Need help mapping out and planning my next move
Hey bigger pockets family just sitting here in need of some advice on my next move. So I have some experience flipping but I am transitioning into the rental landlord aspect of real estate I currently recently purchased a duplex that came with a Efficency making it 3 units I am renting out I have 30k but I live in Miami where prices are unbelievable I know I want to s ale up from 3 units to maybe 6 units but finding that in Miami is impossible so with that being said should I just get another duplex FHA? or continue to save up the 30k ?
If you own the triplex and it's all rented out, you might consider doing a HELOC to use for another purchase if you can't do a re-fi. But the interest rates would be a key factor of those options as well as getting another mortgage to purchase the next property. Whenever you can use OPM (other peoples money) you save yourself from using what you have in reserve. 30k is a decent amount but you might want to consider other options that could help you keep most or all of that amount. Your goals and strategies will also play a role in which option you choose. It'll come down to what are you willing to move forward with and still sleep at night. The way I look at interest rates are that if I get into a mortgage that is a little high, I will refinance when/if they come back down. If they don't come down then I'll have an interest rate lower than future current market. Also if the rates don't come down then I would look at doing a HELOC which my mortgage rate will still be lower than rest of the market and I can use the money to move forward. Hope that makes sense.
Quote from @William F. Senkowsky:
If you own the triplex and it's all rented out, you might consider doing a HELOC to use for another purchase if you can't do a re-fi. But the interest rates would be a key factor of those options as well as getting another mortgage to purchase the next property. Whenever you can use OPM (other peoples money) you save yourself from using what you have in reserve. 30k is a decent amount but you might want to consider other options that could help you keep most or all of that amount. Your goals and strategies will also play a role in which option you choose. It'll come down to what are you willing to move forward with and still sleep at night. The way I look at interest rates are that if I get into a mortgage that is a little high, I will refinance when/if they come back down. If they don't come down then I'll have an interest rate lower than future current market. Also if the rates don't come down then I would look at doing a HELOC which my mortgage rate will still be lower than rest of the market and I can use the money to move forward. Hope that makes sense.
thank you for the reply everything makes sense I’m well aware of leveraging OPM that is what I plan on doing but just need a specific direction but when I purchased this property I got the interest rate at 3.5% I put 20% down and purchase price was 415 ,000 this was 5 months ago
Unit 1 rent 2100
Unit 2 rent 1400
Unit 3 rent 1000
How soon could I pursue a Heloc being that I just purchase this property.
I know that I want to scale up with the brrrr strategy and I know I want to be in the rental long term game or short term in real estate .
I think you're decision to start buying and holding is a great idea. Even if the market sees a down turn people always need a place to live. Before commenting on HELOCs I just want to share my experience with rentals. When my son and I first started we were a little naive. We always paid our bills so we expected otherers would as well. WRONG! There are a lot of people who are what is referred to *** professional renters. They know how to get people t rent to them and after 2-3 months stop paying the rent. Then it takes 2-3 months to get them out. We eventually learned that you have to take emotion and gut feelings out of the decision making process and carefully vet every potential tenant. Legal background checks, income, rental history are all key. Just make sure you do it the same for everyone.
Now with that little bit of info, which you probably already know, let's talk about HELOCs. First, HELOCs on rentals are really tough to find these days. I've contacted 97 lenders over the last several month and as right now I have found 1 that will do a HELOC on an investment property in North Carolina. It might be a little different in FLA but I doubt it. That lender is TD Bank. PenFed was doing them but they pulled the plug a few weeks ago. I know that because I got in with them the day they stopped doing HELOCs. So I just made it. Still not locked in yet but close. HELOCs, which are always on a property in a personal name, not a business name, are based on the property value and your ability to pay. If you are holding the property in an LLC its a different type of line called a Business Line of Credit. The line is secured by the property but the amount you can get is based on the amount of net revenue the property generates. With TD bank they will give you a line of up to 75% of LTV if your debt to income is ratio is 43% or less. The rate is variable but it usually runs around 1.5% + prime. You mentioned that you bought months ago. SO you might not have much equity. Without the equity you can't get a line. Also, most lenders need to see a steady income. They will take your rent into account but they usually discount it to 75%. And with a limited track record they may not count it all. But they will definitely count the $1,500/month you are paying on principal and interest as debt when they figure you DTI.
SO with all this said using OPM like @William F. Senkowsky suggested is probably a more realistic way to go. Now once you buy the property using OPM you can look into a cash out refi to pay off the other person and set up a fixed rate mortgage. But you should work with a lender in advance to be sure you will be able to get a mortgage.
Another option is to get a partner with deep pockets. They supply the capital and you do all the work. This is a tried and true method to grow your portfolio.
Good luck!
Those are some good numbers. In doing a HELOC it would depend on the institution you go with or who is holding the mortgage on time frame of pulling one out. Just call and ask about timelines. The sooner the better especially if you have something you are already considering getting into. If there isn't any appreciation equity you may have to wait until there is and use the 30k in the meantime then do the OPM when it's available.
Quote from @William F. Senkowsky:
If you own the triplex and it's all rented out, you might consider doing a HELOC to use for another purchase if you can't do a re-fi. But the interest rates would be a key factor of those options as well as getting another mortgage to purchase the next property. Whenever you can use OPM (other peoples money) you save yourself from using what you have in reserve. 30k is a decent amount but you might want to consider other options that could help you keep most or all of that amount. Your goals and strategies will also play a role in which option you choose. It'll come down to what are you willing to move forward with and still sleep at night. The way I look at interest rates are that if I get into a mortgage that is a little high, I will refinance when/if they come back down. If they don't come down then I'll have an interest rate lower than future current market. Also if the rates don't come down then I would look at doing a HELOC which my mortgage rate will still be lower than rest of the market and I can use the money to move forward. Hope that makes sense.
Very good information!