Got the money.....but don't know what to do

Got the money.....but don't know what to do

Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes

Hey BP peeps.  I've been investing in real estate for about 6 years now and kinda in a weird state right now.  I have been investing in single-family homes to triplexes for the last 6 years and 2 years ago purchased a steal of a deal on a 10 plex.  I rehabbed the 10 plex, upped the rent, and now did a cash-out refinance.  The amount of cash I can pull out is around the 120k mark.  BUT I've been looking around my local market, and markets further out, and can't seem to find a slam dunk deal to put the money towards.  I'm located in central MN, and have been trying to get into Fargo ND as it's been booming for the last 8-10 years, but the purchase price for property there is so high in relation to what you can get for rent it is almost disheartening.  I feel like I want to get into bigger apartment complexes (20 units+) that are value-add type properties, but nothing is popping its head out at me.  The only other thought I had was I could if I wanted to pay off my personal mortgage on my house (which is around $750 a month) with it and be "personal debt" free (but not "business debt" free).  I always go back to the theory though that I would rather pay for a nice cash-flowing apartment complex that could pay for my mortgage, so that at the end of the day when the mortgage is paid for I still have an apartment complex as well.  

A few notes to consider as well:  In my area, most of the time you make a limited profit on your real estate investments, if not at least break even (if you try to use as much debt as possible when you acquire the properties).  So my cash-flow at the moment isn't anything spectacular.

Any insight would be appreciated.  Thanks!

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Member since 2016 · 13k+ posts · 12k+ votes
9y

Be patient and stay where you are. There will always be another good deal coming soon.

Pay off your home mortgage and immediately apply for a interest only HELOC for the full value you can get to have at the ready.

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  • Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
    9y

    @Kyle Davis

    Have you considered investing out of state?  I live in New York and at the time investing out of state made more sense for me.  Since then I have remained an out of state investor simply because my funds go a lot further then they would by me.

  • Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
    9y

    @Kyle Davis - How about flying out a couple of hours. Eventually, down the road I want to get involved in commercial projects as well, and definitely plan to consider places that are couple of hrs from DC area by flight. 2 Hrs will get me as far as Chi-town to the west and Miami to south. 

    I believe that people who have no experience in real estate investing should try and avoid as far as possible investing far away, at the same time people who have some experience under their belt shouldn't shy away. 

  • Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes
    9y

    @Steve Kontos and @Chinmay J. I have considered going out of state.  I have around 26 rentals in my market at the moment so I feel I'm not a newbie anymore....but to be honest I'm hesitant as I don't know anybody/trust somebody at the moment and maybe I just need to get over it.

  • Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Be patient and stay where you are. There will always be another good deal coming soon.

    Pay off your home mortgage and immediately apply for a interest only HELOC for the full value you can get to have at the ready.

  • Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
    9y
    Originally posted by @Kyle Davis:

    @Steve Kontos and @Chinmay J. I have considered going out of state.  I have around 26 rentals in my market at the moment so I feel I'm not a newbie anymore....but to be honest I'm hesitant as I don't know anybody/trust somebody at the moment and maybe I just need to get over it.

    Maybe you could talk to some people here on BP to see what steps they took to alleviate their fears of investing out of state.  You will need a  team for sure, and you will have to trust them for sure. With having the portfolio that you have, I am sure you can tell when people are being less than honest with you. 

  • Rental Property Investor · Charlottesville, VA · Member since 2012 · 1k+ posts · 726 votes
    9y

    @Kyle Davis Be patient, and keep looking at markets close to you. Conditions may change and you may find a good opportunity. I would stay away from the out-of-state thing unless you find someone you really trust. As for paying off your personal residence only do that if it gives you a really good emotional benefit because that interest is an unbeatable tax deduction.

  • Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
    9y
  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y

    @Kyle Davis congrats on what you've manage to accomplish over the past 6 years.  Seems to me if you want to grow into the next phase of investing you may want to look outside of your backyard.  Continue to persist and you will win!!! Best of luck to you.

  • Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes
    9y

    @Corey Blane sent you a PM!

