What would you do with $50,000!?
Hey guys my name is Amber and I’m new here to Bigger Pockets. I’m a new real estate investor who has successfully house hacked my first duplex in Naples Florida and I’m hungry for more.
I’m coming here to look for answers.
I have $50,000 CASH, $100k equity on an FHA locked in at 2.4% and am able to get traditional financing with W2 income as an intensive care registered nurse.
There are SO many options with real estate investing! Wholesaling, flip, BRRRR, house hack, short term rentals AIRBNB etc. I know this is the path to success but I need to be decisional.
I obviously don’t want to refi on my 2.4%, but I want to purchase my next property.
My question is, what would you do with $50k and $100 equity on a 2.4% FHA??
I’m seeking expert advice! One of my biggest goals is to move out of my current duplex and into another property because I’m not fond of the neighborhood. Naples FL is VERY high end market.
Duplex is 15% down, single family would be 5% but then I’m looking at a mortgage and I’m trying to make money not get a $4000/month mortgage payment, currently I do not pay for living expenses.
I have considered doing out state investing in Ohio and am in fact pre-approved, but the idea of losing my cash for $200 a month is not appealing. I don't have enough cash to BRRRR.
I feel like I’m missing something and this next move with be my make or break. Any advice is appreciated.
Thanks in advance!
Amber
Welcome to BiggerPockets, @Amber Straub!
Congratulations on what sounds like a great house-hack and a great start to your wealth building journey.
First, I'd be interested to know what your monthly accumulation of cash looks like. Are you stockpiling $1,000 per month? $2,000 per month? $5,000 per month? How long will it take you to accumulate another $50,000 in cash? This affects the cadence at which you can invest more than anything else, in my opinion. Knowing that, you will be able to zoom out 3-5 years and envision what your potfolio might look like and back into something reasonable from there.
Second, I agree that you want to leave that 2.4% mortgage in place. So, unless you want to sell out entirely, I think you are looking at a HELOC or 2nd mortgage as your way to harness some of that $100,000 in equity.
Third, I think that the $50,000 in cash can be used either to invest out of state (or elsewhere in Florida - many investors are moving money INTO Florida, even as you are considering moving money OUT. Perhaps there are opportunities within a 90 minute drive of where you live?)
Fourth, I think you can serial house-hack. Not knowing the specifics of your market, and perhaps being Naive about Naples, it would appear to me as an outsider like this or a neighboring town might be ideal for a STR house-hack. This might allow you to generate signficant cash flow. If the stars align, this might allow you to get the best of several worlds - a larger, nicer asset that is more meaningful to your overall financial position, a great owner-occupied loan with a low down payment, and a potential for significant cash flow.
Thank you for replying @Scott Trench! What an honor!!
Currently, my mortgage is $3100. The other half rents for $1900 (slowly increasing from the $1400 I inherited) and I do long term rentals in my efficiency unit on my half to traveling nurses making an additional $1150 monthly. This eliminates my mortgage payment.
if I can find a way to move out of my half, I can bring in at least $1500/month on top of paying my mortgage.
I have looked into HELO/HELOCS but am finding some push back as it is an owner occupied duplex verses a single family. Still working on that piece. I feel the refi/HELO/HELOC next step is a major hole in my investment career I need to understand more about that.
I could house hack another duplex here in this very sought after market. It would take my cash reserves if I don’t find a HELO, it wouldn’t be the best living situation but it would be worth the sacrifice for a year.
I am hopeful the first 5 years is a slow painful growing experience and it can take off from there. I just want to make sure I’m not missing any key pieces. I have been dedicating all my free time and creative space to real estate investing education but still find myself unsure as a newbie!
Quote from @Amber Straub:
Thank you for replying @Scott Trench! What an honor!!
Currently, my mortgage is $3100. The other half rents for $1900 (slowly increasing from the $1400 I inherited) and I do long term rentals in my efficiency unit on my half to traveling nurses making an additional $1150 monthly. This eliminates my mortgage payment.
if I can find a way to move out of my half, I can bring in at least $1500/month on top of paying my mortgage.
I have looked into HELO/HELOCS but am finding some push back as it is an owner occupied duplex verses a single family. Still working on that piece. I feel the refi/HELO/HELOC next step is a major hole in my investment career I need to understand more about that.
I could house hack another duplex here in this very sought after market. It would take my cash reserves if I don’t find a HELO, it wouldn’t be the best living situation but it would be worth the sacrifice for a year.
I am hopeful the first 5 years is a slow painful growing experience and it can take off from there. I just want to make sure I’m not missing any key pieces. I have been dedicating all my free time and creative space to real estate investing education but still find myself unsure as a newbie!
I would keep calling lenders about that refinance or HELOC. When I am trying to do one of those, I will call 10-20 every week. By calling them I am also learning what they have and what my options are. You could find a great property here in Ohio, we have several really good markets. You could get a multi-family that cashflows using your $50,000 as a down payment.
