Where to focus on next?

Question

Hi everyone,

I'd like some advice if you wouldnt mind chiming in.

After closing on our third home, where would you suggest we focus our future on? Work on paying off a home or maybe save for another home in the future?

Here are our mortgages and a snapshot of each one

1) Primary residence: 6.2%, $2,240/month (29 years left)

2)First rental: 3.2%, $1,440/month ($500 CF, 10 years left)

3) Second rental: 7.2%, $2,100/month ($300 CF, 30 years left)

4) Save another 20% for another investment home. This would take us about 30 months

5) Other ideas/ suggestions.

Im all ears.

Thanks for your time everyone!

Dustin Tucker · Answer

Hello Armando,

A couple of things.

1. If you plan on buying 1-2 properties a year at $200k, is a commission between $3-6k.

2. If you have ever heard the saying you have to be in the game to win the game, I have found that you have to look for properties constantly to find the deal you want, but along the way you find a lot of other properties, that if you had your real estate license you could have made money on.  Also, I don't know what profession you are in, but if you are good realtor, you should easily average over $100k/year.

3. Equity in properties is a roller coaster, you gradually increase your equity, before it is lost in a recession.  As long as you have positive cash flow on a rental property, there shouldn't be any fear in pulling out equity.  I am convinced that we are a headed for a major recession and temporary decrease in property values, but you have to have money to take advantage of the buying opportunities.

Hope this helps.

Armando Carrera · Answer

Hi Dustin

Thanks for the reply! We’ve always been cautious (scared actually) about pulling equity out of our homes. Getting my RE license is a good idea. Not sure how much it would benefit me in the long run? Paying brokerage fees etc to really only use it once or twice in the next few years?

Dustin Tucker · Answer

Hello Armando,

I would evaluate my equity position and see if there was additional equity I could pull out of one of my rental properties.

I would shoot for the Fix to Rent Strategy, I feel like it doesn't take a lot of effort to find a 70% or less property in the current market.  Also rental rates are dropping, and we are already seeing rental loan rates in the 5% range, I would expect to see rental rates under 5% by January.

If you are going to be a real estate investor for the long term, why don't have your Real Estate License? You are losing up to 3% on each investment property purchase, also, you get a lot of great tools for evaluating properties, market research, etc.