Am I on track in using my heloc and cash?

Question

Just wondering if there is a better way to do this or am I doing it "right"? I have 3 SF's and will close on another this week, in North Carolina. We bought these in 2019.

Property 1 traditional finance

Property 2 paid cash

Property 3 traditional finance (couldn't cash out refi one above fast enough)

Property 4 paying cash (this included the cash out refi money from property 2 plus a heloc from our primary residence)

Our goal is to have 12 doors with a cash flow of $200 per door for a total cash flow of $2400 per year within 4 years. So we need 8 more doors.

After we cash out refi the property number 4 we will have about $110,000 cash (including $35000 from our Heloc) We were planning to use that to buy another Sf in cash, and continue to cash our refi that until we have 4 more SF's and then the last time use the cash out refi money to put a down payment on a 4-plex.

The only other option I can see at this point is to use the money for an 8-plex.

Is this the best way to use the cash and keep it working for us? What am I missing? Any other ideas????

Jaysen Medhurst · Answer

I don't know your market, @Heather U., but I would look for a 5+ unit building where there is value-add opportunity. You definitely want to go 5+ so you can force appreciation. Perhaps you put down $75k and use the other $25k for renovations. Ideally, you're creating enough value to refi in a year or two and pull out your initial investment. This is basically "big girl BRRRR."

On a separate note, I would seriously consider disposing of those SFRs and using a 1031 exchange to get into this or another 5+ MRF. Best to use all your capital/equity to get into the best possible property to meet your goals.

Heather U. · Answer

Thank you Derek and Jaysen. I hear what you are saying. Why keep monkeying around with Sf's? I can't see how to work out the cash to go immediately to a multi. So I have around $100,000 cash. Do I look to buy a 4 plex for $50,000 down and another for $50,000 down. Or I could do a bigger unit and use the entire chunk as the down payment. At that point then the money is gone and we are done buying houses. Which I guess is ok if we hit our 12 door mark. With the Sf's I am able to rinse and repeat and can continue buying. Just trying to process this. Thanks for your thoughts!! Appreciate help!

Derek Harris · Answer

Heather, if I was in your situation, I would skip the SFR and go straight to MF. As long as the numbers still make sense after the cash out refi, then I see no issues.

Heather U. · Answer

@Jaysen Medhurst thank you Jaysen. Will look into the option of selling the Sf's to roll into Mf's. Thanks for your thoughts!!

Heather U. · Answer

Bumping hoping for more opinions PLEASE!!!! Trying to figure out how to stretch our cash to get the most doors until it runs out!

Heather U. · Answer

Bumping hoping for more opinions PLEASE!!!! Trying to figure out how to stretch our cash to get the most doors until it runs out!

Heather U. · Answer

@Derek Harris and @Jaysen Medhurst

Just learned how to tag people!! But my above post wouldn't let me edit it so just adding it here! Thanks!

Also, just a note, though I said I'd like 12 doors and that is our goal, if there is way to keep rolling the money and keep buying, I could see doing that!! That is why the SF's are appealing I guess. Thanks!

Jaysen Medhurst · Answer

If your goal is 12 doors, I don't know why you're wasting your time with one SFR at a time, @Heather U. A larger MFR will have a lower per-unit purchase price and you'll start to see efficiencies of scale and be able to force appreciation. Scale up and get there this year.

Am I on track in using my heloc and cash?

Am I on track in using my heloc and cash?

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