@Amber Straub
If you are determined to move, then refi your current rental out of an owner occupant as long as it's been a year, and then look at getting another owner occupant with FHA or another low money down product. If you think not losing the rate on your FHA is more important, then keep the loan as-is with the rate and invest out of state in Ohio as you mentioned. If you are looking in OH to invest out of state you should establish what you are looking for that will determine the market best for you.
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Real Estate Agent Ohio (#2021001448)
- (614) 412-4565
- https://www.reafcorealestate.com/
- [email protected]
Thank you for this advice!
Welcome to BiggerPockets, @Amber Straub, and congratulations on doing the work and the success thus far!
I like Scott’s reply very much and would agree with it. I also actually recently wrote a blog post on precisely this: what to do with $50k in real estate. If your interested, let me know.
We pretty much exclusively do out-of-state investing and I am happy to share any and all mistakes, successes, resources, tools, tips, tricks. If you want to chat more, I’d be happy to, please do not hesitate to reach out, connect, and DM me.
@Amber Straub Not sure exactly which hospital you work in and how far you're willing to drive (or if you're willing to relocate), but there's a few other markets a bit further North in Cape Coral, Fort Myers, and Lehigh Acres, that have potential to be a much more suitable environment for house hacking, depending on exactly what you're looking for where you're willing to live
One thing I'm surprised no one has mentioned yet is that although you would have to refinance out of the FHA loan and into conventional to move out of your current duplex, you could also likely eliminate the PMI with your current equity in that process. Even though the interest rate will obviously be higher on the new loan, the total payment amounts might not be as far apart as you think after accounting for this. In addition to that, you could also rent out the unit that you're currently living in, bringing additional income from the property
Once you're refinanced out of the FHA loan on your current duplex, you're then free to use the FHA structure again for another low down payment purchase on another duplex (ideally somewhere you enjoy living in much more). With a 3.5% down payment on a quad in any one of the markets I mentioned above, you would still be able to max out the loan limit with $50,000 in hand, so that's definitely something worth taking advantage of!
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Broker
- (850) 259-2910
- https://www.thesimonelligroup.com/
- [email protected]
@Stetson Miller thank you for this! Eliminating the PMI was not something I had previously considered, I appreciate that input.
Nice to hear from someone close to home. I actually was introduced to your group at the local REAI here in Fort Myers a few months ago!
I do have a 6 year old daughter in school so moving out of Naples isn't a viable option at this time but I have considered doing BRRRR in the above mentioned markets, although not much of a profit margin even in those cities. This is why I moved towards out of state.
I did some calculations on refi out of my 2.4 into a 5.5 and the difference over 30 years is a lot to swallow. How many times can a person refi on a house I wonder? Am I over thinking this loss looking at the grand scheme of things?
@Nathan Murith thank you, I will contact you!
@Amber Straub That's awesome that you're already attending those meetings! Even if you're looking to stay in Naples, although it is rare, it's still possible to find a 4 unit property under the FHA loan limits in a decent area. Like you said, the difference in those interest rates over 30 years is significant, but your best bet would be to maximize your income potential by holding out for something that has 3 or ideally 4 units
With that in mind, the total loan amount paid over the life of the loan is not something that I would recommend focusing on. Instead, comparing properties based on your monthly cash flow projections will be the best way to take an objective approach to the situation. You're also not limited at all on how many times you can refinance! But, there are closing costs involved with each refinance, similar to when you originally purchased the property, so you would ideally still limit the number of times you have to do this
Even still though, it's highly unlikely that you will be stuck with a 5.5% interest rate for the lifetime of the conventional loan after your initial refinance, which is why the total loan amount paid is not of high significance. At some point over the 30 years, it is highly likely that interest rates will be lower than 5.5%, at which point you can refinance into the new lower market rate and likely pull a significant amount of equity from the property for another purchase!
-
Broker
- (850) 259-2910
- https://www.thesimonelligroup.com/
- [email protected]
@Stetson Miller this is excellent advice, thank you!!
Quote from @Amber Straub:
Hey guys my name is Amber and I’m new here to Bigger Pockets. I’m a new real estate investor who has successfully house hacked my first duplex in Naples Florida and I’m hungry for more.
I’m coming here to look for answers.
I have $50,000 CASH, $100k equity on an FHA locked in at 2.4% and am able to get traditional financing with W2 income as an intensive care registered nurse.
There are SO many options with real estate investing! Wholesaling, flip, BRRRR, house hack, short term rentals AIRBNB etc. I know this is the path to success but I need to be decisional.
I obviously don’t want to refi on my 2.4%, but I want to purchase my next property.
My question is, what would you do with $50k and $100 equity on a 2.4% FHA??
I’m seeking expert advice! One of my biggest goals is to move out of my current duplex and into another property because I’m not fond of the neighborhood. Naples FL is VERY high end market.
Duplex is 15% down, single family would be 5% but then I’m looking at a mortgage and I’m trying to make money not get a $4000/month mortgage payment, currently I do not pay for living expenses.
I have considered doing out state investing in Ohio and am in fact pre-approved, but the idea of losing my cash for $200 a month is not appealing. I don't have enough cash to BRRRR.
