Would love to hear some feedback on my scenario. I have a $150k that i have committed to my RE investments. I currently own over a dozen SFR in Long Island NY about 15 mile east of NYC. Things are VERY EXPENSIVE in my market, and I'm sure most of you will suggest I take that money and invest out of state (would love to but but still don't have the nerve)..I am buiilder/developer in Long Island so all my work is in the area which makes thing easier and efficient for me to manage.
Anyway this is my "dilemma", do i pay off 1 loan on a SFR i have in the amount of $150k therefore having one less mortgage in my name and increasing my net rent for that property by $950 per month? Currently its generating $615 per month and the loan amount is $950. Yes SFR in Long Island rent for big #s, this 1100 sqft property rents for $2700 per month!
Or do i purchase a legal 3 family building in same area for $550k putting down the $150k and finance $400k? This building would then generate me a positive cash flow in the amount of approximately $1500 per month, so essentially my net cash flow per month is increased by $550 per month.
Utilize the leverage and the banks money and put the d/p on the multi.
It really depends on your goals, where you want to go and what you see your market doing.
We got lucky and got started at the lowest part of the market. So to say we have been going through sticker shot is an understatement. To be honest its almost been a detriment because we have lost out on AMAZING deals because it was too expensive at the time but now great deals are even higher!
The thing that has helped me answer this question is sitting down and looking at our goals. Our goals is to own an empire to fund early retirement. Our current houses won't cut it. Our areas we invest still have a lot of potential so I made the decision to keep investing.
The interest rates are amazingly low so for us getting 4.5% and less debt has been amazing. We are young so leveraging as much as we can now is key.
That being said, I know there will be a time where we like you mentioned. Will stop buying and start paying off debt.
Only you know what strategy is best for you. The only piece of advise I can offer is don't get sticker shock (the old investor form of analysis paralysis). It might be expensive but the question is where do you see the market going. I am sure 2003 investors see sticker shock all day but those deals no longer exist.
if you think Long Island has good long term appreciation prospects (I imagine it does, but I don't invest there), plus you're basically leveraging your money by pulling cash out of existing properties, and you can get a fixed rate loan on that triplex, and it cash flows, to me it sounds like a no brainer.
I'm a newbie so excuse my question if it doesn't make sense. Could you possibly put a down payment on another property to generate some cash flow, pay off half your loan and then refinance. Therefore your paying down more debt and generating more cash flow.
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