$175k in equity, cash flow, and I STILL don't know my next move

5 Replies

Hey all just wanted to get your opinion. I'll make it nice and easy.

9 units stretched across 2 properties. 100k in equity in one, 75k in equity on the other. My wife and I bought these FHA.

The original plan was to buy two rentals with FHA, refinance, then buy two more with conv. 5% (I've already consulted with a couple underwriters and they have confirmed we can do this as long as it's a major upgrade from our current living situation - please let's not debate this part lol).

Not sure if I should:

1. Sell and now use those funds to start the process over (Doubt I would sell).

2. Continue with the plan

3. Go with an alternate plan which is to break into a cheaper market near me and use the equity as down payment via heloc.

4. Or just do all the above lol

What would you do? 

You mention the equity in each property, but not the net rental income. I'm not sure how you can buy two new homes at the same time with a FHA loan (I thought you had to live in it to get a FHA loan). If they are cash flowing and in good condition, I'd keep them and buy another property.

By cheaper property, I am assuming you mean going into a different class of neighbourhood.  If that's the case, I'd think about the type of tenant you are likely to get.  Cheaper homes often attract a different type of tenant than a home in an established area.

@Austin Smith personally you should sell everything and scale up to larger properties with more units. The reason I say that is because one costly repair to a sfr (plumbing line, hvac, water heater, etc.) could ruin your cash flow for an entire year which then means your investment breaks even or is a loss for you (not great when we need time to compound returns). However, you should figure out what your family needs and goals are then figure out what investment makes sense for you. For example, if you live off the cash flow generated by your current assets then you might not be able to sell them right away. Good luck.

I have similar questions. I wonder if there is a webinar or podcast or something that helps with all the "how do you know if you should sell"-type questions. I'll be watching other answers here! Good luck.!

Originally posted by @Danny Randazzo :

@Austin Smith personally you should sell everything and scale up to larger properties with more units. The reason I say that is because one costly repair to a sfr (plumbing line, hvac, water heater, etc.) could ruin your cash flow for an entire year which then means your investment breaks even or is a loss for you (not great when we need time to compound returns). However, you should figure out what your family needs and goals are then figure out what investment makes sense for you. For example, if you live off the cash flow generated by your current assets then you might not be able to sell them right away. Good luck.

 They're both 3-family properties. 

When I move out of the unit I'm living at currently, $2,500 will be the monthly income. 

The honest 1st tier goal is 10k net cashflow. 

Average net cash flow per property I buy is about 750-1000.

Hey @Austin Smith , I think you are doing just fine with Option #2

Think about it for a sec, you pull out this equity and your monthly mortgage payment goes right up?

Don't get me wrong, I think the BRRRR strategy is great but if you are cash flowing just with what you have now, why pull out equity unnecessarily?

Unless I am missing a crucial part of the situation here. If not, I'd say keep going and amass more equity and principal paydown, then scale up.