Inheriting a property
Hey all, I had a death in the family and am fixing up by fathers home to rent out. It’s paid off (worth 225k) could rent for 1850.00 I will have an additional 200k cash to invest in property. Should i buy an additional place for 200k and have 2 paid off rentals and leverage the equity for more down the road, or split the 200k over 3-4 other properties and get loans for the difference?
Thanks, Matt
If I was in your shoes I would split the 200k over a few properties, id look into commercial deals with those kind of reserves and if you want to partner up i have a self storage im looking for partners on and a a apartment complex
Sorry for your loss. If it’s your first time to be a landlord, I’d say get the hang of the one. You don’t HAVE to sell to get the liquidity.. you could always pull it out via a refi or type of line of credit secured by the asset. I would then get the hang of two properties… and so on and so on. You’re in a wildly awesome position to scale a brrrr based portfolio like crazy.
Quote from @Nate Sanow:Thanks, I actually have about 200k in CDs that are making nothing there. I may pick up a second home and learn the ropes on both before leveraging both for more. I think brrr-ing will make sense in a year or two when the interest rates hopefully drop.
Sorry for your loss. If it’s your first time to be a landlord, I’d say get the hang of the one. You don’t HAVE to sell to get the liquidity.. you could always pull it out via a refi or type of line of credit secured by the asset. I would then get the hang of two properties… and so on and so on. You’re in a wildly awesome position to scale a brrrr based portfolio like crazy.
@Matt Allen Before you put a lot of money into your father's home to rent it out, check the market value of other homes in the area. You don't want to over-invest in renovations if other homes are selling for $225K. I would invest what you need to get it up to rental condition, then, leverage it to buy your second rental. Also, keep in mind that you can do cost segregation on your inherited property to reduce or eliminate your tax liability when it is occupied and paying you rent.
It is so hard to lose a loved one, you and your family have my sympathy.
Quote from @Bonnie Griffin Kaake:
@Matt Allen Before you put a lot of money into your father's home to rent it out, check the market value of other homes in the area. You don't want to over-invest in renovations if other homes are selling for $225K. I would invest what you need to get it up to rental condition, then, leverage it to buy your second rental. Also, keep in mind that you can do cost segregation on your inherited property to reduce or eliminate your tax liability when it is occupied and paying you rent.
It is so hard to lose a loved one, you and your family have my sympathy.
Thanks, I’m doing the basics. It had some neglect and damage so im doing new carpet, paint, a few appliances. I have insurance money for most of it.
I always leveraged as much as I felt comfortable with over numerous properties but you have to decide what's right for you so you feel comfortable. It depends on where you want to go. If you want to scale then leverage and go multiple properties; if you are fine with the one property so be it. Whatever you decide check out the numbers and your commitment and comfort level.
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@Matt Allen Damn, been there it sucks but keep your head up.
IMO I would keep the house, rent it. Take the other 200K and look at a 3-5yr purchase with a syndication, I like new construction, with someone who has been in the industry 10+ years. But a multi family ( already built) 3-5 year investment will yield 8-10% Cash on Cash and 18-25% Appreciation at sale.
Quote from @Adam Bartling:Thank you,
@Matt Allen Damn, been there it sucks but keep your head up.
IMO I would keep the house, rent it. Take the other 200K and look at a 3-5yr purchase with a syndication, I like new construction, with someone who has been in the industry 10+ years. But a multi family ( already built) 3-5 year investment will yield 8-10% Cash on Cash and 18-25% Appreciation at sale.
Id love to know more about purchasing with a syndication.
Quote from @Adam Bartling:
@Matt Allen Damn, been there it sucks but keep your head up.
IMO I would keep the house, rent it. Take the other 200K and look at a 3-5yr purchase with a syndication, I like new construction, with someone who has been in the industry 10+ years. But a multi family ( already built) 3-5 year investment will yield 8-10% Cash on Cash and 18-25% Appreciation at sale.
not to mention the deprecation as well great idea overall
@Matt Allen
If I were you I'd look into commercial, 5 units or more. I would be looking to use the 200k ad a down payment for properties up to 800k, hoping for 10 units or more.
