Hi Investors! This is my first post:)
I'm curious to get expert input on what I should do in my situation. I live in Austin, TX and I own two homes in the two highest average annual appreciated zip codes (78702 - 12%, 78721 - 11%).
I bought my first house in 2013 for $180k. I owe $133k on it currently. It is worth around $290k now. I lived in it for 2 years, but it is now rented and cashflowing $400/month.
I bought my second house in 2016 (primary residence) for $300k, put a bunch of work and about $34k into it to make it nice and convert the detached garage into a 1/1 little house. It is now worth about $450k. I live in it, but rent the back house on Airbnb - I'm cashflowing on average about $900/month plus I live for free.
I'm in a very good position for age 28, but I want to keep investing! I went from full time elementary school teacher, to part time to focus on my property management and open a small business. This makes it really hard to get a loan or to even cash out refinance because they cant count a lot of my income.
My question is: How do I best use this equity? Or if you think I should let those properties be, how do I continue to obtain properties with such a perceived high DTI ratio?
I hesitate to sell my initial property because it is cash-flowing and it is continuing to increase in value. In Texas, I cannot cash out refinance on a rental property, only a primary residence.
If you were in my position and wanting to build your portfolio, what would be your next step?
THANK YOU SO MUCH IN ADVANCE! This platform is so amazing:)
@Stephanie Douglass simply refinance to cash out the equity, then reinvest that into additional property.
It's not true you can't cash out refi a rental in Texas. I just did it.
That said, with those numbers I don't think a cash out refi will make sense...doubt it will cash flow if you lever up. You should sell before you lose the capital gains exclusion and put that money into something else with a better ROE. Yes I know easier said than done
@Andrew oh! Who is your lender?
Hi Stephanie, welcome to BiggerPockets!
I just did a cash out refinance of a rental property in 78721. Used RBank. I also have properties in 78702.
What's the lot size of the first one you bought? You might be able to build an ADU (small secondary home) on the lot. You could rent it out, or better yet sell it as a condo. You could probably build it for less than 150K, and sell it for over 300K. And sell the original home for almost what it's worth now. Or keep, and continue renting both units
@Stephanie Douglass I used Max Leaman .
@Stephanie Douglass I think a cash out refi makes a lot of sense. I own two duplexes about 800 sq ft each side in 78721. I am curious what are you getting for rent? When looking for a renter how do you market it?
@Joe Scaparra I just use Craigslist to market. It’s a 2/1 and I’m getting $1590/month.
Good to know I can cash out refinance on my rental! I might look more into that.
@Stephanie Douglass maybe look into a HELOC on your primary residence. This shouldn't impact either of your existing loans and should just give you a line of credit to use when you need it.
Congrats on being in such a great position in your late 20s! I recommend taking this to a few local lenders. I saw that @Andrew Allen mentioned Max Leaman. That's a solid place to start. However, it definitely pays to shop around, especially for what you're looking to do. I'll send to a DM with some other lender contacts in town.
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