Made $150K on our first property. Now what?

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Made $150K on our first property. Now what?

Turo Tales
Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes

My wife and I purchased our first property in 2013 and just closed on the sale after renting it out for 4 years. We made $170,000 on the sale of the house.

We want to invest most of it in real estate. I'm an Apache Helicopter Pilot in the Army (currently deployed).

What has worked for you? If you could start out with $150K, what would you do?

I'll continue to read the forums to seek knowledge & wisdom.

Thanks!

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Joe VilleneuvePro Member
Plymouth, MI 路 Member since 2013 路 13k+ posts 路 19k+ votes
7y

What's your plan? It all depends on your plan. Random answers or suggestions won't help you. My first suggestion (not random), is for you to build that plan before you make any other moves. You wouldn't think of sending your chopper into battle without one...REI is no different.

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  • Joe VilleneuvePro Member
    Plymouth, MI 路 Member since 2013 路 13k+ posts 路 19k+ votes
    7y

    What's your plan? It all depends on your plan. Random answers or suggestions won't help you. My first suggestion (not random), is for you to build that plan before you make any other moves. You wouldn't think of sending your chopper into battle without one...REI is no different.

    14Reply
  • Turo Tales
    OP
    Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes
    7y

    @Joe Villeneuve

    Great advice.

    The plan is to make passive income with real estate and be financially independent. I'm completely open to how to do that.

    What would you do?

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI 路 Member since 2013 路 13k+ posts 路 19k+ votes
    7y
    Originally posted by @Turo Tales:

    @Joe Villeneuve

    Great advice.

    The plan is to make passive income with real estate and be financially independent. I'm completely open to how to do that.

    What would you do?

     That's not a plan...that's a general set of goals.  First you need to establish your financial "finish Line".  The financial goals that will allow you to do what you stated above.  The plan, is reverse engineered from your financial finish line, to where you are now. 

    9Reply
  • Patrick M.
    WI 路 Member since 2018 路 123 posts 路 69 votes
    7y

    @Turo Tales thanks for your service.

    @Joe Villeneuve is right about formulating a plan.  I haven't been here long but find Joe's posts very refreshing.

    In my area 150k would get you a down payment on 2-3 single family homes in B/B+ neighborhoods with good school districts. Probably closer to 2 homes with leftover money going towards rehab costs. Depending on your buy price you can clear 4-500/month on these homes after PITI self managing. So $1000 on 2. Not a game changer initially but reinvested you can continue to scale SFR. If that's what interests you.

    There is also your non RE life to consider.  Do you and your wife make good money? How much consumer debt do you have? Are you savers? Do you spend intentionally? Do you have/want children? How long before you want to retire? Do you want active or passive real estate?

    4Reply
  • Aaron Bihl
    Investor 路 San Antonio, TX 路 Member since 2017 路 344 posts 路 268 votes
    7y

    @Turo Tales  Not doubling down on Turo?  

    I started watching your videos about a year ago and now have 6 cars on Turo.  I appreciate the content!

    3Reply
  • Steve K.
    Denver, CO 路 Member since 2017 路 265 posts 路 234 votes
    7y

    @Turo Tales

    Curious: if you want to grow a passive real estate portfolio, why'd you sell rental #1? What made this a "bad" investment going forward? Why not "add" to it, instead of replacing?

    Yes, you free'd up $150k in cash....but you just suffered transaction costs, and created a taxable gain. (each could have been deferred if rental #1 is a decent long-term hold)

    Have you read about the BRRRR strategy? If you can accomplish some remodeling while serving in the military, It's one of the fastest ways to grow wealth...because you use a lot of leverage.

    1Reply
  • Account Closed
    Rental Property Investor 路 Brooklyn NY 路 Member since 2018 路 263 posts 路 469 votes
    7y

    Do nothing until you develop a plan.  Stick it into a savings account and educate yourself.  

    If I had a windfall of $150k today, I would split it up between:

    -  The market (Vanguard Total Stock Index)

    -  Real estate 

    -  Cash  

    -  Beer

    12Reply
  • David Pere
    Rental Property Investor 路 Springfield, MO 路 Member since 2016 路 1k+ posts 路 890 votes
    7y

    @Turo Tales As it has been said above, you need to decide on long-term goals, develop a plan on how you intend to meet that goal, and then do your homework and start looking for deals. There are a ton of ways to invest that cash, depending on if you want to be completely passive, somewhat passive, or even an active fix/flip investor.

    1Reply
  • Turo Tales
    OP
    Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes
    7y
    Originally posted by @Aaron Bihl:

    @Turo Tales  Not doubling down on Turo?  

    I started watching your videos about a year ago and now have 6 cars on Turo.  I appreciate the content!

     Thanks for watching and subscribing. I hope it is still going well for you. 

