Selling my first rental property but what next?

Question

Hello

My wife and I finally decided to sell our first and only rental property after 8 years(will put it on market in May). We will likely walk away with $160k-$170k and we want to use that to launch our real estate investing with passive income. For the past year I have been going to meetups, reading books, listening to podcasts, currently have the bigger pockets webinar on to figure out our next move and overall strategy.

We live in Chicago and would like to buy a couple of properties while still living here. What I am thinking is we buy a 3 flat somewhere on the outskirts of Chicago and put the 25% down and we may have something left to do a FHA househack as well, but not sure of the chances of getting 2 mortgages in the short period of time that is required with the 1031 exchange.

After a recent meetup and listening to a speaker about commercial real estate now I am thinking we could possibly buy a 6 unit or more in a C class neighborhood possibly and I do like the sound of that.

So I am putting this on the forums for advice or suggestions on what to do. Also after we use the profit on this property, what is next? I am currently reading the book on Raising private capital by Matt Faircloth and I find it very interesting, so I am thinking that would be the next step in our plan, to raise private capital for the 2nd or 3rd property. I would really love to find a mentor but I know that is not something that needs to be a bit more organic, but finding a mentor is one of my goals this year.

Thank you for any input

Dave Madoch · Answer

I think I should have left out "passive income" from my post. In no way did I mean that I do not want to do any work to get the passive income. I was just using the term "Passive Income" to show that I am looking for rental income vs fix and flips. For my current job which I have been doing for 17 years, an 80-90 hour work week is not uncommon, so I am not afraid of hard work. I know there will be hard work in real estate investing.

For the 5 years of "easy management"  I was very lucky with great tenants that managed themselves.

I will just continue to educate myself in the world of real estate investing in preparation to buy my new investment property this year.

Thanks for the input

Jason Merchey · Answer

Congrats! Selling now is a great opportunity. Why wait until the music stops.

P.S. I agree with Alina, there is no such thing as "passive income." It's either a) work hard b) manage it c) or manage your manager. There is no sitting on the beach with your cellphone turned off while you drink booze from a coconut. My two cents.

Please refer me to your manager if management was easy for 5 years straight!

Dave Madoch · Answer

Agree, just not sure if that is smart on my first multi family. The current house we are selling in in south carolina and we had the same tenants for 5 years so management was easy and I self managed.

Alina Trigub · Answer

@Dave Madoch You always have an option of going further out or completely out of state.

Dave Madoch · Answer

@Alina Trigub   I should have been more specific. Once the property has been renovated and stabilized then yes I would like to have property management take over. The tough part is finding the right deal that we can cash flow with the additional expense of property management. Thanks for your input

Alina Trigub · Answer

@Dave Madoch

When you say "passive income" do you mean you want to buy and manage property? This isn't exactly passive, at least at the beginning when you need to put in the hours to bring the property into rent-able condition, find tenants and potentially if you're house-hacking or managing on your own, manage tenants, do the repairs. In any way, in this case, start looking for your next property now and potentially consider to 1031 into this larger property to defer paying taxes until later.