Is Existing Real Estate Cash Flow Enough?

Q. We are retired with a fair pension and have invested in real estate over the years and have a good cash flow. However, there is quite a bit of dead equity in real estate and we have heard about TIC's. What is your opinion about them?

A. If you are wanting to get rid of existing RE without having to pay the capital gains taxes now, then a 1031 Exchange into a TIC can make sense. They are expensive as a result of commissions and management fees and with capital gains rates as low as they are now it may make more sense to go ahead and pay the tax. Then you could invest in REITs with much lower cost and greater flexibility.

The issues to consider are the current return you are making in the real estate, the management hassle and how much it is apppreciating.

If you are getting a nice rate of return off of the cash flows and it is steadily appreciated, then you can also consider borrowing against the real estate to free up equity. Increasing leverage (as long as you do it wisely) will increase your return on investment from the rents.

Your posted comments on this and other questions are welcome.
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