    We are definitely going to keep going on Turo. We also want to replace the more passive stream of income that we received from the house that we sold. (Essentially Turo, but for houses ;o) 

    1Reply
  • Turo Tales
    OP
    Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes
    7y
    Originally posted by @David Pere:

    @Turo Tales As it has been said above, you need to decide on long-term goals, develop a plan on how you intend to meet that goal, and then do your homework and start looking for deals. There are a ton of ways to invest that cash, depending on if you want to be completely passive, somewhat passive, or even an active fix/flip investor.

     David, 

    We want to do what your company name implies. ;o)


    I would ideally like to use the money to set up one VR and another traditional in the same area to see how they compare. Obviously, being in the military takes a considerable amount of time. We probably can't become a full time flipper, but somewhere in the middle would be great. 

    What did you do to go from the military to RE?

    0Reply
  • David Pere
    Rental Property Investor 路 Springfield, MO 路 Member since 2016 路 1k+ posts 路 890 votes
    7y

    I'm still active duty @Turo Tales but I am primarily a buy and hold guy. SFR, multi-family, apartments etc.

    VR will make more money, but take a lot more time/effort.

    2Reply
  • Turo Tales
    OP
    Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes
    7y
    Originally posted by @Steve K.:

    @Turo Tales

    Curious: if you want to grow a passive real estate portfolio, why'd you sell rental #1? What made this a "bad" investment going forward? Why not "add" to it, instead of replacing?

    Yes, you free'd up $150k in cash....but you just suffered transaction costs, and created a taxable gain. (each could have been deferred if rental #1 is a decent long-term hold)

    Have you read about the BRRRR strategy? If you can accomplish some remodeling while serving in the military, It's one of the fastest ways to grow wealth...because you use a lot of leverage.

     Steve, 

    Great question. 

    We decided to sell because we anticipated several large repairs were going to happen in the near future. (Roof, Deck, Septic) We have no debt, but not a ton of cash to spend should they all occur simultaneously. We also wanted to go from 1 to more and thought that the cash would help us do that. Finally, we wanted to avoid the Capital Gains tax and were approaching the time when we would have needed to sell it. 

    I went back and forth on it for awhile, thought I would list it for a week to see what happens, and we received the full asking price within days. (Probably a sign that it was a keeper)

    The house was making us $450/month on a 15 yr loan. Adding to it would have been ideal. I probably should have found out about BiggerPockets prior to listing, instead of later.  

    I'll look more into BRRRR. Do you live in them at any point or is it akin to flipping?

    Thanks for the comment!

    0Reply
  • Steve K.
    Denver, CO 路 Member since 2017 路 265 posts 路 234 votes
    7y

    @Turo Tales

    BRRRR is a buy and hold landlord strategy. It merely adds a remodeling component. Check out podcasts.....several on BRRRR, including one where the BiggerPockets author speaks about his book on BRRRRR

    1Reply
  • Turo Tales
    OP
    Rental Property Investor 路 Fort Bliss, TX 路 Member since 2019 路 19 posts 路 18 votes
    7y
    Originally posted by @Patrick M.:

    @Turo Tales thanks for your service.

    @Joe Villeneuve is right about formulating a plan.  I haven't been here long but find Joe's posts very refreshing.

    In my area 150k would get you a down payment on 2-3 single family homes in B/B+ neighborhoods with good school districts. Probably closer to 2 homes with leftover money going towards rehab costs. Depending on your buy price you can clear 4-500/month on these homes after PITI self managing. So $1000 on 2. Not a game changer initially but reinvested you can continue to scale SFR. If that's what interests you.

    There is also your non RE life to consider.  Do you and your wife make good money? How much consumer debt do you have? Are you savers? Do you spend intentionally? Do you have/want children? How long before you want to retire? Do you want active or passive real estate?

    I make ~$90K. My wife doesn't work and we have 5 kids. (I think we're done making babies now) We have no debt and save pretty much only in my Roth IRA.

    I think SFR are the easiest and safest to pursue. I have been enamored with VR though and feel like they have more upside albeit with a higher initial investment.

    Being in the military complicates some things. I'll likely move in the next 12-18 months. Do I buy where I live, where I want to retire, or just find a good market someplace to invest?

    Should I pay cash for a house or split it up into a few downpayments?

    0Reply
  • Steve K.
    Denver, CO 路 Member since 2017 路 265 posts 路 234 votes
    7y
    Originally posted by @Turo Tales:

    The house was making us $450/month on a 15 yr loan.  

    Turo, I'd encourage you to re-analyze your last rental. Read up on Bigger Pockets. Check out the rental profitability calculators. I'd challenge you to really look at what the "cash on cash" return was for that house? It would have been higher with a 30yr loan and minimum down payment. (more leverage).....if you're comfortable with more debt.

