Bought it right. Got equity. What's next?
It's been a long journey and I've finally arrived at the beginning!
-Jester Bobbity
TL;DR: I have ~$200K equity in my first (and only) multi-family. How do I get it out? And once I do, what next?
I bought a multi-family with an FHA in 2017. I owe ~$340K and I believe it is worth between $600K-$700K right now. The property makes about $5657 gross each month with minimal repairs and upkeep due to rehabbing it over the years (~$590/mo. Including all bills and property management fees) and the mortgage is ~$3200
Time for the next step. I want to someday be buying large apartment complexes and commercial properties so I'm not looking to manage anything myself. Buy, repair, hire a PM or a realtor and move on to the next big thing. My goal is to scale as quickly as possible.
As I see it these are my options and im looking for some advice/refinement that will help me move forward.
#1) What's the best way to get the equity out of my original apartments? Refinance? My current rate is 3.75% so I'm not sure how much I could get from an 80% LTV :(
I could sell it but that would mean a 1031 exchange. Rushing around trying to find a new property in 90 days doesn't give me time to wait for the right deal. My marketing plan takes half that long to start producing leads, let alone deals. And lastly, this is a property with some great cash flow! I'm really not eager to sell it given I can raise rents 3-7% a year in that area like clockwork.
#2) Once I get the 150K-300K equity out of my apartments what do I do with it? The way I see it I have three options.
a) BRRR - I can start acquiring properties that cash flow, pay me back on the refinance and keep doing that until I have the money to buy multi-families. The downside is (as far as I understand it,) this approach could take a decade or more since due to refinancing restrictions I can only do it once every four months or so.
b) Use it as 20% down on another multi-family. The trouble here is that, while I can get ten units immediately, once I do, I'm right back in the same boat waiting for appreciation and rental increases before I can buy the next one. Yes, if I buy right I can raise rents, rehab and maybe refinance to get enough out to do it again but I dont know if that's a reasonable assumption to make.
c) Buy more FHA properties. Since FHA allows me to buy a multi-family as long as I live in it for a year, and I have no problem moving each year, I can save the money and use it to buy a four-plex each year for the next five years. The trouble is that it seems slower. I don't know if it is, but it seems like it is. The lower interest rate on FHA loans and lower down payments would drastically increase my ROI but I don't know if that makes it a better idea.
In case you couldn't tell, I'm just a touch impatient :P
It's taken a while to get this far and now that I'm here, I'm eager to reach my goals.
So that's the landscape. What would you do if you were me?
Thanks in advance for the advice :)
-Jester