If you have $400k cash, and a all paid off $800k Single family home. How would you invest those money?
Depends on your investment goals/objectives, risk appetite & whether you wish to be active/passive. You can do a lot with $400k and build a diversified portfolio - options range from SFR, MFR, flipping with value-add, buying land and developing, going out-of-state, to commercial syndicates on the other end of the spectrum.
If no prior expertise in real estate, then stick to simple - SFR w/ value-add (in your home market or out of state) & commercial syndicates, gain experience & knowledge and chart your path forward.
All the best!
Seconded Amit - if you can get specific about your skills and desires I’d be happy to get specific about what good options would be in my experience. Cheers!
I'm just starting out as a real estate investor. I'm looking for more of a long term passive cash flow. Although I am definitely interested in commercial syndication. But just like Amit said, I do plan to dabble my feet in small multifamily first. I am looking for a way to invest the money I have in a efficient way. Besides the $400k cash, would it make sense to take out a HELOC or HE loan on the $800k property, that way I can leverage more?
Hi @Hon Ching Lai ,
It definitely doesn't hurt to pull a HELOC on the $800k property. You wouldn't be incurring any charges or interest unless you draw from the actual line of credit. Thus, it's there if you need it, but doesn't have to be touched.
Looking for a small multi-family that cash flows will be hard in the Seattle area. Aside from that, within Seattle city limits you need to be aware of the rental laws. If you look further north and south than Seattle itself, you can find some properties. What your actual criteria and strategy is would dictate the type of property, condition of the property and location.
I've had success with cashflow rentals in Seattle by getting off the beaten path- there are established investors bidding up the price (and therefore bidding down the cap rate) on many small multi-families, but those same investors are not going after large 6-9 bedrooms SFHs that you can rent by the room to young professionals and college students. Most are also are not establishing STRs, especially now that Seattle regulations limit most families to just 1 Airbnb/STR outside their primary residence.
I'm in Seattle, and have two rentals currently returning double the average Seattle CAP rate. Feel free to send me a message if you have more questions or would like to chat over coffee. Cheers!
@Michael Haas has a good suggestion about single family homes with many bedrooms to rent out individually. I did pretty well with a 6-bedroom "boarding house" in Seattle for many years, providing low cost housing for students and young professionals getting started and trying to save. I could have been charging quite a bit more. However, I believe Seattle still limits the number of unrelated roommates to 8 per SFR. Not a bad idea to buy something close to any of the universities where you can find a way to add bedrooms.
@Jared Boundy good point about the max unrelated occupancy per unit in Seattle. Practically it hasn’t come up for me much- the only times I’ve had more than 8 was with some members of the same family and / or married couples in double occupancy rooms.
What about the BURRR strategies in Everett, Renton, Tacoma areas? Are those limited by the Seattle regulations?
HELOC - Yes, it's never a bad idea to have a line of credit established. Whether you use it or not is up to you. It can come in handy to fund value-add projects for short-term periods.
Also before you decide on SFR / MFR, look at the numbers and let them guide you. I think your best bet is to find an investor-friendly realtor ("investor-friendly" is important) who can help compile some numbers for current deals on MLS. You may also be able to pull this yourself from realtor.com (choose Property Type=Multiplex or SFR). There's very good Excel sheets available on BP where you can plug in your numbers to understand all the key metrics like Cap Rate, Cash-on-Cash, IRR etc. As another poster mentioned, be very aware of rent control laws and know what you are getting into if acquiring MFR that is occupied with tenants.
Hi @Hon Ching Lai ,
Those areas are not limited by the same rules as Seattle city limits. The BURRRR strategy works just fine anywhere, they key is to find a property where the numbers work. The rental portion of the BURRRR strategy is what I'd be cautious with within Seattle city limits.
Agree. As long as the ARV is high enough compared to what you're putting into the deal, it doesn't matter where you are.