I feel like I’m missing something and this next move with be my make or break. Any advice is appreciated.
Thanks in advance!
Amber
I would do another house hack. I kept house hacking in Columbus, Ohio when I first began. I got 10 units through house hacking a duplex and two, quads
Quote from @Amber Straub:TD Bank and PENFED offer HELOC’s on multi family and investment property. If you can get approved for a HELOC I think that’s a great option for capital since you only pay interest on funds that have been drawn and it will allow you to access equity w/o trading in your current interest rate.
Thank you for replying @Scott Trench! What an honor!!
Currently, my mortgage is $3100. The other half rents for $1900 (slowly increasing from the $1400 I inherited) and I do long term rentals in my efficiency unit on my half to traveling nurses making an additional $1150 monthly. This eliminates my mortgage payment.
if I can find a way to move out of my half, I can bring in at least $1500/month on top of paying my mortgage.
I have looked into HELO/HELOCS but am finding some push back as it is an owner occupied duplex verses a single family. Still working on that piece. I feel the refi/HELO/HELOC next step is a major hole in my investment career I need to understand more about that.
I could house hack another duplex here in this very sought after market. It would take my cash reserves if I don’t find a HELO, it wouldn’t be the best living situation but it would be worth the sacrifice for a year.
I am hopeful the first 5 years is a slow painful growing experience and it can take off from there. I just want to make sure I’m not missing any key pieces. I have been dedicating all my free time and creative space to real estate investing education but still find myself unsure as a newbie!
Thank you @Jordan Garcia! I will give them a call tomorrow!
@Amber Straub I understand why your don't feel that losing your cash for $200/mth is not appealing. It's not that appealing to me either, however, if you're looking at only that $200/mth cash flow, then you're missing the big picture. No one gets wealthy on just cash flow a lone unless you can build a large portfolio. Real wealth through real estate comes from multiple sources and over time. On a typical single family investment, cash flow accounts for only about 1/3 of total returns. Equity through appreciation and mortgage paydown make up the lions share especially over the long haul. A big mistake too many investors make is evaluating a property on the basis of 1st year cash on cash and ignoring total income and equity over at least a 10 year time frame. I think you'll find that much more appealing. The key to making it work however is to invest in markets with growing populations, growing jobs and modern/diverse economies and industries. These are the markets with the best potential for appreciation and steady growth in income through rental increases.
Flip a property and make a good return then start scaling the process. When I started, I focused on moving capital quickly to acquire more properties so I would have more options to choose from when selling or holding into a portfolio. Net worth and capital compounds the quickest through renovating and building to move the money into bigger projects.
@Mike D'Arrigo excellent advice and I do take it to heart! I do recognize cash flow is a small part of the bigger game plan. It took me about a year to acknowledge this but I am understanding it more as I continue to educate myself. Thank you for reminding me!
@Amber Straub Congrats on the success so far. Care to share what you bought the current duplex for? There's great advice in here already but the reality is you live in Naples. It's one of the most expensive places to live in Florida hands down. I'm from Indiana and know that. If your living expenses are covered by rent I'd stock pile CASH like crazy. Like @Scott Trench said how long can you accumulate another $50K? Take advantage of the sacrifices you already made (most of us have) and you'll grow so much faster when a good deal comes you way. You could house two or three times and HOLD every cash-flowing property in Naples. Each property could be a real winner netting you cash-flow, appreciation, and tax benefits. I think you're targeting travelling nurses from what I gathered here so just keeping going down that path!
Quote from @Amber Straub:
@Stetson Miller thank you for this! Eliminating the PMI was not something I had previously considered, I appreciate that input.
Nice to hear from someone close to home. I actually was introduced to your group at the local REAI here in Fort Myers a few months ago!I do have a 6 year old daughter in school so moving out of Naples isn't a viable option at this time but I have considered doing BRRRR in the above mentioned markets, although not much of a profit margin even in those cities. This is why I moved towards out of state.
I did some calculations on refi out of my 2.4 into a 5.5 and the difference over 30 years is a lot to swallow. How many times can a person refi on a house I wonder? Am I over thinking this loss looking at the grand scheme of things?
Amber, It may seem like a huge increase over 30 years but you also have to remember that you plan on keeping this property as a long term 'hold' rental property, Im assuming. Someone will always be paying your mortgage + cash flow, so as long as you are saving/reinvesting your cash flow, it will all wash out in the end if you decide to sell down the road.
@Jaron Walling yes! Half of me is very hungry for more and I want to run and the other half says slow down and let things cook a bit! I purchased the duplex at 553000
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Use it as down-payments for 4 flips using hard money
Hi Amber, you are getting some great advice on the money part. My thought immediately went to short term rentals for travelling nurses because it would be easy for you to make those connections. I have a client who is a travelling nurse and he house hacked in all of the markets that he was working in then rented out both sides once he moved on. I know you can't travel now, because of your daughter, but Is that something that you would have knowledge of in your market that would get you higher rents, or finding the markets where there is a high need for travelling medical personnel and concentrate there? I would think that you could stretch your dollars a lot further and make higher rents. Just something for you to think about.