Build Cash Flow: Swap Big/small, Costly/cheap, House/mobile

Topics: Asset Protection

Big expensive houses appreciate more, look better, and are easier to rent, but they create negative cash flow in almost any market.  If you’re looking for ways to reduce negative cash flow and increase your income, think small, cheap, and mobile.

As credit begins to disappear from the market, people are going to revive the ancient and tested practice of trading their equities.  There are a lot of old investors out there with lots of cheap, high cash flow houses and mobile homes that would like to trade up to bigger and better properties.  You might not like the houses you get, but you’ll like the cash flow.  It’s even better when you can trade one or more expensive leveraged houses for some smaller free and clear houses.

One retired couple had put a large down payment on a lake house with payments that they couldn’t afford on their fixed retirement income.  I traded them a small free and clear house that was worth about half of their equity.  They happily gave up the equity that they thought they’d lose through foreclosure in return for the peace of mind that being debt-free engendered.   I would up with their equity.

You can take either side of this bargain.  You can get rid of houses you can’t really afford, and have little hope of refinancing in return for smaller houses that will produce a much higher ratio of cash flow to value.  If you can trade for mobile homes, you’ll be astonished at the percentage of value that rents will supply.  Don’t be proud.  You can always re-enter the high priced house market once you get your own cash flow in order.

If you’re an investor with a lot of free and clear fully depreciated houses that produce highly taxed income, you can gather a bunch of them up and trade them for a big, expensive house.  To the extent that you take title “subject to” any existing debt, it is added to your cost basis.  Once you’ve completed your exchange, move in for 5 years and sell it.  The first $500,000 plus your cost basis will be tax free.  You too can always use this money to go out and buy some cheap mobile homes if you want more cash flow.

Learn more about trading real estate to improve cash flow at


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