Rental Property Investor · New York, NY · Member since 2015 · 16 posts · 3 votes
I currently own a 4-Plex that gross $3K and cash flows over $2K a month. The property is a B- or C+ type and has at least $300K in equity thanks to the rise in value since the Aug 2012 time frame when I acquired it. I have 750 credit, net $12K a month in salary excluding my passive income, and have $50K saved (saving at full throttle now that I have small revolving debt). I am looking for advice in what is the best way to expand my real estate portfolio to increase my cash flow. I am thinking of acquiring another income property via a FHA 203K that cash flows, possibly sell my property and 1031 exchange into an apartment building, or buy turn key properties out of state, where the cash flow is greater than in Los Angeles area and the 20% down payment is smaller. The property I have is completely renovated and a true passive income as my PM does all the work, tenants pay timely, and since its new, I don't have repair issues; thus, I really have more preference into just increase my portfolio. Any opinions welcomed, and thank you for your time in advance.
Welcome to BP, @Marco Campos. I was in a similar situation 15 years ago. In my case, I had one house and one condo that I exchanged for a 16 unit apartment building. I didn't even have to go outside of CA. It worked out great for me, it was my entry into the commercial Multifamily asset class. I've acquired hundreds of units in multiple states since, and none of that would have happened had I not sold those two properties and done that exchange.
Another option would be to do a cash-out refinance and use the proceeds to acquire additional property. Be sure to perform an analysis of the cash flow now vs. cash flow with higher debt service and additional income from the other properties. You want to make sure that you are increasing your portfolio level cash flow, not decreasing it.
Welcome to BP, @Marco Campos. I was in a similar situation 15 years ago. In my case, I had one house and one condo that I exchanged for a 16 unit apartment building. I didn't even have to go outside of CA. It worked out great for me, it was my entry into the commercial Multifamily asset class. I've acquired hundreds of units in multiple states since, and none of that would have happened had I not sold those two properties and done that exchange.
Another option would be to do a cash-out refinance and use the proceeds to acquire additional property. Be sure to perform an analysis of the cash flow now vs. cash flow with higher debt service and additional income from the other properties. You want to make sure that you are increasing your portfolio level cash flow, not decreasing it.
Jeff Morelock - Thanks for the encouragement and recommendation to move towards an apartment building. I am a high risk/high reward (calculated risk) kind of guy so if I find a good 1031 exchange deal that makes sense, I will do it. Also, I have no experience in participating with a REI club so thanks for that new information. Sounds like these clubs are were the pocket listings are.
Jesse T - Based on my salary and down payment, I can probably get at least a $1M income property via the FHA route since my wife would be moving to LA. I figured using the FHA 203K option would be a good tool to buy and flip a property to hold for cash flow in comparison to turn keys available. BTW, thanks for the tip on using the next property to subsidize taxes.
Brian Burke - Your comment could be life changing for me. I really am considering now the 1031 exchange option for an apartment building in a up and coming neighborhood such as that close to DTLA. I snatched up my quad that cash flows using the VA loan with a 3.25% interest rate, so I am a bit hesitant on the cash refinance part.
Mark Nolan - Thanks for the tip, I am serious about my real estate ventures so I may just go pro even though I am not really a real estate investor yet. I look forward to learning and maybe even contribute to the forum.