I am seeking advice on my current situation. I currently have 2 rental properties both of which are the result of me moving for work after purchasing a home to live in. I purchased both of the homes with renting them out as a backup plan. I use property managers for both properties and have grown to love the real estate business.
I would like to scale my real estate investing portfolio with the overall goal of generating cash flow. I recently moved to College Station, TX for work, I am currently renting with a lease ending 12/9/2017. I am interested in buying single or multi family homes in my current area.
Home 1 - Littleton, CO - 2 bed 1 1/2 bath town home with garage - Purchased 7/2013 for $150k - Current Mortgage $138k 3.75% int- Current Value Approx 250k-270k - Renting for $1650 per month with a month cost of $1211 (not including repair of cap budget.) - Lease ending 6/31/2018 - Good Neighborhood B+
Monthly cashflow $439 - Estimated proceeds of sale = +/- $100k
Home 2 - Friendswood, TX - 3 Bed 2 bad single family with 2 car garage - Purchased 9/2015 for $155K - Current Mortgage 142K 4.35% int - Current Value Approx 175K - Renting for $1650/mo with a cost of 1401/mo (not including repair of cap budget.) - Lease ending 5/31/2018
Monthly cashflow $249 - Estimated proceeds of sale = +/-20K-Good Neighborhood B+
*This property currently has a escrow shortage due to rising property taxes. This shrinks cash-flow to $106/mo for the next 12 mo.
I can raise approximately 50K in additional capital. I have excellent credit and low debt.
1. Would it be worth it to sell both of those properties to get the $120K and turn that into additional investments?
2. Does it make more sense to take all 170K I can gather and purchase a well researched multifamily and live in a unit or look to purchase multiple properties to limit risk?
3. Finally should I hold my current properties until they reach a certain bench mark?
In summary I respect the wealth of knowledge in this community and appreciate the advice and wisdom of more experienced investors.
I would be happy to meet with you and explore some options and give you insight to what I have done via 1031 and moving from Austin to College Station - if a meeting is of interest to you - Contact me off forum and we can arrange!
Some thoughts that might help with your questions:
- If your equity can get you a higher return elsewhere, maybe it's time to shuffle money around. (Eg. You've got over 100K tied up in the CO home, and making ~5k/yr cash return... Can you find new investments today that can give you more than 5k/y cashflow for your 100k? (This math is oversimplified - Realize there are other factors like appreciation, principal pay down etc. that contribute to full ROI).
- Have you looked into refinancing vs. selling off your existing places? This gives you access to cash without letting go of your portfolio. You are not taxed on the money you borrow - you are taxed on the profits if you sell.
- I don't think you need to "take all $170k out" to buy a new multi-family property. I say this because the cashflowing duplex/fourplexes in B/CS area seem to be around 200-300k purchase price. You shouldn't need that much capital to buy these. Unless you're looking at 5+ units?
- Any big decision you make should relate directly back to your goals. If it's cashflow, go get it. If it's a certain number of properties, go get it. If it's fully paying off your properties, go do it. Everyone i've talked to has a different benchmark for when to sell properties - usually the time to sell related back to what you're trying to achieve in the long run.
Would love to chat more. Message me directly and maybe we can chat over the phone. Would love to hear where you are looking in BCS and we can compare notes.