Investor · Auburn, MA · Member since 2017 · 10 posts · 0 votes
I have purchased my 1st income property 2 yrs ago but over the last year the repairs have outpaced the income from it and am wondering where to go from here. I wasn't tapped into BP and had no strategy when I bought it, I just knew I wanted to get into investing in real estate. So now I'm learning more and want to invest in more properties but I need roughly $100k in repairs on my current property. Do I refinance it, use my 401k, get out of it right now as is or what? I know this is vague but any help would be appreciated.
Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
8y
$100,000 is a lot of repairs, is it even worth holding onto as a rental? I know you may have sentimental attachments to your first investment property but borrowing that much from a 401k for repairs can be risky. It can be even riskier if the property isn't the best investment.
I guess that would depend on if you plan on accessing income generated from the property out of your 401k. I would put together a spread sheet, run the number and figure your ARV and then figure your annual rental return vs. flipping the property after repairs vs. getting out of the property. If this property is solely used to help fund retirement and you won't be accessing that income for reasons other than investing, then I would see if it makes sense to keep that property until retirement.
Also:
1. what kind of property is it: Multi, Single, Apartments, Duplex?
2. What was your purchase price?
3. What are similar properties selling for in your area?
4. What is your return on spending the $100K in repairs?
I am not a financial expert, but if you give us a bit more detail I bet someone on here could provide you with much better direction than I can. Good luck!
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
8y
@Paul Lussier Keep in mind generally the limit for a 401(k) loan is $50k, and it's all due back if you lose your job or it becomes taxable income.
Possibly reach out to local banks in your area and see if they can provide rehab financing. They'll order an appraisal for the ARV and that will give you an answer if it's worth the repair work or not. $400 for the appraisal which definitely could be worth the investment.
@Paul Lussier Keep in mind generally the limit for a 401(k) loan is $50k, and it's all due back if you lose your job or it becomes taxable income.
Possibly reach out to local banks in your area and see if they can provide rehab financing. They'll order an appraisal for the ARV and that will give you an answer if it's worth the repair work or not. $400 for the appraisal which definitely could be worth the investment.