Real Estate Agent · Houston · Member since 2022 · 7 posts · 0 votes
Hello, BiggerPockets Community!
I’m looking for guidance on progressing my real estate investment journey and would appreciate any advice from experienced investors. I am inexperienced so please be mindful of that. Any information that you need to help guide your advice for me, just ask. Here’s a bit about my current situation and goals:
Current Rentals:
Number of Properties: 1
Type of Property: Single-family home (we lived in it and turned it into a rental when we moved out)
Location: Corpus Christi, TX
Investment Goals:
Short-term Goal: Acquire more properties and build an equity-heavy portfolio to have leverage if needed.
Long-term Goal: Build a portfolio that provides enough cash flow to cover all living expenses.
Focus: Expand my portfolio, preferably to at least 10 properties in the next 10 years.
Financials:
Current Monthly Cash Flow: Close to breakeven (potentially negative by $20, factoring in reserves).
Future Investment Budget: No savings at the moment. Bought the first property for $182k, currently worth about $245k, with a mortgage balance around $163k.
Financing: Unsure about options. Should I save for a conventional loan, get a HELOC, or do a cash-out refinance with my first property?
Experience and Knowledge:
Experience: A little over a year owning my first rental.
Expertise: Still learning about all aspects. I have a real estate license and want to focus on single-family homes (4 units and below).
Mentorship: Not working with a mentor or investment group.
Challenges:
Current Hurdles: Unsure what to do next to expand my portfolio. Considering saving up for a 20% down payment but wondering if there are faster or better ways.
Guidance Needed: Financing options based on my situation.
Strategy:
Current Strategy: Buy and hold.
Open to New Strategies: Yes, interested in fix-and-flip and short-term rentals, but I have no experience in these areas.
Market:
Market Selection: I want to invest locally in Houston. Current rental is in Corpus Christi.
Considerations: Debating whether to sell the Corpus Christi property and reinvest locally. Current interest rate on the property is 3.375%. Average price in West Houston is around $314k, but wondering if I should look for something in the $250k range. Is selling my property the right move if my goal is to expand my portfolio?
I would appreciate any advice on the best steps to take next, especially regarding financing options and whether I should sell my current property to reinvest locally.
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Noah Margate, you only have to have lived in it for 2 out of the 5 years prior to selling it. So you qualify right now. You would get the full primary residence exclusion (up to $250K of profit if single or $500K if married). Any extra profit above that. Or any depreciation could be deferred by also doing a 1031 exchange. You would qualify for both.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
Books have been written on this topic, and you might find a few.
Distilling this down, given your investment goals: find a house to move into, ask for seller credits at closing. Spend one year in that house improving as you are able (new paint and landscaping at the very least). Move out, turning the house into your next rental. Do that again, once each year.
Always ask for seller financing, to preserve your cash. You will be at 10 properties in 10 years. The first 5 will have paid down a bit of the mortgage and rents will likely have moved up.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
I have houses in a small Texas town, and they cash flow nicely. I also have houses in a beach side Florida market, and they appreciate nicely. The cash flow houses help me to hold on for the long haul, while the appreciation houses enable me to buy more houses. I would not sell the Corpus house, since the interest rate is low and I would expect the cash flow to be solid. If you find the house is a dud, sell it.
I have houses in a small Texas town, and they cash flow nicely. I also have houses in a beach side Florida market, and they appreciate nicely. The cash flow houses help me to hold on for the long haul, while the appreciation houses enable me to buy more houses. I would not sell the Corpus house, since the interest rate is low and I would expect the cash flow to be solid. If you find the house is a dud, sell it.
Please ask questions.
Hi Kerry! Thanks for the advice. I’d love to do this strategy, but my wife won't agree to it. If it were just me, I'd definitely do that over and over. Do you have any other advice?
Also, what do you mean by getting seller financing to preserve my cash? Don’t you still have to place a down payment for the seller?
Regarding your other comment, I appreciate the insight on having a mix of cash flow and appreciation properties. I see the value in keeping the Corpus house with its low interest rate if it had solid cash flow. Unfortunately, I was earning about $100/mo cash flow, but when insurance and property taxes rose this year, I'm negative to around ($16). If I increase the rent to about $1900, from $1850, I can at least be net positive at around $26.
