on inflation each year! hahaha! I think you have a better plan than he does.

        • Well it did happened in 2009. I remember, but I think banks lending is a little more regulated now, we probably won’t have another housing collapse for another 5-10 years when people forget about how bad it was.

          I think the topic of investments and money management will come up at some point during our pre-marital counseling. See if we can reach a more team approach.

  6. Everyone sells for a different reason and I have to say that at least you plan to sell these great names to fund another income producing asset so it’s not a total loss. Selling your stocks for a new car or tech gadget is a waste but for a rental home it can work out just fine too. EMR, TD, RY, CAT, DOV are some really great names and I’d have a hard time getting rid of those positions. But, you have a plan and that’s a god thing. Thanks for sharing.

    • Thank you! Auction.com finally received my deposit, and they said the paper work is rolling. Looks like closing will be on time. Epic excited, my sister said my siblings are willing to rally to get the house fixed up as soon as the house is mine.

      I might do a write up on how to bid for a house in front of the court house or through a bidding site.

  7. I came to your blog over today for some inspiration. Things have gotten busy on my end with me shuttling between east coast and west coast offices for work. I recently decided to pull money from my stocks, whatever little I had to drop on offer on an Hubzu foreclosure. I am hoping to be able to close soon, which will let me walk in to the property with about 50K equity without requiring any fixes. As an first generation American, this will be my first big purchase. Here’s to many more to come – Cheers!

    • Cheers!

      It’s amazing, I check the houses nearby with less square footage, and they are going for $120-250k, the assessor office has this house at $98k, so already I’m close to $40k of profit or more.

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