Decisions, decisions. Please help!

8 Replies

Hello everyone, 

My name is Tanner and I'm trying to make a decision that is greatly going to affect my future as a real estate investor and lifestyle but don't have much experience! Any advice or help would be great. I purchased a house a few years back in Tucson, Az and I owe 245k on it now and It currently cash flows about $600 a month. It is a great property that's located in the best school district and in a new area where multiple developments are coming in within the next 2-4 years. We rented it out for a year as I left to go work overseas. The renters will be out in Aug and I'm considering multiple options with it but struggling picking the best option. My end goal is to be able to come home and start a family with my wife. Years of working as active duty and overseas as a contractor is not something I want to do much longer. 

Option A: I could sell it in Aug for a good profit around 85-100k. Use that money to finance other real estate investments. I would lose the $600 a month and potential gain of the house but gain multiple properties over the course of the next few years. I also think that it is a specially unique time in Tucson for the house being worth this much and am speculating it won't be this high for quite some time. 

Option B: I can cash out some of the value in the house and still keep the property. I can cash out about 45k for only about $100 more added to my mortgage payment. With 45k I think I can do two maybe three investments using my VA loan for one of them and a short term vacation rental for another.

Option C: Something you guys know that I don't haha

Thanks for taking the time to checkout my post and I appreciate any advice!


Tanner

Hey Tanner, the good thing is that you cant go wrong with either option. I would only sell if you are sure that you can find a better return on your $. Option B seems like the best option in my opinion but everyone has different end goals. Whatever you do, make a decision and go 100% into it!

Hi Tanner, if your tenants are good tenants and are taking care of the property and paying rent on time, then I'd suggest Option B. 

Good tenants are generally harder to find than keep and $500/mo cash flow (after your mortgage increases) from one property is nothing to scoff at!

What I might suggest is using the $45k from Option B to purchase a duplex so you can start a family on one side and rent out the other. 

You may find that your personal living cost ends up being next to nothing or you start cash flowing on a second property.

@Tanner McKinley

I definitely now how you feel being overseas and investing I deployed a couple of times in the army.

But I would definitely go with option B! Pull your cash out take advantage of the low interest rate and buy a couple more properties!

Hopefully all goes well! Im up in PHOENIX if you ever need anything feel free to message me!

Hello Tanner and everyone, 

I would say if your future goal is to start a family then the next thing would be to figure out what your financial independent  number is. You seem stuck between having monthly cashflow and growing your portfolio, that why commercial deal or another assets class that has higher cash flow might be ideal to meet both of your goals. Wish you luck

Hey Tanner! Great post, I currently live in Tucson and am on Active Duty so I know the struggle. Honestly, if I were in your shoes I would go with "Option B". I say this because with the VA loan you can get an adequate house for your family since it has certain requirements to meet and you do not need to put any money down which frees up your capital to go to "work". It also allows you to keep your cash flow property working on making more capital. The Vail school district is the best one in the city and is prime for growth opportunity so I imagine your property will appreciate quite a bit in value as long as you hold onto it. I have looked into getting a duplex myself and they are few and far between in this market or in less than desirable areas. Good luck and let us know what you decided to do.

@Tanner McKinley I think Option B is the better option keeping in mind you are currently a contractor and returning to the states I assume shortly and it sounds like your Tuscon property is a nice class of rental that will retain its value. You can only use the VA loan for Owner occupied so depending on where you settle it may be more of less possible to get a duplex to leverage the VA for investment purposes. One consideration If you plan to go back to some areas is to look for something on VA loan with a legal ADU possibly also suitable for STR.

It is hard to envision 45k spreading across 3 properties in decent areas but there are places.  How certain are you on the value?  I am not sure what is happening in Tucson but I bought a property outside phoenix in 2016 and value has gone up 100k on refinancing so know your numbers. Also this might be a point where you decide that you are willing to drop the cash flow from $600 to $300. Make sure you have good reserves as well.  Good Luck


Some thoughts: 

  • Currently you qualify for the owner for having owner occupied at least 2 of last 5 years.  I did not see anyone point this benefit of selling out.
  • Did you profit include selling costs.  If you are not a real estate agent you should allocate ~8% to 20% to agent fees, closing costs, and anything small items needed to obtain top dollar.
  • Not sure why if you want to continue investing in RE why you would want to sell with associated expense except to take advantage of 2 of 5 rule.

Good luck

Updated about 1 month ago

8% to 10% for selling costs. Had a fat finger typo.

@Tanner McKinley Tanner probably I am little late on response, and you may already have made the right decision. But for the sake of the forum and future reference, I would pick option B. With rates being so low, VA loans are lowest of all and no down payment, you cannot beat that. I would say take an advantage of VA loan and play your option. All the best.