This strategy is used when an investor has built a portfolio of properties. They are usually looking to simplify things and not need to pass on their assets to the next generation or a charity. Instead they are more interested in passing along the equity.
This would usually involve planning out the selling of assets over time. It could be one property a year or one property every two years or another time frame. The equity from the property is used for lifestyle after the capital gains have been paid on them.
The selling of the assets are done with the consultation of their accountant and based on the amount of equity and cash flow that are coming from each of the assets. The lowest cash flow and lowest equity are sold first. And each future asset is sold based on the same criteria.
Let’s say the first property had 200k in equity after all the legal and real estate costs for accounted for. Taxes would be based on 50% of the gain. We could estimate the investors tax rate at 50%, so they would have to pay $50,000 in tax. That would leave them with $150,000 to spend on their lifestyle.
These are the eleven ways that I have seen real estate entrepreneurs use their properties to retire:
Quentin D’Souza is the Chief Education Officer of the Durham Real Estate Investor Club. Author of The Action Taker's Real Estate Investing Planner, The Property Management Toolbox: A How-To Guide for Ontario Real Estate Investors and Landlords, The Filling Vacancies Toolbox: A Step-By-Step Guide for Ontario Real Estate Investors and Landlords for Renting Out Residential Real Estate, and The Ultimate Wealth Strategy: Your Complete Guide to Buying, Fixing, Refinancing, and Renting Real Estate.
Using Real Estate for Financial Independence (Retirement)
Sell Some Assets and Private Lend the Money for Financial Independence (Retirement)
Convert Real Estate Portfolio Into a REIT or Fund for Inter-generational Wealth and for Financial Independence (Retirement)
VTB Mortgages on Apartment Buildings then Private Mortgages for Financial Independence (Retirement)
Sell Some Assets and Pay Off the Rest for Financial Independence (Retirement)