  • Investor · Victoria, MN · Member since 2016 · 93 posts · 31 votes
    9y
    @ Kyle Davis - have you considered partnering with another investor to break into the Fargo market?
  • Investor · Victoria, MN · Member since 2016 · 93 posts · 31 votes
    9y
    Corey Blane - I'd be interested in learning more about the properties you have available. Timing might not be ideal for me right now (closed on my first 2 this year already), but worst case it would be another connection. Let me know your thoughts. Craig
  • Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes
    9y

    @Craig Fitzsimmons Potentially, yes.  It all depends on the deal.  The majority of the deals I looked at in Fargo (and when I say majority, I mean I probably looked at 10-15) didn't have very fantastic cash-flow potential.  I looked at one that was for sale for $1,400,000 as a 24 plex and at the end of the year, with a 10% down payment, my cash flow would only be $10,000 a year.  I can achieve that in my local market at 1/4 of the sticker price.  That being said, I haven't been incredibly thorough in my search in Fargo.  I gave two phone calls to realtors as well in the Fargo market to hit me up with any deals and both of them didn't send me one.  Pretty frustrating!

  • Investor · Fargo, ND · Member since 2015 · 84 posts · 11 votes
    9y

    @kyle davis I live in Casselton but I consider Fargo home, and grew up near Staples. Fargo is a great market if you're in it for the long haul. "Good" deals are hard to come by, but it's a consistent market. By consistent I mean stable growth and relatively minor market swings. I'd love to chat about it sometime if you're looking for some insight. 

  • Fargo, ND · Member since 2017 · 29 posts · 15 votes
    9y

    @Kyle Davis I currently live in Fargo and am originally from Hawley. I'm down in Ottertail all the time in the summer for the lake though! If you PM me I could give you the contact info for the realtor I use in town. He is an investor himself and found me my last deal on an off market 4plex.

  • Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
    9y
    Ibn Abney I agree with what you said. Hello Kyle Davis I would consider looking into the suburb areas of chicago as well. Although it's kinda dry right now it's not uncommon to find deals that cash flow pretty well. South suburbs of chicago can definitely surprise you if someone presents a good deal to you. Also consider northwest Indiana its right next to chicago and deals are very good when the market isn't as airtight as it is now. If you need any help definitely shoot me a PM.
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    9y

    Congrats on getting to where you are, the next logical step is to gain more doors for cash flow and larger apartments are likely your best opportunity. Single family and small multis are totally blown out in price in most areas and you are likely set for bigger steps than that anyways.

    There is also something to be said about area diversification as well. Having your current units and then going elsewhere for more could also be beneficial however, I personally would only suggest that if you do larger apartments as they provide the opportunity for professional on site management that would elucidate some of the "trust issues" you face when doing out of state small multis and houses.

  • Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes
    9y

    @Will Barnard Thanks, Will, for your comments.  I've been leaning towards buying larger apartments in bigger cities.  The only monkey wrench that just recently got thrown into the mix is a very successful brewmaster friend of mine wants to open up a new brewery in my ho

  • Appraiser · Ottertail, MN · Member since 2016 · 53 posts · 5 votes
    9y

    @Will Barnard whoops...it got cut off.  My friend wants to open a brewery in my home town now and wants to make me a partner.  Gonna look into that in the next couple days and make a decision from there.

  • Investor · Everywhere, USA · Member since 2016 · 69 posts · 19 votes
    9y

    @Kyle Davis, so I am jumping into this pretty late. But have you checked out this book? I'm currently reading it and it sounds just like what you want right now. The author specializes in small to mid sized apartments and always talks about investing out of state. Check it out!

    https://www.amazon.com/How-Make-Money-Small-Apartments-ebook/dp/B00N57JBXW

  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    9y
    Originally posted by @Kyle Davis:

    @Will Barnard whoops...it got cut off.  My friend wants to open a brewery in my home town now and wants to make me a partner.  Gonna look into that in the next couple days and make a decision from there.

     Interesting. Let's see, beer or apartments? Beer or apartments. Ok, decision made, beer wins hands down!!!!

  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Kyle Davis I live in the Twin Cities and I have been investing out of state for nearly a year. I have been buying apartment buildings since June and love investing out of state. There are many good markets out there to invest in. Why sit on your thumbs when you can make money and increase your portfolio is what I decided. I researched a lot of markets for over a year and finally decided to take the jump.

  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Kyle Davis:

    I wouldn't pay off the mortgage;  maybe double up on payments, but not pay it off. As soon as you pay it off the Slam Dunk you're looking for will appear & you won't have the cash to execute so be patient.

    There are 2 ways to find slam dunks.  The 1st is just dumb luck running into a slam dunk.  The 2nd is to do some market research.  If you can't get a good return on investment in your market do some research on best markets for rental return & pick a few of the good markets near you.  Then hire some boots on the ground to help you find the slam dunks in those markets.   

  • Investor · Victoria, MN · Member since 2016 · 93 posts · 31 votes
    9y
    Todd Dexheimer - I'd love to hear more about your decision to go out of state. I'm at that point now and strongly considering it. [Solicitation Removed by Moderator] Craig
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