Quote from @Matt Allen:
Matt, do yourself a favor and read a few books on real estate investing to learn the power of leverage. Here's a very basic explanation to get your juices flowing:
Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.
Buy one house for cash. In five years, you'll have Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.
Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
Quote from @Nathan Gesner:
Quote from @Matt Allen:
Matt, do yourself a favor and read a few books on real estate investing to learn the power of leverage. Here's a very basic explanation to get your juices flowing:
Assume a house costs $200,000 and rents for $1,500. The market appreciates 3% per year.
Buy one house for cash. In five years, you'll have Pay cash for one house and rent it for $1,500. After five years you'll have earned $90,000 in rent income and gained $34,000 in appreciation.
Buy four houses with $50,000 down on each. Mortgage payment is $1,000 on each house, so you're essentially earning $500 per house or $2,000 a month. After five years you'll have earned $120,000 in rent income and gained $136,000 in appreciation. You've earned $132,000 more by splitting your money and leveraging it.
That is pretty incredible, thanks for your input.
Hey Matt,
My firm puts clients in passive income funds like DSTs, alts, and gas & mineral right royalties. Most of our clients have inherited or sold property and want to 1031 into a passive income fund like this. DSTs are 1031-exchangeable. An example would be - Cantor Fitzgerald is the sponsor of this Amazon warehouse in Texas that produces a 6% return to investors for 4-7 years and has a 15% IRR at the end of the hold period.
Shoot me a DM if interested!
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@Matt Allen sorry for your loss but happy for being in a positive situation. I would take the next few months fix up the inherited house and do some research on what you want to do going forward. Making decision in peak emotional times can be costly. While everyone on here has valid points they may not be best for you. Leverage is huge and can make your returns far greater, however if you don't like rentals it makes it far greater to unwind. Likewise if you love owning them tying money up in a syndication may not be for you.
You aren't rushed to make a decision and waiting a few months will allow you to really make a solid plan.
Quote from @Chris Davidson:
@Matt Allen sorry for your loss but happy for being in a positive situation. I would take the next few months fix up the inherited house and do some research on what you want to do going forward. Making decision in peak emotional times can be costly. While everyone on here has valid points they may not be best for you. Leverage is huge and can make your returns far greater, however if you don't like rentals it makes it far greater to unwind. Likewise if you love owning them tying money up in a syndication may not be for you.
You aren't rushed to make a decision and waiting a few months will allow you to really make a solid plan.
Thanks, Chris
I am working on getting his home renovated now and will have it ready in 2 months. I’m also a realtor in the DC area and was doing research 9 months ago about brrr-ing properties. After speaking with a hard money lender I think I’m going to get 2-3 places with the 200k, rent and hold those till the rates start to drop and start brrr-ing then.
Best, Matt
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@Matt Allen sounds like this might be able to supercharge your goals. Might want to look into a HELOC on the inherited property and use it like a hard money lender. Or you could tap into that equity and really leverage up. Just don't over extend yourself.
Go crush it!
Quote from @Chris Davidson:
@Matt Allen sounds like this might be able to supercharge your goals. Might want to look into a HELOC on the inherited property and use it like a hard money lender. Or you could tap into that equity and really leverage up. Just don't over extend yourself.
Go crush it!
Thanks brother!
When dealing with inherited property, make sure that the tax basis is correct when you start to rent the property and include it on your tax return.
You may get step-up in basis.
Thanks everyone.
Just ratified my 2nd property!
@Matt Allen Congrats man! Love your responses here. Don't over leverage and follow the basics like @Nathan Gesner mentioned and you'll crush it. Can't go wrong with that market.
At what point is it considered to be over leveraged? Quote from @Jaron Walling:
@Matt Allen Congrats man! Love your responses here. Don't over leverage and follow the basics like @Nathan Gesner mentioned and you'll crush it. Can't go wrong with that market.