Michael writes: As you hold a rental property you can deprecate it. Based on the accumulated depreciation over time would use that as an indicator of when to sell?
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Welcome back to the real investing show. I’m Tim Herriage. Thanks for coming back today. Michael writes, as you hold a rental property, you can depreciate it based on the accumulated depreciation over time. Would you use that as an indicator of when to sell well, Michael, that’s a great question. The answer is no, I do not look at the depreciation used or remaining as a trigger time to sell or not to sell. I am now of the mindset. And I now have my portfolio to the position where I will not be selling my long term assets. If I have something that let’s say there’s trapped equity or let’s, um, the cash flow is really good and could support higher debt. And I would like to deploy more capital I, as we sit here in year 21 of this career, mine, my mindset and my business plan now calls for the refinancing of properties, right?
I would rather pay a little more interest or let’s be real. Have a tenant pay a little more interest for me and have the tax fee free refinance money that I could deploy the new assets to get more depreciation. So the way I look at it, you sell a property. You either, you got, you either need 10 30, 1 it into another property in order to, you know, avoid the tax implications. Or you can simply refinance the property, have minimal expenses, no tax hit, but still accomplish the goal of having deployable capital that you can then acquire and depreciate a new asset. So the way I look at it is running the course on the depreciation only puts me into a position where it probably makes more sense to refinance it, reduce the cash flow, reduce the income by paying a little extra interest, and then deploy that capital into a new asset, allow the existing asset to continue to grow.
And then, you know, the new house I would get, uh, we’re actually doing cost segregation on a lot of our houses. So no, I do not use accumulated depreciation over time as an indicator of when to sell. We’ve spent a lot of time in the last 14 years calling through our portfolio. And I can tell you, as we sit here today, there may be one house left in the portfolio that I would not want to stay in for an extended period of time. Most of the homes are in really nice neighborhoods and really nice quality collateral. And it’s definitely something that, um, we wanna hold onto for the long term. They’re all our forever houses. We never plan to sell it to Michael. I hope that helps. Thank you for taking the time to submit a question. Remember if you’re listening to this and you have any questions in the real estate investing business hop on over to, Ihavelunchmoney.com, submit your question and I will do my best to answer everyone’s questions in a time and manner. So until next time, which is tomorrow, I’ll see you around. Thanks for stopping by.
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