Trying to figure out best way to invest in RE

2 Replies

Hello fellow BP'ers,

I currently own two single family homes that I'm renting. I bought the first one about 14 months ago and the 2nd one just 3 months ago. It's been a learning experience, but I have decent positive cash flow, so all is well. 

I'm also in the process of hopefully buying a triplex. I should know later this week if my offer will be accepted. 

Let's say I can get this triplex. It's currently rented and I'd have positive cash flow. 

This is how I've done it so far. With my first rental, I took out a small HELOC and was approved for $30K. I used about $19K of it and a bit of money out of my pocket to pay the down payment and closing costs on that first house. I put 25% down. I hadn't found or heard about Bigger Pockets while doing this.

With my 2nd home, I closed on 12/1/17. I paid a 20% downpayment using savings to do so. At that time, I still hadn't heard of BP. 

Roughly a month or so ago, I heard about BP. I have read two of @Brandon Turner books, I've watched a bunch of podcasts and webinars and I'm a Pro member. 

With this triplex, here is how I'll get it if it works out. Or, this is the plan at least. I'm retiring from my job in a week. I'll get a pension.  

I have a 457 plan and once I retire, I can cash out of that. For the triplex, I have to put 25% down. I'll use this 457 money, after they withhold 24% in taxes of it, to pay the down payment.

Here is what I'm wondering as I plan to move forward. 

I'm going to work PT and my wife also works FT.  We can keep saving up money and in a year or two, we could buy another single family home. And, we can keep repeating this. 

Multi-family homes in this area are sort of rare to find. As of this moment, I'm not ready to buy out of my area. I do want to get and read @David Greene 's book on investing via long distance. I'm retiring from being a police officer, so perhaps I can follow in David's footsteps. 

I'm also debating doing this. 

My personal residence is fully paid for. It's probably worth about $185K. I do already have the $30K HELOC and it has a balance of about $10K due on it.

Do I try to get a larger HELOC? If I did, I could use that money for more down payments on rentals.

I've always been frugal and the only risk I take, besides my job, is investing in stocks, which I don't find risky. I've returned around 17% since 2005 on buy and hold long term quality companies. I find it easy. Real estate is much more work than investing in stocks. But, so far, I love being a landlord. 

If I get a HELOC for 70% of the value of my personal residence, this seems risky. What if hard times are in my future and I struggle to pay the HELOC back. Could I loose my personal home?

Anyway, if I can get this triplex, I'll have 5 doors. I'd love to grow that to 10, then to 15, then 20 and so on. 

I do appreciate any and all comments, thoughts, suggestions, criticisms and so forth. 

Stay safe,

Mark

@Mark K.

How much do you need of the down payment on the triplex? Does it really require you to push your HELOC to 70%? I would use the HELOC first before the 457. I would wait on the 457 withdrawal until after you retire. Once you retire, your lower income and write-offs from rentals should reduce the taxes you pay on the 457. As a police officer, I would expect you'll have pension income which should provide you a bit of a cushion if times get tough.

@ Robert Carraway

I will need to put 25% down on the triplex.  Once I retire in a week, and get the 457 money, it will give me roughly 80% of the down payment.

I'll probably use a bit of my existing HELOC to get the rest of the down payment.

I could ask my credit union about increasing my HELOC so I could use that to cover all of the down payment. But, should I?

If I do, the 457 money goes into an interest bearing account and I can hold onto it so I have a larger cushion.

Yet, I then have to pay more back on the HELOC loan, so my really good positive cash flow will!l just be good cash flow.

I'll keep thinking on it.

Does anyone else have any thoughts?

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