Lender · Austin, TX · Member since 2024 · 17 posts · 4 votes
2y
Noah,
Real estate investing is an exciting venture, and I’m thrilled to hear that you’re beginning to build your portfolio. As someone who works with a private lender catering to many real estate investors, I’ve seen firsthand the importance of thorough market research in achieving success.
The potential for investment properties can vary significantly between markets, depending on your investment strategy. For instance, markets with low property values and expenses are often ideal for cash-flowing long-term rentals, especially in areas where many residents are unable to purchase homes. Conversely, if you're interested in short-term rentals, I recommend using tools like AirDNA to identify markets with high potential, based on the market score of the surrounding region.
Additionally, understanding your financing options is crucial. Take the time to research the best ways to finance your investment properties to align with your long-term goals.
If you have any questions or need further advice, I’m here to help.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
2y
@Noah Margate, if I get seller financing, I don't have that mortgage show up on my credit report, I can negotiate the interest rate with the seller, I do not require an appraisal, origination fees and other "junk" closing costs. In addition, older sellers like getting a down payment and receiving the mortgage payment as their income. Lastly, they don't get a hit on their taxes until they receive their money, which is a benefit to the seller that is easily over looked. Younger folks want their money back, in my experience. So I have excellent experience with tired landlords.
Even if your wife doesn't want to do that, it is the best strategy. Could you agree to do 5 houses, staying 2 years in each (which would be better for your capital gains taxes)?
When you ask for equity in the short term, there is one way I have been able to do that...and it is direct mail to distressed home owners, such as those in pre-foreclosure or late on property taxes. I hand wrote letters to properties in distress.
I’m looking for guidance on progressing my real estate investment journey and would appreciate any advice from experienced investors. I am inexperienced so please be mindful of that. Any information that you need to help guide your advice for me, just ask. Here’s a bit about my current situation and goals:
Current Rentals:
Number of Properties: 1
Type of Property: Single-family home (we lived in it and turned it into a rental when we moved out)
Location: Corpus Christi, TX
Investment Goals:
Short-term Goal: Acquire more properties and build an equity-heavy portfolio to have leverage if needed.
Long-term Goal: Build a portfolio that provides enough cash flow to cover all living expenses.
Focus: Expand my portfolio, preferably to at least 10 properties in the next 10 years.
Financials:
Current Monthly Cash Flow: Close to breakeven (potentially negative by $20, factoring in reserves).
Future Investment Budget: No savings at the moment. Bought the first property for $182k, currently worth about $245k, with a mortgage balance around $163k.
Financing: Unsure about options. Should I save for a conventional loan, get a HELOC, or do a cash-out refinance with my first property?
Experience and Knowledge:
Experience: A little over a year owning my first rental.
Expertise: Still learning about all aspects. I have a real estate license and want to focus on single-family homes (4 units and below).
Mentorship: Not working with a mentor or investment group.
Challenges:
Current Hurdles: Unsure what to do next to expand my portfolio. Considering saving up for a 20% down payment but wondering if there are faster or better ways.
Guidance Needed: Financing options based on my situation.
Strategy:
Current Strategy: Buy and hold.
Open to New Strategies: Yes, interested in fix-and-flip and short-term rentals, but I have no experience in these areas.
Market:
Market Selection: I want to invest locally in Houston. Current rental is in Corpus Christi.
Considerations: Debating whether to sell the Corpus Christi property and reinvest locally. Current interest rate on the property is 3.375%. Average price in West Houston is around $314k, but wondering if I should look for something in the $250k range. Is selling my property the right move if my goal is to expand my portfolio?
I would appreciate any advice on the best steps to take next, especially regarding financing options and whether I should sell my current property to reinvest locally.
Thanks in advance for your help!
Hey there!
It sounds like you’re in a solid starting position with your first rental and a clear vision of where you want to go. Based on what you've shared, I can definitely relate to your goals, as I specialize in helping investors like you scale their portfolios with strategically selected properties.
Financing & Expansion Options:
Given your current financials, here are a few paths you could consider:
HELOC or Cash-Out Refinance: Tapping into the equity of your current property could give you the liquidity needed to acquire more rentals. A HELOC might offer more flexibility if you're planning to purchase multiple properties over time, while a cash-out refinance could provide a lump sum that you can deploy immediately.
