Californians: Property Rich, Cash Poor? There is a Solution
California was expensive before the 2018 Tax Act. Now, it will be almost impossible for some to continue to live there. Many have left or are leaving California for lower cost states.
If you are considering a move, the following is a solution that not only accomplishes the goal of moving, but also puts stable, inflation-friendly income in your pocket every month while keeping an underlying asset that grows overtime.
Below are photos of two homes. The home on the left is listed for $1,500,000, was built in 1957, has 3 bedrooms and is a little over 1,400SqF. The home on the right is listed for $376,000, was built in 2002, has 3 bedrooms, a pool and is a little over 1,400SqFt.
| Location | Bay Area | Las Vegas |
|---|---|---|
| Typical Photos |  |  |
| List Price | $1,500,000 | $376,000 |
| Built | 1957 | 2002 |
| Bedrooms | 3 | 3 |
| Approx. SqFt | 1,400 | 1,400 |
| Private Pool | No | Yes |
Suppose you sold the house on the left, bought the house on the right, and purchased three investment properties as illustrated below:
After you purchased the Las Vegas home you have about $1,124,000 remaining. Next, purchase three investment properties at $300,000 each and deposit the remaining funds in a secure but liquid asset. Your net rental income would be about $4,500/Mo. plus you would enjoy the tax benefits and inflation protection that investment real estate provides. With a large cash reserve and significantly more income, your peace of mind would increase immeasurably.
An Additional 7% Benefit of Living in Las Vegas
When you live in California and you receive funds from social security or your retirement account, you will pay California income tax in addition to the Federal income tax. One study stated that the average California tax rate for retirees is 7%. So, if you withdrew $5,000/Mo. California tax would be about 7% or $350/Mo. In Nevada, there is no personal income tax so you would receive the entire $5,000. You have a lot of options if you act now, before you drain all your resources.
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