Taking the next step

7 Replies

I just recently purchased my 4th rental (all townhouses) and was looking to go a different route on my next purchase, Here are my current #'s.  Townhomes 1-3 are in the same neighborhood and have a value of around $290k each. Townhome #4 is worth around $240k. TH#1 is rented to my mom which is why the rent is only $800. I have $450k available cash. Im looking for more of a long term investment and really don't know what way I should go with it. I have thought about possibly trying a commercial building or high end cabin and rent it on VRBO. Ive spent time looking at vacation rentals in Florida but Im not sure if I want to have an out of state rental.  There are not any multi family units where I live and apartment complexes are way out of my price range. Anything besides what I am doing now would be out of my comfort zone but I feel I need to try something with a bigger risk bigger reward. I appreciate any advice or direction on my current situation. 

TH #1Rent-$800 mortgage $500/month($104,000 owed) HOA $230/month taxes $200/month

TH#2 Rent $1800 mortgage $1000/month ($193,000 owed) HOA $230/month taxes $200/month

TH#3 Rent $1800 mortgage $850.month (1$185,000 owed) HOA $230/month taxes $200/month

TH#4 Rent $1500 mortgage $660 month ($86,000 owed) HOA $250.month taxes $180/month

With all the #'s added up its +$2,070/month 

Hi @Mike O. ,

Congrats on everything so far! It looks like you have a great portfolio! First thing to do is ask yourself what is your goal! This will determine the route you chose!

If I was in your shoes I would leverage and buy multiple properties rather than purchasing in cash.

You can get few stable rental properties with similar cash flow to the ones you have or better and at the same time try a short term rental property as well. This why you are also diversifying and you leave yourself more room for mistakes in case we get a second lock down and the STR industry is impacted.

Of course this is not the best advice because I don't have all the information on your current portfolio and your goals but I would love to connect, discuss and help!

I am currently 36 and make around 78k a year. I work 50+ hours a week in the summer and only when it snows in the winter.  Right now I am just looking to build long tern wealth and to maybe retire in 15 years. If I was able to get the right investment to make around 78k a year I would potential quit my job and focus on that.

You shouldn't rule out apartment complexes if you can get owner financing. Then you won't need the usual giant down payment. Also, the market is pretty high right now - have you considered selling one or two of these properties to add to the amount of cash you have available for your next purchase? Seems like you have over $500k in equity?

Im comfortable with the properties I have now and probably wouldn't want to sell any of them. I really don't have any knowledge operating an apartment building or commercial real estate. There isn't anything for sale that I would be interested in right now. My wife and I have talked about getting a place in Anna Maria island in Florida and rent it out using VRBO. Another option would be getting a lake front cabin in Brainerd, MN and rent it out using VRBO. We could benefit from both of those by being able to use them a few times a year but would mainly be an investment property.

@Mike O. without a doubt DONT sell, no sense in that what so ever, you loose the goose to get just 1 last egg doing that. 

There are a few good opportunities at hand, first of all what is your current mortgage rates at? The first step before getting into commercial properties is making yourself known and attractive to those who finance commercial deals, those $$$$ relationships make a giant difference in the commercial realm. It may be time to refi out to a commercial mortgage to start building that relationship.

Next, I get the sense that your feeling apprehensive about going and starting a totally different thing, that's smart. Vacation Rentals are NOT the same as standard rental housing, nor is either like section 8, being good at 1 does not mean success will be had in the others, if anything it means the odds are greater of failure at the others because it's a different thing. I would advise against starting a whole different venture until your insulated from loss's with current holdings, and $2k a month is not there, it's a darn good start but not there, a $20k loss on something could still cut too deep for comfort. 

That said, there is some ways to better scale what your doing now, to make a better COC rate of return, and to get things set so you can more easily dip toes into the VRBO waters free of any blowback from loss's in such. Fact is in Covid-world you need to be ready to weather 3-6 months of $0 revenues and all expenses with a Vacation Rental because it's a very real potential.

I know, everyone is gonna cry "but the cure is almost here", yeah, and so is Jesus, and loosing that 10lbs from 19 holidays ago, and one and on and on. This counting chickens before hatched nonsense is the most epic setup for failure and it bewilders me how mass delusion of such has taken over. 

In addition to the mass delusion, thinking that in a SELLERS market a person can just get C4D financing on a "good" buy is complete horned-cow-excrement. Why would a seller take $100k on C4D terms vs accepting the $100k cash offer at hand? "Oh, because of tax...." yeah, BS! That's informercial BS! Those of us ACTUALLY in the market know to get C4D terms, which gives more risk to seller, that means buyer will have to "pay" for such. That is bad advice by bad actors who only care about selling programs, books, commissions etc vs telling real actual factual reality and sound advice.

@James Hamling I actually just refinanced on TH 1 and 2 in June which is why I have $457k cash available right now. Part of me just wants to sit and wait 6 months to see what is going to happen with real estate and COVID. At the end of the day buying a cabin would be my first choice but at the same time I am always up to buy another rental townhome. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you