Next moves after two rennovate and holds, built up some equity

Next moves after two rennovate and holds, built up some equity

Pittsburgh, PA · Member since 2008 · 68 posts · 3 votes

Looking for advice as to next steps as someone looking to eventually make a career out of real estate. 

Over the last two years I have bought and renovated two properties in a neighborhood in pittsburgh that has seen intense appreciation and have built up something like 225k in equity.

My current high level financials are: 

Own two properties, both mortgaged and rented

Conservative total market value of all properties: 550k

Combined debt on properties: 325k

Total equity: 225k

Monthly gross rental income: 3.4k

Monthly net rental income: 1k

I bought both properties on traditional non commercial mortgages and I have an 80k heloc alll factored into the combined debt number above. Neither of my properties is in an llc.

I'm 27 now and making decent money as a programmer but would really like to start transitioning more and more of my income to passive (or passivish) income. I'm really interested in getting into larger scale buy and hold deals, maybe apartments or commercial.

I'd like to hear hear what some more experienced investors might do in my situation to leverage the initial equity i've built up into some bigger deals. Should I be pursuing financing from major banks, smaller banks and credit unions, or more alternative forms. Are there any other alternative forms of finance that are inaccessible to smaller investors but may be available to me as I build capital?

Anything else I should be doing right now to be better positioning myself for future deals?

All advice is appreciated, especially if it comes along with a story of someone who has gone through some of this in the past.

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  • Contractor · Pittsburgh, PA · Member since 2014 · 885 posts · 359 votes
    10y

    @Andrew M. you're already at about 60% LTV on your property. You could tap a little bit more (~$55k) and be at the 70% LTV, which is the functional ceiling for mainstream lending.

    Are you open to other investment forms? (flipping, specifically).  You could use revenue from flips (funded with hard money) to accelerate the principal pay-down, which would allow you to create more equity in the property you currently own, and perpetuate forward ad infinitum.

    The only way to realize all of the equity in your current holdings is to sell them, which may or may not be a part of your long-term plan.

    Small tangent: $1k cash-flow is not bad for two units per month, as long as your already accounting for CapEx and maintenance. You could simply wait it out, and slowly build the capital to do something else, but I'm guessing that you want to go faster (two deals in two years is fast for a new investor who is self-funding).

    I'd be happy to talk to you about this with more specifics, if you have the time or the inclination.

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