1031 Exchange: If you decide to sell your Corpus Christi property, you might explore a 1031 exchange to defer capital gains taxes. This could allow you to reinvest the proceeds directly into one or more properties in Houston, which seems to align with your goal of expanding locally.
Leverage New Construction Opportunities: I work with Neu Real Estate Group in Indianapolis, where we focus on high-quality duplex builds that are designed with strong rental returns in mind. These kinds of properties can be a great way to balance cash flow with long-term appreciation, especially if you're looking to diversify your portfolio geographically. Even if you’re focused on Houston, the same principles apply—finding areas with promising growth and strong rental demand.
Strategic Growth:
Since you’re considering building up to 10 properties in the next decade, you might want to look at markets that offer both affordability and growth potential. In your case, staying in Houston or exploring surrounding areas could be smart moves, but don't overlook other regions where new construction might be booming.
Consider a Mix of Strategies:
While your primary strategy is buy and hold, it could be worth looking into markets or property types that might give you better cash flow opportunities. For example, a mix of long-term rentals and perhaps a few duplexes or small multi-family properties could help stabilize and grow your cash flow while you build equity.
Selling Your Corpus Christi Property:
With a low interest rate like 3.375%, selling might not be the best move unless the equity can significantly jumpstart your portfolio in Houston. If the Corpus Christi market is still appreciating, holding onto it while acquiring new properties might provide you with a balanced mix of appreciation and cash flow.
Final Thoughts:
If you're interested in learning more about how to strategically grow your portfolio, especially with new builds, I’d be happy to connect and discuss further. I’ve been working with other investors to help them navigate similar challenges, and I believe there are some great opportunities out there for someone with your goals.
Feel free to reach out if you’d like to dive deeper into any of these ideas.
@Noah Margate, if I get seller financing, I don't have that mortgage show up on my credit report, I can negotiate the interest rate with the seller, I do not require an appraisal, origination fees and other "junk" closing costs. In addition, older sellers like getting a down payment and receiving the mortgage payment as their income. Lastly, they don't get a hit on their taxes until they receive their money, which is a benefit to the seller that is easily over looked. Younger folks want their money back, in my experience. So I have excellent experience with tired landlords.
Even if your wife doesn't want to do that, it is the best strategy. Could you agree to do 5 houses, staying 2 years in each (which would be better for your capital gains taxes)?
When you ask for equity in the short term, there is one way I have been able to do that...and it is direct mail to distressed home owners, such as those in pre-foreclosure or late on property taxes. I hand wrote letters to properties in distress.
I see. Thanks for the info on seller financing. My wife won't agree to the 2 years; it's too soon and she hates moving. We just moved into our 2nd home, and she was agreeable to move in about 5-7 years, but that's too long. I can do direct mail or cold calls. I make calls all the time as an agent, so that won't be a problem. I just need capital...
I’m looking for guidance on progressing my real estate investment journey and would appreciate any advice from experienced investors. I am inexperienced so please be mindful of that. Any information that you need to help guide your advice for me, just ask. Here’s a bit about my current situation and goals:
Current Rentals:
Number of Properties: 1
Type of Property: Single-family home (we lived in it and turned it into a rental when we moved out)
Location: Corpus Christi, TX
Investment Goals:
Short-term Goal: Acquire more properties and build an equity-heavy portfolio to have leverage if needed.
Long-term Goal: Build a portfolio that provides enough cash flow to cover all living expenses.
Focus: Expand my portfolio, preferably to at least 10 properties in the next 10 years.
Financials:
Current Monthly Cash Flow: Close to breakeven (potentially negative by $20, factoring in reserves).
Future Investment Budget: No savings at the moment. Bought the first property for $182k, currently worth about $245k, with a mortgage balance around $163k.
Financing: Unsure about options. Should I save for a conventional loan, get a HELOC, or do a cash-out refinance with my first property?
Experience and Knowledge:
Experience: A little over a year owning my first rental.
Expertise: Still learning about all aspects. I have a real estate license and want to focus on single-family homes (4 units and below).
Mentorship: Not working with a mentor or investment group.
Challenges:
Current Hurdles: Unsure what to do next to expand my portfolio. Considering saving up for a 20% down payment but wondering if there are faster or better ways.
