Advice on Expanding After Owning First Rental Free & Clear

[Brandon Yanssens]

Hey everyone,

I currently own a student rental house that I’ve managed for the past 3 years. It’s held in an LLC, and I have 100% equity in it (no debt). The property has been stable and cash-flowing well, and now I’m looking to expand into more units—ideally an apartment building.

I’m curious how others would approach this situation. A couple of questions I’ve been thinking about:

• Would it make sense to use an FHA loan to acquire another apartment building while keeping my current property free and clear?
• Or should I look into pulling equity out of my first rental (through a cash-out refinance or HELOC) and using that as leverage to purchase another apartment building? Or do both?
• Timing-wise, is it smarter to secure financing on the next property first and then tap into my existing equity, or the other way around?

I’d love to hear how other investors have handled this type of situation. What routes would you take to scale from here?

Thanks in advance for any insights.

[Travis Timmons]

Get the FHA or conventional loan on the next 2-4 unit house hack property while you have no debt on the first rental. A refi on that would count against your DTI, which is always the biggest obstacle for investors going from their first to second property or house hack. If you want to refinance the paid off property after that, you have DSCR loans as an option if your DTI pushes the limit.

And if you want to keep the free and clear property paid off, that's okay too. Life does not exist on a spreadsheet. It's really nice owning a paid off property and having that stability.

Nice work...keep that snowball rolling down the hill. I'm of the opinion that you do not refinance the first one until you are ready to take on the next deal. If you have a 3-5% down payment for a 2-4 unit house hack without a refi/HELOC, buy property #2, stabilize it, and then save that cash out refinance until when you are ready for property #3.

Feel free to send me a message if you want to discuss further. I am happy to help and have nothing to sell.