Growing my rental portfolio

17 Replies

Looking to expand upon my rental portfolio.  I currently have one rental that I have owned since 06.  I have a very small mortgage with lots of equity build up.  It is in a sought after neighborhood, school district, etc..and produces serious cash flow ($700-800)/month.  Looking for opinions as to whether or not to sell this income property to use the large chunk of cash to move into multi family or hold onto it and find other creative means of financing multi family deal?  BiggerPockets thoughts greatly appreciated.

@Brooks Everline

I agree with @J Scott. Just refinance the property to buy more, because:

1. You get to keep the current property and the rent that it produces

2. Leverage will greatly increase your rate of return, provided you maintain positive cash flow

3. Inflation works in your favor when you have low-interest, long-term debt

4. There are costs associated with selling the property

@Brooks Everline  Refi away!!!!!

Look at it this way.  If you sell the property, not only does somebody else now get your cash flow, but you have to start all over again at square one...OK, you have a few more dollars than when you started...square two.

If you refinance, you get to keep the cash low (at a little less than now, but it's still cash flow) and you get the benefits of a sale by walking away with cash for your next deal(s).

Not knowing the actual numbers, I (or anyone else) can't give you any definitive result, but we can say without question you will be better off with the remaining cash flow and at least one or two additional cash flow properties.

Thanks to all of you who have responded..Greatly appreciate the insight and time!  Happy Investing 

Good morning everyone. I'm in the same boat as Brooks and I'm also new to the site. I have been wanting to refi my only rental to get cash for another deal but I have never refinanced a house. Being a newbie, I'm curious what's involved in refinancing and what I should figure my cash flow would be on it if I refinance. Can anyone give me some speculative numbers. My rental is worth about 115K. I owe 62K. It currently cash flows 700.00 per month. Is refinancing the same as a cash out? Thanks for any help. 

Hey Jake, the Refi most are referring to is cash out. The banks will have a percentage they will lend basedon the equity build up on the property. Process is like a new loan with closing fees etc..with higher monthly payment so in return lower cash flow.  I look for at least $350-400 per month cash flow including taxes and insurance on any property.  If I can't get that I won't do it. It's all about cash flow!  Look into a line of credit on the property.  They typically are low interest or interest only without closing and other fees.  

thanks. I'll check into it. 

HELOC are the best. Very low fees...say $100. Usually interest only for 5-10 years. Also, their underwriting standards are more lax and turn around is pretty quick. You can get the most cash out and have the lowest payment for the longest period of time.

Originally posted by @Eric Bowlin :

HELOC are the best. Very low fees...say $100. Usually interest only for 5-10 years. Also, their underwriting standards are more lax and turn around is pretty quick. You can get the most cash out and have the lowest payment for the longest period of time.

Hey Eric, thanks for chiming in. Question, would a HELOC make since if I'm buying another rental? I don't know much about HELOCs. Seems better for buying a flip rather than a rental. Am I missing something?

Best,

Jake

There are lots of ways to do anything.

I had a multi and paid it way down. I found a bank that would do a cash-out HELOC. They paid off the old loan and gave me a huge line of credit. I used that line of credit as a down payment on my next property which is more traditionally financed.

I bought another property to renovate with all cash using the line from the first. I got a HELOC and it financed 3 more purchases and a little on a 4th.

I just feel that the HELOC is a very powerful and flexible leverage tool. It's interest only so your cash-flow is much higher as well.

Originally posted by @Eric Bowlin :

There are lots of ways to do anything.

I had a multi and paid it way down. I found a bank that would do a cash-out HELOC. They paid off the old loan and gave me a huge line of credit. I used that line of credit as a down payment on my next property which is more traditionally financed.

I bought another property to renovate with all cash using the line from the first. I got a HELOC and it financed 3 more purchases and a little on a 4th.

I just feel that the HELOC is a very powerful and flexible leverage tool. It's interest only so your cash-flow is much higher as well.

Great info man. I appreciate the tips. Exciting! 

I agree with refinancing your rental to leverage funds. I don't know how much cash you put into your rental when you bought, but pulling your funds out could possibly increase your ROI percentage. Great move to increase your return while picking up an additional asset!

Cheers!

Medium bp north peak logoJeff Wallenius, North Peak Investments | [email protected] | 855.290.2444 | http://www.northpeakinvest.com

dont dump this one. just get another one. then another. then another.

Only problem I see with using heloc on a investment property is not many banks will do this. I have called around 10 banks in the New Orleans area and most want to do some type of commercial loan.

5042281389

i only know one bank that will do it and I have to own it cash before hand. They won't buy out another lien with it.

For me, I jumped from one building to the second so they were my personal residences at the time. I live in my own SFR now so it's more difficult.

I'm closing a 12 unit complex for around $1300 out of pocket next week. That includes getting my insurance started!

Here's a thread where I detail how I do my deals.

http://www.biggerpockets.com/forums/311/topics/125040-how-do-you-scale-your-business-so-quick

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