Which way would you choose to expand?

Question

Dear BP community,

Wanted to solicit feedback on a few options I want to consider on my next step.  I own 3 SFH’s and closing on a duplex in 3 months and at a crossroads of where I’m at and how to move forward.

I have a demanding W2 job at Amazon and I don’t have the time to be a “traditional” investor where I spend the time knocking on doors and negotiating, etc...  This is something that won’t change as I actually like my job and planning for the future vs. I have to quit now.

So far I’ve done everything turnkey with good (but not fantastic) success.  I would say my CoC returns have been roughly 6% after vacancies, repairs, etc...

I was able to muster up more cash and I can invest up to $200K in the next 6-12 months and I want to set a direction. My ultimate goal is to close on 7-8 4 plexes in the $1000-$1200 per door per month rent range assuming the same cost structure compared to my current properties to hit my retirement goal.  Once I hit these properties it’s time to pay them off and live off the cash flow when it’s time. I wouldn’t even mind doing a flip or a wholesale to expedite paying them off + whatever extra cash flow I get from rentals.

1) Option A: build a team of realtors, contractors, property managers, etc.. and I can find properties with better returns and much better odds of finding 4plexes.  I don’t mind doing hard money loan to refinance later as my credit score is 800 ish +/-

2) continue on the turnkey path and buy them very quick and pay them off knowing fully well that 4 plex turnkey don’t exist so I have to hit my 10 mortgage limit (not interested in creative financing right now) and pay off 1 loan quickly and buy another, etc... then rinse and repeat.

3) combination of both 1&2

After I close on my duplex I have 5 more loans to go to hit my 10 loan cap so I want to be more strategic to take advantage of the interest rates being as low as they are right now.

Any feedback or tips would be greatly appreciated.  I thought about joining one of these masterminds but maybe I can get some sound advise here first as I don’t really want to spend that kind of money and obviously the time commitment that comes with it given the work I already have to for my W2 job.

Thank you and happy Friday.

Khaled El Dorry · Answer

@Steve Donovan good insights and points well made.  Thank you.

Steve Donovan · Answer

Hello @Khaled El Dorry  I think that the answer depends a bit on the area that wish to expand into.  If you are staying within your own area and have access to reliable contractors, it will always be more cost effective to rehab properties and build your own equity.  There is some risk with this approach as occasionally you will run into issues during the rehabs and your projects will run over budget.  Staying within your own area also only makes sense if there are properties available that will provide good cashflow after rehabbing  them.

I think that if these criteria cannot be met in your local area, you should pursue the turnkey option, where the properties are rehabbed, rented and producing cashflow.  Be careful with your market selection and fully vet the turnkey organization before moving forward.  Best of luck to you!