Next step in real estate

[Madhan S.]

Hi,

I have a general question.  Over the past 15 years, I have acquired many buy-and-hold single family homes and one 4-plex.  Usually I buy 1 house per year but recently noticed that I don't have as much appetite for single family homes due to the work involved in getting loans and meager cashflow, expenses, low return, etc etc.  I am in a tech job that pays well and funds the down payment and mortgage very well.  But I can jump full time into real estate if necessary and I think I would like that.  The cashflow from rentals can support my life style and family expense fully.  I would like to grow my portfolio/business, but not sure what is the best approach since I have maxed out conventional loans.  

I am in a high price area where there are not many rentals with any cashflow and I don't like betting purely on appreciation.  Don't mind moving to a different part of the country for cashflow property investing.  Also, I don't like syndication (LP's) and would rather be an active participant in real estate.

Should I sell some of my rentals?  Should I buy multi-family?  Should I go for apartments out-of-state?  Should I buy a business in real estate (PM, brokerage, contractor)?  What is the next step?  Appreciate any guidance!!

[Melissa Justice]

@Madhan S.,
Thanks for the thoughtful background -you're in a strong position, and it’s clear you’ve built up a solid base over time. Your challenge is very common for investors who hit that "second stage" of growth: you’ve proven your model works, but it’s no longer scalable or motivating under the same terms. Let's walk through your situation and some strong next steps based on your goals and constraints.

Where You Stand:
Portfolio: 15+ years of buy-and-hold SFRs, one 4-plex
Financing: Maxed out on conventional loans
Lifestyle: Tech income funds investing; rental income can support your family
Goals: Scale portfolio, become more active, increase returns, potentially go full-time
Constraints: Don’t like low cash flow, tired of financing hurdles, not interested in syndication, want control

Strategic Objectives:
Given everything, your best path forward is likely one or more of the following active real estate investment strategies that are scalable, higher cash flow, and do not rely on conventional loans.

1.  Move Toward Larger Multi-Family (5+ Units)
Why: These qualify for commercial loans (no limit like conventional loans), are easier to scale, and cash flow better per unit.

Where: Consider landlord-friendly, cash-flowing markets like in the Midwest and Southeast and some parts of the Southwest like New Mexico or Arizona (if not overpriced)

Next Steps:
Partner with an experienced property manager in one of those markets.
Start underwriting small 6–20 unit properties.
Get prequalified for a commercial loan or local bank financing.
Consider seller financing or creative terms.

2. 1031 Exchange into Better Assets
Why: If you’ve had strong appreciation, selling low-cash-flow SFRs and trading up into MF or commercial assets can drastically improve returns and simplicity.
Bonus: 1031 helps avoid capital gains and depreciation recapture.
Ask: “Which of my SFRs are most equity-rich but underperforming?”

3. Explore Mixed-Use or Commercial Real Estate
Especially appealing for investors seeking more active roles and better returns.

Niche commercial real estate (small strip centers, offices converted to residential/mixed-use, etc.) can cash flow very well and be more stable with long-term leases.

4. BRRRR in Affordable Markets
You could BRRRR small multifamily (2–8 units) in cheaper markets with less capital, especially since you don’t need W2 income to live.

This works well if you’re willing to spend 3–6 months intensively working with contractors and lenders in a focused market.

5. Buy or Build a Real Estate-Adjacent Business
If you enjoy the business and operations side, consider:
Property Management Company: Especially if you build a small multi-family portfolio in a single city. You'll control tenant experience, costs, and can service other investors later.
Brokerage (with investment focus): Could be worth it if you want to create cash flow plus deal flow and equity in projects.
Construction/GC firm: Only if you love renovations and are hands-on. Otherwise, don’t let this become a headache.

Should You Sell?
Yes - but selectively. Sell low-cash-flowing SFRs with high equity and low depreciation left.
Keep those that are still cash-flowing well or have low leverage.

Use proceeds to:
1031 into better assets
Pay cash for smaller multi-family
Fund a small BRRRR project or business

Suggested Game Plan:
Pick a target market out-of-state where cash flow is strong and landlord laws are favorable.
Interview PMs and lenders to start building your team.
Sell 1–2 underperforming SFRs (or do a portfolio analysis to find which).
1031 exchange into 5–20 unit apartments or small commercial in that new market.
Decide on your "platform": Property mgmt, rehab firm, acquisitions, or investment-focused brokerage.

Tools & Tips:
Use cost segregation studies if you haven’t already to accelerate depreciation.
Explore DSCR loans or commercial portfolio loans to avoid personal DTI caps.
Run portfolio reviews yearly to assess performance and equity growth vs. cash flow.

You’re in an ideal position to go from “builder” to “optimizer + scale operator.” The next moves should focus on fewer, larger deals with better cash flow and scalability.

Always here to chat more about specific markets or run deal scenarios side by side!

Best of luck,

Melissa