    0Reply
  • Michael Ealy
    Developer 路 Cincinnati, OH 路 Member since 2018 路 1k+ posts 路 3k+ votes
    7y
    Originally posted by @Turo Tales:

    My wife and I purchased our first property in 2013 and just closed on the sale after renting it out for 4 years. We made $170,000 on the sale of the house.

    We want to invest most of it in real estate. I'm an Apache Helicopter Pilot in the Army (currently deployed).

    What has worked for you? If you could start out with $150K, what would you do?

    I'll continue to read the forums to seek knowledge & wisdom.

    Thanks!

     Turo,

    I am biased towards apartment buildings because that's how I earned my millions. I went from $0 to 1,000 apartment units.

    The cashflow is more and the capital gains is a LOT more. 

    There are 2 ways you can do it (given that you have a $150K capital to start with):

    1. DIY - maybe start with a small multi-family, a 4-plex and trade up as you gain experience and equity

    2. Done for you - you can invest in a syndicated multi family deal and earn 5-8% yield on your investment AND get 30% profit share without you doing anything (truly passive income)

    1Reply
  • Alex KhanPro Member
    Specialist 路 Southeast Michigan 路 Member since 2015 路 300 posts 路 244 votes
    7y

    @Turo Tales Buy 3 properties for 150 that will appraise for 200k+ would be the first move if going sfr. Flip or cash flow them refinance repeat.

    248-979-8119
    0Reply
  • Cory CarlsonBusiness Member
    Real Estate Broker 路 OR 路 Member since 2018 路 311 posts 路 226 votes
    7y

    @Turo Tales

    Go pay your taxes 馃榿

    In all seriousness, it depends on your goals, risk tolerance and time horizons...

    503-222-0282
    Constant Commercial Real Estate Inc543 Reviews
    WebsiteView Page
    0Reply
  • Jeffrey Bower
    Member since 2019 路 94 posts 路 50 votes
    7y

    Is your current rental property SFH or multi-family? Maybe look into a small multi-family unit, like a duplex or 4-unit building, for instance. ...And I just realized Michael Ealy said it for me. But I agree, look at what works for you and plan accordingly.

    0Reply
  • Kip Lynch
    Member since 2019 路 2 posts 路 2 votes
    7y

    @David Pere

    Apologies for my ignorance, but what does VR stand for?

    2Reply
  • Antoniella Ranga
    Investor 路 Toronto, ON 路 Member since 2016 路 10 posts 路 13 votes
    7y

    I second @Michael Ealy 鈥榮 advice.

    If I knew just two years ago what I know now, I would buy more doors under one roof, not just duplexes.

    Keep listening to podcasts, get a mentor (who鈥檚 in multi-units?) and keep building your risk muscles...

    Good luck!!

    2Reply
  • Jenny Sung
    Member since 2019 路 3 posts 路 0 votes
    7y

    @Turo Tales depends on your stratgey, however, to defer taxes, you could do a 1035 exchange and reinvest.

    0Reply
  • Bruce C.
    Seabrook/Galveston 路 Member since 2018 路 274 posts 路 178 votes
    7y

    @Turo Tales was the home you just sold in El Paso?  Do you have any idea where you are being transferred?  

    I鈥檝e been tempted by the multi families available in Killeen. They seem to have a solid rent to price ratio. I鈥檓 just worried about buying too far away right now. I think you could find 1-3 du-4plex in killeen that wouldn鈥檛 need a big remodel with the cash you have and doing 30 year loans. 

    For instance, just with a quick glance:

    https://www.har.com/u/8DEb9446...
    https://www.har.com/u/193954ed

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges 路 St. Petersburg, FL 路 Member since 2013 路 9k+ posts 路 9k+ votes
    7y

    @Turo Tales,  It's your journey but after reading where you're at I'd say "trust your gut"!!  Well done!!!  

    @Jenny Sung is on the right track with her suggestion of using a 1031 tax deferred exchange to move your portfolio however and wherever you choose.  The power in the 1031 is that you can sell investment property and purchase any other type of investment property anywhere and defer payment of tax and depreciation recapture on the gain.  In your case that would have freed up $20K - $30K for you to reinvest for your benefit.

    Unfortunately the 1031 must be started prior to the closing of the sale of your old property.Once you have closed and received the proceeds you can no longer do the tax deferred exchange.  Tagging @Johnny Quilenderino another active serviceman whos made a killing using 1031s to invest where he's stationed and then again to consolidate his portfolio.  Johnny's got a great story.  

    The 1031 Investor5137 Reviews
    WebsiteView Page
    0Reply
  • David Fairall
    Salt Lake City, UT 路 Member since 2019 路 42 posts 路 30 votes
    7y

    @Kip Lynch VR= Vacation Rental

    3Reply
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