What do I do next?

Question

I'm in the process of purchasing my first multi family home, we're about a month away from closing.  Unfortunately the rent won't be high enough to pay the entire mortgage but it will pay more than half.

I'm always thinking ahead and my question is what is the best next step? I will have extra cash to use to purchase another multi family or should I look into a house that I can flip?  I know it depends on my goals but I'm still unsure which route I want to go.  I'd love to get some feedback on prior experiences and starting stories.

Engelo Rumora · Answer

@Fuat Bagsever

Hi Fuat,

There are so many high cashflow markets across the US.

Maybe look at purchasing another complex to offset your losses on the one you will closing on.

I have been down this road with my portfolio in Australia where I owned numerous properties hoping they will appreciate in value.

I have decided to not purchase a property anymore unless it is a heavy cash cow.

Just my opinion.

Thanks and have a great day.

Aaron Montague · Answer

@Fuat Bagsever

I would figure out how to get your investment to start making you money.

If the place is fully rented at market rates, I'd take the loss on the earnest money and back out of the deal. If you have a game plan to get this investment to make money month to month, focus on executing that part of your plan.

Michael Moikeha · Answer

Well, why not both? The greatest advise that I ever received was continue to reach for my goals, but take anything that I come across along the way. I may be looking for MF complexes, but if in my search, I find a flipper, why not!?! Or at least wholesale it.

Keep both options open, and as you go along looking for your next investment oppurtunity, let timing help find the answer.

Engelo Rumora · Answer

Look into SFH in the Midwest.

I am bias as this is my target market but if you do the work yourself and spend time building trust with the right people you can easily generate a minimum 20% net cashflow on your $100,000.

Thanks for reading and have a great day.

Kimberly T. · Answer

Fuat, that's great that you're buying a multifamily for your first property to live in.  As for the rest of the money you have, you have to decide what your goal is, and how you want to invest it.  My husband and I are looking for more buy-and-hold multifamily rentals, because we just want cash flow.  If you decide you want that too, you have to decide if you want to buy locally (and whether you will manage them yourself or hire a PM) or in other states (perhaps states that are more landlord-friendly than NY?).  There are lots of options for you, read through the forums here on BP to see what others are doing and then decide what your long-term goal is.

Fuat Bagsever · Answer

I guess to follow up on this question is what should I do next?  I have 100k that I can spend-what would you guys do with 100k today?  That is in addition to the home I am buying.

Nicole Holmes · Answer

I totally agree with Engelo - maybe it's the Aussie side in us.

Let it also be said- negative cashflow is going to be around forever- positive on the other hand is not.

Aaron Montague · Answer

@Fuat Bagsever

Ah, you occupying the home changes things.  This is most definitely an investment property.  You will probably being paying rent somewhere, it may as well be to yourself.

I'd look 3 years down the road as well.  When you move to your SFH, is the place you are buying now going to be a good investment?

Annunciata R. · Answer

Most of my properties that dont cashflow appropriately, significantly appreciate over time.  If you are not planning to live there more than three years investigate previous sales data to see if it is likely ro appreciate over time. If it is then you may consider selling it when you move out.

Fuat Bagsever · Answer

well my fiancé and I are getting married in August and we need somewhere to live.  In our market in Orange County,  NY the only place to get a property that will generate immediate cash flow would be a three family (which are either out if my budget and the ones in my budget are in a REALLY BAD area).

This is our first home that we are buying for 180k.  I understand that your primary residence in a liability and not an asset but we do not plan on living there longer than three years.  Our plan is to live here and have the rent help pay the mortgage while continuing to invest.

@Aaron Montague  I guess we can't call this an investment right this second but my thought process was that it's a good building block, please correct me if I'm wrong

@JOAN DICKIE the property will not create cash flow for a few years, when we move out into a single family home in about three years.  I figured it's better to start here with having someone help me paying the mortgage while I start to invest elsewhere and it will ultimately create cash flow.

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