Guidance Needed: Financing options based on my situation.
Strategy:
Current Strategy: Buy and hold.
Open to New Strategies: Yes, interested in fix-and-flip and short-term rentals, but I have no experience in these areas.
Market:
Market Selection: I want to invest locally in Houston. Current rental is in Corpus Christi.
Considerations: Debating whether to sell the Corpus Christi property and reinvest locally. Current interest rate on the property is 3.375%. Average price in West Houston is around $314k, but wondering if I should look for something in the $250k range. Is selling my property the right move if my goal is to expand my portfolio?
I would appreciate any advice on the best steps to take next, especially regarding financing options and whether I should sell my current property to reinvest locally.
Thanks in advance for your help!
Hey there!
It sounds like you’re in a solid starting position with your first rental and a clear vision of where you want to go. Based on what you've shared, I can definitely relate to your goals, as I specialize in helping investors like you scale their portfolios with strategically selected properties.
Financing & Expansion Options:
Given your current financials, here are a few paths you could consider:
HELOC or Cash-Out Refinance: Tapping into the equity of your current property could give you the liquidity needed to acquire more rentals. A HELOC might offer more flexibility if you're planning to purchase multiple properties over time, while a cash-out refinance could provide a lump sum that you can deploy immediately.
1031 Exchange: If you decide to sell your Corpus Christi property, you might explore a 1031 exchange to defer capital gains taxes. This could allow you to reinvest the proceeds directly into one or more properties in Houston, which seems to align with your goal of expanding locally.
Leverage New Construction Opportunities: I work with Neu Real Estate Group in Indianapolis, where we focus on high-quality duplex builds that are designed with strong rental returns in mind. These kinds of properties can be a great way to balance cash flow with long-term appreciation, especially if you're looking to diversify your portfolio geographically. Even if you’re focused on Houston, the same principles apply—finding areas with promising growth and strong rental demand.
Strategic Growth:
Since you’re considering building up to 10 properties in the next decade, you might want to look at markets that offer both affordability and growth potential. In your case, staying in Houston or exploring surrounding areas could be smart moves, but don't overlook other regions where new construction might be booming.
Consider a Mix of Strategies:
While your primary strategy is buy and hold, it could be worth looking into markets or property types that might give you better cash flow opportunities. For example, a mix of long-term rentals and perhaps a few duplexes or small multi-family properties could help stabilize and grow your cash flow while you build equity.
Selling Your Corpus Christi Property:
With a low interest rate like 3.375%, selling might not be the best move unless the equity can significantly jumpstart your portfolio in Houston. If the Corpus Christi market is still appreciating, holding onto it while acquiring new properties might provide you with a balanced mix of appreciation and cash flow.
Final Thoughts:
If you're interested in learning more about how to strategically grow your portfolio, especially with new builds, I’d be happy to connect and discuss further. I’ve been working with other investors to help them navigate similar challenges, and I believe there are some great opportunities out there for someone with your goals.
Feel free to reach out if you’d like to dive deeper into any of these ideas.
Best of luck on your journey!
Ryan Cheek
Thank you for sharing. What are the downsides of using a HELOC? I dont want to cash-out refinance because my margins are very thin already and refinancing to a higher rate will only increase my monthly payments and negatively affect cashflow.
Real estate investing is an exciting venture, and I’m thrilled to hear that you’re beginning to build your portfolio. As someone who works with a private lender catering to many real estate investors, I’ve seen firsthand the importance of thorough market research in achieving success.
The potential for investment properties can vary significantly between markets, depending on your investment strategy. For instance, markets with low property values and expenses are often ideal for cash-flowing long-term rentals, especially in areas where many residents are unable to purchase homes. Conversely, if you're interested in short-term rentals, I recommend using tools like AirDNA to identify markets with high potential, based on the market score of the surrounding region.
Additionally, understanding your financing options is crucial. Take the time to research the best ways to finance your investment properties to align with your long-term goals.
If you have any questions or need further advice, I’m here to help.
Did ChatGPT write this?.... I appreciate the effort Jonathan! Please share me your personal experiences! I want to know what the next steps or options that I should take in my situation.
