Saturday, July 23, 2016

Recent Sell - Realty Income (O)

With the markets at all time highs here this week it's getting harder and harder to find stocks to invest in. Not only that but stocks are increasingly looking overvalued, so much in fact that I have taken my foot off the pedal and stopped funding my brokerage account. Now I am left wondering what I can do with my money.

Well every month when I get my statement from my mortgage company and I see the ridiculous interest rate (5.375%) I have and I wonder why I haven't been paying it down. I've finally decided enough is enough and began aggressively paying down my principal.

In order for me to completely pay off my mortgage in the next month or two I will need some extra capital. The money I need will have to come from the sale of one of my core holdings. I wanted to sell a position that I thought was overvalued and could possibly get back in at a better price in the future. There were a few candidates but I ultimately chose Realty Income (O).

I have owned Realty Income since 2012 and have an average cost basis of about $40 per share and completely sold my entire position for just under $70 per share. I'm looking forward to the day I can use the money I save every month and put it towards new investments again. Possibly even Realty Income.

20 comments:

  1. Captain,

    I too made the decision to pay off my house six years ago and haven't regretted it once. It's a great feeling knowing that aside from taxes no one can ever take your home away.

    Also like you mentioned, you will find yourself investing even more aggressively once the debt is completely gone.

    Congrats!

    MDP

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    1. Good job paying yours off! I imagine it will feel like a big weight has been lifted off my back even though my mortgage is relatively small compared to most.

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  2. I've been thinking of doing the same thing with O as well because it's well overvalued at this point. Congrats on being that close to paying off your mortgage. Freeing up your mortgage payment will really let you make some big progress on building up your portfolio. I've thought of trying to get ours paid down earlier as well and might start throwing some extra cash that way especially with the markets looking very frothy. All the best.

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    1. With interest rates as low as they are I can see why there's still a lot of investors who wouldn't think about paying off their mortgage but I never refinanced so my rate is still sky high. At this point with so little left for me to pay I'd just prefer to pay it off rather than refinance. After that as you say I can put that money to work for me in one way or another. Thx

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  3. I've been selling covered calls on O to collect extra cash. With the continued increase of stock price, it will likely get called away. I cannot complain though since my cost basis is in the $40s.

    I like your idea of paying down your mortgage. Once that's gone, you'll be able to laser focus on investing.

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    1. Sounds like a good idea with the markets skyrocketing and investors looking for yield in a low interest environment, O could have room to run. I'm certainly in a situation where I could have buyers remorse normally but not in this case since I know I'll be better off with less debt. Thx for the visit!

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  4. First, congrats on capital appreciation on Realty Income. You booked a great return. Second, I would do the same thing if I was you. A 5.375% interest rate on mortgage is ridiculously expensive. My mortgage rate is 2.54%, twice as less as yours. That's why I'm not chasing on paying it down sooner.

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    1. Thanks! I think a lot of people in your shoes wouldn't pay off with such a low rate. I should have refinanced a long time ago. At this point though paying it off looks more attractive still.

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  5. I stick to index ETFs, so I do not have to worry about capital gains taxes or trading fees.

    I did pay off my personal mortgage, and am now paying off another rental. I typically buy ~$15K in ETfs each month, and put up a $4K principle payment.

    Keep moving forward, the money will come.

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    1. I'm a stranger to index ETF's I have to admit. You don't have to pay a capital gain if you sell with a gain?

      BTW You are operating on a whole different level with those monthly updates. Wow, I must say, very impressive.

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  6. The decision to sell a position and take profits is always a hard call. But O is clearly overvalued right now and I commend you for making this decision. It makes sense to own something yielding 3.4%, while paying 5.3% in mortgage interest. Better to take the capital gains and pay off your 'high-interest' debt first.

    Best wishes
    R2R

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    1. Exactly my thinking, and it's sort of like getting a 5.375% yield with zero risk. I thought to myself why on earth haven't I done this earlier!

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  7. I sold half of my O position this month. My goal was to raise cash so I could round out other positions for options trading. Like you and others that have commented, I feel O is trading at a premium right now. Why only half? I'd like to retain some of the monthly income that O generates for me, and, believe it or not, it could go even higher from here...

    Paying off your mortgage will be a great achievement. We're certainly very far from being able to do that! Congratulations!

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    1. I did see your update and a few other bloggers have mentioned thinking about selling O as well. Good luck with your options, I'll keep my eyes peeled for your updates.

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  8. Great move! It is exactly like you stated earlier. A %5.375 (Tax free, risk free) dividend. I paid off three mortgages over the past three years totaling $177,650. I blogged quite a bit for the accountability aspect.

    Since paying off the last rental earlier this year I've been investing in dividend growth and have about 46k invested. I'm selling one of the houses for near $100k in order to have funds on had for the next big pullback or recession. Buffett is an excellent example of one who knows how to sit on cash and wait for the right pitch. I think we're close but still wanted to get some skin in the game. Did real well on T. Also not bad on IBM.

    Wishing you the best in your mortgage payoff endeavor. You can check out my blog if you're interested in following my three year trek.

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  9. Captain, you did!?! Man, way to go. Takes guts to do something like that. Hopefully my article didn't persuade you too much? :) But I still think you made the right call. Replace it with a higher yielding, fundamentally sound company and you MADE THE RIGHT CHOICE!

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  10. I made the same decision almost two years ago. I sold off a few positions and paid off my mortgage. I love being debt free but I'll admit it's been hard seeing positions I sold go higher. I don't think you'll regret paying off the loan in this market. I'm holding cash as well. I also have a trailing stop loss on O. Its only a matter of time before we see a big sell of at these valuations. When that happens, you'll be in a good position to take advantage of it.

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  11. It takes a lot of discipline to sell as asset prices are increasing but if you think it's overvalued then certainly the right call. And a 5.3% loan is not cheap, which I think makes it more difficult to justify purchasing more equities instead of paying down the loan given that your own personal risk free rate of return is 5.3%. So it seems like a smart and sound approach indeed!

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  12. very nice information about Realty Income and this blog is totally full of goodness and we can use the money I save every month and put it towards new investments again. Possibly even Realty Income. for much similar information best passive income ideas please visit http://www.waystomakemoneypassive.com/

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  13. Paying off your mortgage and debt first is by bar the best way to go. I focused on doing that and paid off my house at 35. Best move I made.

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