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Baron Wheeler
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Help with next steps from new Colorado Springs area investor

Baron Wheeler
Posted Apr 14 2024, 09:09

My wife and I are newer to investing. We have had 2 long term rentals. 1 when we were in our early 20’s and got hurt a little during the 2008 down turn and sold it. Our current rental was our primary that we held onto to rent and moved into a new primary.

Both of our houses are in Teller county just outside of Colorado Springs. Our rental is paid for and has rental income of $2200 month and our primary has a mortgage of $1800 so we are currently living for free basically.

we have a credit line on our rental for $275k and recently got a letter from our mortgage company offering a cash out refi on our primary of approx $300k and still be able to keep our current interest rate on the remaining balance of the mortgage which is mid 3 %.

We are trying to grow our rentals and struggling to figure out the best way to do that. We currently do not have much money in saving due to recently rehabbing both of our houses. (We were planning to move back to our rental and rent our primary due to higher rents so started to rehab the primary then found out insurance would not insure us due to the high fire risks if we changed so ended up rehabbing both houses and burned the savings).

Our dilema is we don’t want to sell either of our current houses due to excellent locations and appreciation potential but want to progress with more rentals. Our current rental was purchased for roughly $340k 7 years ago and is worth in the mid $500’s now and is paid off, and our primary was purchased for $430k 4 years ago and valued low to mid $600s and we owe $180k.

Option1 we are considering are a fix and flip to provide cash for a down payment for a long term rental to allow the rent to cover the mortgage and at least break even. Might take a couple fix and flips to get enough cash to provide the necessary down payment for that. (We have fixed up 3 houses now and primaries not fix and flips and really enjoyed it) my job also works 1/2 the year so I have plenty of free time for rehabs.

Option 2, just purchasing a long term rental with the cash out but this will produce a negative cash flow due to the cost to rent in the springs area and $0 down. We make good money at our jobs and could afford the payments due to our primary being covered by the first rental. And with the appreciation in the springs area we should be able to hold the property and let appreciation do its thing and refinance in the future to provide cash flow then.

option 3, sell our primary and pay cash for a new primary which will free up the profits from our rental to use toward another rental and between both rents will easily cover a mortgage payment. Our concern with this is that our current primary is across from the best school in our area on a cul-de-sac lot and we feel it will continue to grow at a high rate and don’t want to miss out on that. 

Last option, moving to Houston where houses are cheaper but don’t seem to appreciate as well, taxes and insurance seem higher and cut into the profits. We would sell both houses here and free up approx $850-$900k to invest in Houston.  I have a job offer that will make slightly more than I currently make and will provide housing for my family so no expenses there. We just hate Houston for living and lifestyle but can see that as a potential game changer for investing other than the high taxes and insurance and lack of appreciation compared to Colorado.

We are open to other ideas and ways to grow and appreciate any help and feedback possible. We have also found some meetups in the spring and plan to start attending them to learn and grow as well, sorry for the long post.

Edited to add our investing goals are to be able to live off of our rental portfolio in the next 12-15 years when our kids graduate, obviously the sooner the better but we understand it’s a long term game.

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