Retiree Gives Herself a Raise During Retirement

CASE STUDY #1
  • Suzy
  • 74 years old
  • Retired
  • Santa Clara Resident
CA investor more than doubles her return on equity (%) by selling a CA investment property (built in 1964) and exchanging into three new construction homes in the Memphis MSA (built in 2020). She has boosted her overall return while significantly reducing her risk profile with a turn-key investment.
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FULL STORY
Right at the start of the Covid pandemic, I put my rental home in CA up for sale. It had been where I raised my family & had been renting it out for 12 years. My financial advisor introduced me to the idea of doing a 1031 exchange by selling that home & purchasing multiple homes thru Meridian Properties. It was a good decision as my collective income from the 3 homes that I purchased surpasses the income from the single home. As a divorced 74 year senior, the move was scary but I have not regretted the move. I had never considered getting property out-of-state. The folks at Meridian were helpful every step of the exchange process. In addition to purchasing the homes from Meridian Properties, I use their subsidiary as my property managers.
Suzy, Santa Clara
Right at the start of the Covid pandemic, I put my rental home in CA up for sale.  It had been where I raised my family & had been renting it out for 12 years.  My financial advisor introduced me to the idea of doing a 1031 exchange by selling that home & purchasing multiple homes thru Meridian Properties.  It was a good decision as my collective income from the 3 homes that I purchased surpasses the income from the single home.  As a divorced 74 year senior, the move was scary  but I have not regretted the move. I had never considered getting property out-of-state.  The folks at Meridian were helpful every step of the exchange process.  In addition to purchasing the homes from Meridian Properties, I use their subsidiary as my property managers. 

Suzy, Santa Clara

Overview

 

Sales Price of California Property: $940K

 

Real Estate commissions/closing costs/repairs: $86K

 

Net proceeds from Sale: $854K

 

Purchase price of three (3) investment homes near Memphis: $805K

 

Pocketed funds: $49K

 

SAN JOSE NUMBERS

San Jose Performance Data

  • Home Value $940,000
  • Down Payment % 100%
  • Debt $-
  • Down Payment $ $940,000
  • Est. Closing Costs $-
  • Est. Total Investment $940,000
  • Est. Monthly Rent $2,950
  • Gross Annual Rent $35,400
  • Vacancy Allowance $(708)
  • PM Fee $(2,775)
  • Property Taxes $(2,220)
  • Est. Property Insurance $(2,385)
  • Annual HOA Fees $-
  • Maint. Allowance $(1,943)
  • Net Operating Income $25,389
  • Debt Service $-
  • First Year Before-Tax Cash Flow $25,389
  • First Year Cash Flow Per Month $2,116
  • Cap Rate 2.7%

San Jose Sales Data

$940,000
Sales Price of San Jose Property
$86,000
Real Estate Commissions, Closing Costs, and Repairs
$854,000
Net Proceeds from Sale
MEMPHIS NUMBERS

Memphis Purchase Data

$805,000
$270,000 + $262,000 + $259,000 + Closing Costs
Combined Purchase Price of three Memphis investment homes.
$49,000
Pocketed Funds

Memphis Property Totals

PropertyCombined Number4254 ShinAult LaneOlive Branch MS6335 Darwood DrOlive Branch MS70 Fairway Hills DrOakland TN
Home Value$791,000$270,000262,000259,000
Down Payment%100%100%100%100%
Debt-$-$-$-$
Down Payment$$791,000$270,000262,000259,000
Est. Closing Costs$13,967$4,732$4,667$4,560
Est. Total Investment$804,967$274,732$266,667$263,560
Est. Monthly Rent$5,590$1,895$1,895$1,800
Gross Annual Rent$67,080$22,740$22,740$21,600
Vacancy Allowance$(1,342)$(455)$(455)$(432)
PM Fee$(6,574)$(2,229)$(2,229)$(2,117)
Property Taxes$(7,691)$(3,440)$(3,376)$(875)
Est. Propety Insurance$(2,300)$(750)$(750)$(800)
Annual HOA Fees$(593)$(125)$(200)$(268)
Maint. Allowance$(1,315)$(446)$(466)$(423)
Net Operating Income$47,266$15,296$15,285$16,685
Debt Service$-$-$-$-
First Year Before-Tax Cash Flow$25,389$15,29615,285$16,685
First Year Cash Flow Per Month$2,116$1,274$1,390$1,390
Cap Rate2.7%5.7%5.8% 6.4%
SIDE-BY-SIDE COMPARISON

San Jose

  • Purchase Price (Equity in Asset) $940,000
  • Total Investment $940,000
  • Pocketed Funds $ -
  • No. of Properties 1
  • Year Built 1964
  • Cap Rate (Year 2020) 2.7%
  • 1st Yeare Before Tax Cash Flow $ 25,389
  • 10 Year Cash Flow Total $ 281,454
  • 10 - Year IRR(per Year) 5.6%
  • Projected 10 Year Net Gain $ 607,655

Memphis MSA

  • Purchase Price (Equity in Asset) $791,000
  • Total Investment $804,967
  • Pocketed Funds $ 49,108
  • No. of Properties 3
  • Year Built 2020
  • Cap Rate (Year 2020) 6.0%
  • 1st Yeare Before Tax Cash Flow $ 47,266
  • 10 Year Cash Flow Total $ 500,664
  • 10 - Year IRR(per Year) 8.3%
  • Projected 10 Year Net Gain $ 761,191

San Jose Returns

$607,655
Projected 10-Year Net Gain

Memphis Returns

$761,191
Projected 10-Year Net Gain
$49,000
Cash Packeted at Time of Purchase *

* This does not include potential tax implications

PROPERTY PHOTOS
SAN JOSE, CA
70 FAIRWAY HILLS DR. OAKLAND TN
4254 SHINAULT LANE, OLIVE BRANCH MS
6335 DARWOOD DR. OLIVE BRANCH MS
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