Real estate investing is an exciting venture, and I’m thrilled to hear that you’re beginning to build your portfolio. As someone who works with a private lender catering to many real estate investors, I’ve seen firsthand the importance of thorough market research in achieving success.
The potential for investment properties can vary significantly between markets, depending on your investment strategy. For instance, markets with low property values and expenses are often ideal for cash-flowing long-term rentals, especially in areas where many residents are unable to purchase homes. Conversely, if you're interested in short-term rentals, I recommend using tools like AirDNA to identify markets with high potential, based on the market score of the surrounding region.
Additionally, understanding your financing options is crucial. Take the time to research the best ways to finance your investment properties to align with your long-term goals.
If you have any questions or need further advice, I’m here to help.
Did ChatGPT write this?.... I appreciate the effort Jonathan! Please share me your personal experiences! I want to know what the next steps or options that I should take in my situation.
I sent you a request so we can schedule a meeting to discuss this.
I’m looking for guidance on progressing my real estate investment journey and would appreciate any advice from experienced investors. I am inexperienced so please be mindful of that. Any information that you need to help guide your advice for me, just ask. Here’s a bit about my current situation and goals:
Current Rentals:
Number of Properties: 1
Type of Property: Single-family home (we lived in it and turned it into a rental when we moved out)
Location: Corpus Christi, TX
Investment Goals:
Short-term Goal: Acquire more properties and build an equity-heavy portfolio to have leverage if needed.
Long-term Goal: Build a portfolio that provides enough cash flow to cover all living expenses.
Focus: Expand my portfolio, preferably to at least 10 properties in the next 10 years.
Financials:
Current Monthly Cash Flow: Close to breakeven (potentially negative by $20, factoring in reserves).
Future Investment Budget: No savings at the moment. Bought the first property for $182k, currently worth about $245k, with a mortgage balance around $163k.
Financing: Unsure about options. Should I save for a conventional loan, get a HELOC, or do a cash-out refinance with my first property?
Experience and Knowledge:
Experience: A little over a year owning my first rental.
Expertise: Still learning about all aspects. I have a real estate license and want to focus on single-family homes (4 units and below).
Mentorship: Not working with a mentor or investment group.
Challenges:
Current Hurdles: Unsure what to do next to expand my portfolio. Considering saving up for a 20% down payment but wondering if there are faster or better ways.
Guidance Needed: Financing options based on my situation.
Strategy:
Current Strategy: Buy and hold.
Open to New Strategies: Yes, interested in fix-and-flip and short-term rentals, but I have no experience in these areas.
Market:
Market Selection: I want to invest locally in Houston. Current rental is in Corpus Christi.
Considerations: Debating whether to sell the Corpus Christi property and reinvest locally. Current interest rate on the property is 3.375%. Average price in West Houston is around $314k, but wondering if I should look for something in the $250k range. Is selling my property the right move if my goal is to expand my portfolio?
I would appreciate any advice on the best steps to take next, especially regarding financing options and whether I should sell my current property to reinvest locally.
Thanks in advance for your help!
Hey there!
It sounds like you’re in a solid starting position with your first rental and a clear vision of where you want to go. Based on what you've shared, I can definitely relate to your goals, as I specialize in helping investors like you scale their portfolios with strategically selected properties.
Financing & Expansion Options:
Given your current financials, here are a few paths you could consider:
HELOC or Cash-Out Refinance: Tapping into the equity of your current property could give you the liquidity needed to acquire more rentals. A HELOC might offer more flexibility if you're planning to purchase multiple properties over time, while a cash-out refinance could provide a lump sum that you can deploy immediately.
1031 Exchange: If you decide to sell your Corpus Christi property, you might explore a 1031 exchange to defer capital gains taxes. This could allow you to reinvest the proceeds directly into one or more properties in Houston, which seems to align with your goal of expanding locally.
Leverage New Construction Opportunities: I work with Neu Real Estate Group in Indianapolis, where we focus on high-quality duplex builds that are designed with strong rental returns in mind. These kinds of properties can be a great way to balance cash flow with long-term appreciation, especially if you're looking to diversify your portfolio geographically. Even if you’re focused on Houston, the same principles apply—finding areas with promising growth and strong rental demand.
Strategic Growth:
Since you’re considering building up to 10 properties in the next decade, you might want to look at markets that offer both affordability and growth potential. In your case, staying in Houston or exploring surrounding areas could be smart moves, but don't overlook other regions where new construction might be booming.
