Getting our Net Worth Moving

by Dual Income No Kids on March 31, 2008 · 0 comments

Hi All,

So, given that our net worth was flat the last time we measured it, I’ve been brainstorming ways to turn the situation around.

The idea I’m considering right now is accessing the equity in our investment property. As it stands we’re making $960 dollars in pre tax annual income. The cash is nice, but that’s a return on equity of around 1.3%. While we certainly aren’t experts, it seems that if we make an effort we should be able to do better than a 1.3 percent return.

At this point, a couple of options come to mind.

1) Selling the property and investing the difference in high yield canroy. We could probably do 9% before taxes in this asset class. That’s about $4,960 or about five times as much on an annual basis as the property is currently yielding. The disadvantage of this plan is that we’d get hit with the long term taxes on the capital gains, a sum of about $15,000.

2) Selling the property and doing a 1031 exchange for another rental property. This would take some shopping, but we might be able to parlay our single rental into a larger property with greater appreciation potential or cash flow. Since we are in DC, the market around here is still pretty robust and we should be able to get a reasonable price.

At this point, its unclear what decision, if any, we are going to take. One thing is clear, we can do better than 1.3% ROI, even in the current investment climate.

Best,

James

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