Next Steps Advice for Rental Business

5 Replies

Sorry for the long post but I am 32 years old and looking for some advice on next moves. 

I currently have 6 doors; 5 rental 1 primary:

-$280K single family home in North East Austin with $177K loan balance, cash flow $250/mo acquired in 2011. This was my first home and house hacked with 3 roommates. Current rate is 3.875% on 20 year amortization. Property has been rented out since 2016 so could sell this year and avoid capital gains (lived in as primary residence 2 of last 5 years). I could make a few cosmetic improvements and sell for $300k. The area is seeing high appreciation rates so may not be the best strategy to sell. Home is also relatively new as it was built in 2010.

- $400K duplex in South Austin with $365K loan balance, cash flow neutral acquired in 2018 (FHA loan) which would cash flow about $250 / month if I paid down the note and refinanced to avoid PMI and lower the loan amount. Current rate is 4.25% on 30 year amortization. There are some cosmetic improvements I can also make next year to raise the rents further.

-$420K duplex in South Austin with $231K loan balance, cash flow $800/mo acquired in 2017 (originally HML but refi to investment loan) which I did an extensive remodel inside and out. Current rate is 4.375% on 20 year amortization. Only remaining improvement is new HVAC on one side ($4K) and waiting until current system causes an issue to replace (10+ years old).

-$500K condo in Downtown Austin with $344K loan balance would cash flow -$400 if rented but currently used as primary residence. Acquired in 2016, current rate is 3.875% with conventional 30 year amortization. The property suits my lifestyle perfectly and is just right size and location for me despite the high monthly expense. 

Looking forward, I do not have capital at the moment to purchase another property but want to focus on acquiring more duplexes in Austin area. I will now need at least 25% down payment or find another screaming hot deal and go in with HML or private money. However, finding deals has become very difficult with the hot market of Austin, especially duplexes. I do have a good cash reserve of ~$80K and have other retirement accounts but do not want to tap into any of them to avoid taking on too much risk. I am currently full time corporate employee making good salary and contributing maximums to retirement accounts. My goal is to grow the rental business so I do not have to rely on the W-2 income in the near future (3-5 years out).

For the seasoned pros out there, what advice do you have to provide as to next steps for my rental business endeavors?

Sell your low performers and buy better performers. Look in Killeen/Copperas for better cash flow for the money. Keep reserves since you will need them for conventional loans.

Stack cash, lend it until you find a deal and focus on lower cost acquisitions with similar or greater cash flow. 

or sell your properties and buy units cash or sell all and just do private lending at 12/2- best return in this market or consolidate all loans into a portfolio product with a bank and buy more using overall equity position

There are too many options and not enough info.