Consider a Mix of Strategies:
While your primary strategy is buy and hold, it could be worth looking into markets or property types that might give you better cash flow opportunities. For example, a mix of long-term rentals and perhaps a few duplexes or small multi-family properties could help stabilize and grow your cash flow while you build equity.
Selling Your Corpus Christi Property:
With a low interest rate like 3.375%, selling might not be the best move unless the equity can significantly jumpstart your portfolio in Houston. If the Corpus Christi market is still appreciating, holding onto it while acquiring new properties might provide you with a balanced mix of appreciation and cash flow.
Final Thoughts:
If you're interested in learning more about how to strategically grow your portfolio, especially with new builds, I’d be happy to connect and discuss further. I’ve been working with other investors to help them navigate similar challenges, and I believe there are some great opportunities out there for someone with your goals.
Feel free to reach out if you’d like to dive deeper into any of these ideas.
Best of luck on your journey!
Ryan Cheek
Thank you for sharing. What are the downsides of using a HELOC? I dont want to cash-out refinance because my margins are very thin already and refinancing to a higher rate will only increase my monthly payments and negatively affect cashflow.
Hi Noah,
Great question! One of the main downsides of using a HELOC is that it typically comes with a variable interest rate, which means your payments could increase over time if interest rates rise. This could impact your cash flow, especially if your rental income margins are already tight.
Another thing to consider is that a HELOC often has an interest-only payment period for the first 5-10 years. After that, you'll need to start repaying both principal and interest, which could also affect your cash flow.
However, the flexibility of a HELOC can be beneficial, especially if you plan to make strategic investments that generate higher returns in the short term. It allows you to access funds as needed without the immediate commitment of a large lump sum, like with a cash-out refinance.
Given your focus on maintaining positive cash flow, carefully evaluating the terms of any HELOC offer is essential. You might also want to have a contingency plan for managing rate increases or fluctuations in your rental income.
If you'd like to discuss this further or explore other options that might fit your strategy better, feel free to reach out. I'm happy to help you navigate these decisions.
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Noah Margate. If the property is already not generating cash, it wouldn't be a bad idea to find better cash flowing investment properties. If you decide to sell the property you would be able to do a 1031 exchange. It sounds like you might not qualify for a 121 exclusion, where you would have needed to live in the property for two out of the five years of owning it. A 1031 would allow you to use the taxable gain on the property you would have to pay, to purchase another or multiple investment properties. In your case maybe multiple properties if you want to be even more diverse.
@Noah Margate. If the property is already not generating cash, it wouldn't be a bad idea to find better cash flowing investment properties. If you decide to sell the property you would be able to do a 1031 exchange. It sounds like you might not qualify for a 121 exclusion, where you would have needed to live in the property for two out of the five years of owning it. A 1031 would allow you to use the taxable gain on the property you would have to pay, to purchase another or multiple investment properties. In your case maybe multiple properties if you want to be even more diverse.
I have lived in the property for 3 years, 2020-2023. Would I qualify or do I need to own the property for 5 years?
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
2y
@Noah Margate, you only have to have lived in it for 2 out of the 5 years prior to selling it. So you qualify right now. You would get the full primary residence exclusion (up to $250K of profit if single or $500K if married). Any extra profit above that. Or any depreciation could be deferred by also doing a 1031 exchange. You would qualify for both.
I’m looking for guidance on progressing my real estate investment journey and would appreciate any advice from experienced investors. I am inexperienced so please be mindful of that. Any information that you need to help guide your advice for me, just ask. Here’s a bit about my current situation and goals:
Current Rentals:
Number of Properties: 1
Type of Property: Single-family home (we lived in it and turned it into a rental when we moved out)
Location: Corpus Christi, TX
Investment Goals:
Short-term Goal: Acquire more properties and build an equity-heavy portfolio to have leverage if needed.
Long-term Goal: Build a portfolio that provides enough cash flow to cover all living expenses.
Focus: Expand my portfolio, preferably to at least 10 properties in the next 10 years.
Financials:
Current Monthly Cash Flow: Close to breakeven (potentially negative by $20, factoring in reserves).
Future Investment Budget: No savings at the moment. Bought the first property for $182k, currently worth about $245k, with a mortgage balance around $163k.
Financing: Unsure about options. Should I save for a conventional loan, get a HELOC, or do a cash-out refinance with my first property?
Experience and Knowledge:
Experience: A little over a year owning my first rental.
Expertise: Still learning about all aspects. I have a real estate license and want to focus on single-family homes (4 units and below).
Mentorship: Not working with a mentor or investment group.
Challenges:
Current Hurdles: Unsure what to do next to expand my portfolio. Considering saving up for a 20% down payment but wondering if there are faster or better ways.
Guidance Needed: Financing options based on my situation.
Strategy:
Current Strategy: Buy and hold.
Open to New Strategies: Yes, interested in fix-and-flip and short-term rentals, but I have no experience in these areas.
Market:
Market Selection: I want to invest locally in Houston. Current rental is in Corpus Christi.
Considerations: Debating whether to sell the Corpus Christi property and reinvest locally. Current interest rate on the property is 3.375%. Average price in West Houston is around $314k, but wondering if I should look for something in the $250k range. Is selling my property the right move if my goal is to expand my portfolio?
I would appreciate any advice on the best steps to take next, especially regarding financing options and whether I should sell my current property to reinvest locally.
Thanks in advance for your help!
Hey there!
First off, congrats on starting your real estate journey and already owning your first rental! You're in a good position to expand, and I love that you're focused on building an equity-heavy portfolio for long-term cash flow.
From what you’ve shared, it sounds like you’re debating between holding onto your current property in Corpus Christi or selling to reinvest locally in Houston. I’d say there are a couple of routes you could consider:
HELOC or Cash-Out Refi: With your current property valued at $245k and a mortgage balance of $163k, you’ve got some solid equity built up. Since your interest rate is favorable at 3.375%, doing a cash-out refinance might allow you to pull out some capital without selling the property. This could give you the flexibility to invest locally in Houston or even in a different market that offers better cash flow and growth potential.
Diversifying Out of Your Local Market: If Houston’s average price point is around $314k, and you're looking for something in the $250k range, you might find it difficult to meet your goals without putting down a significant down payment. One option to consider is investing out-of-state where property prices are lower, and returns are more favorable.
For example, Indianapolis is a great market for cash-flowing properties with lower price points. You can find new construction duplexes in the $400-450k range, offering strong rental returns with solid growth potential. These types of investments could help you hit your goal of expanding your portfolio faster and with less capital compared to your local market.
Leveraging Your Real Estate License: Since you have a real estate license, you’re in a great position to find off-market deals or help yourself with transactions. This can be a huge advantage, especially if you’re looking into fix-and-flip strategies or even short-term rentals to generate quick equity.
Mentorship: Connecting with an investment group or finding a mentor might be helpful as you navigate financing options and new strategies. A mentor could provide insight into what’s worked for them, especially if they’ve gone through the process of scaling up with similar goals.
If you're interested in discussing this further, I specialize in helping investors like yourself find value-add properties, and I'd be happy to share some insights about the Indianapolis market that could align with your goals.
Best of luck on your journey—feel free to reach out if you'd like to chat more!
@Noah Margate. If the property is already not generating cash, it wouldn't be a bad idea to find better cash flowing investment properties. If you decide to sell the property you would be able to do a 1031 exchange. It sounds like you might not qualify for a 121 exclusion, where you would have needed to live in the property for two out of the five years of owning it. A 1031 would allow you to use the taxable gain on the property you would have to pay, to purchase another or multiple investment properties. In your case maybe multiple properties if you want to be even more diverse.
Loved*A 1031 would allow you to use the taxable gain on the property you would have to pay, to purchase another or multiple investment properties. Why did you mention the fact the property is not generating cash? What else should the owner of a property know about 1031 Exchange?
@Noah Margate, you only have to have lived in it for 2 out of the 5 years prior to selling it. So you qualify right now. You would get the full primary residence exclusion (up to $250K of profit if single or $500K if married). Any extra profit above that. Or any depreciation could be deferred by also doing a 1031 exchange. You would qualify for both.
Loved* You would get the full primary residence exclusion (up to $250K of profit if single or $500K if married).
Why does the full primary residence exclusion go up when Married?
