Hi - New Member - Looking for some input

[Anne Payne]

Hey everyone, I’ve had the membership for a while but haven’t really taken full advantage of it yet. I’m an engineer and a mom to a 5- and 2-year-old. I got into real estate because I want more flexibility and time with them, with the long term goal of replacing my W-2 income. I’ve been figuring things out as I go.

I bought a pretty rough waterfront house back in 2016 and fully renovated it. After having my first daughter in 2020, I purchased my first investment property, initially to deal with a squatter situation across the street, and it’s turned into a strong performer, cash flowing about $1,500/month. My original home is currently rented to family and covers the mortgage.

Since then, I’ve picked up a vacant lot with a great barn/workshop that was built about three years ago, along with another vacant lot, both on the same street. I’m planning to build on the lot with the barn and am still deciding what to do with the second one. I also have a condo flip hitting the market tomorrow and a primary residence in town.

At this point, everything is paid off except for my original home, since the mortgage rate is only 2.75%.

The challenge I’m running into now is that my job is very high stress, and I find myself bringing that stress home more often than not. I recently spoke with a friend who mentioned someone he knows is buying houses in Georgia through a wholesaler, renovating them, and then owner-financing the sales.

Is anyone here doing something similar? I could potentially pull cash out of my properties to try this approach, but I feel a bit stuck on what the right next move is.

I also just want to say I really appreciate everyone who contributes here, I’ve learned a lot from reading through the threads.

[Greg Scott]

Congrats on your success so far. You have achieved a lot, and your goals of getting out of your W2 are realistic.

Here are some idea I would share with you.  These are reactions to things you mentioned in your post.  Thinking about thse differently might help you get to your goal faster.  I'll go in order as I found them in your post.

 - You said your one property is cashflowing great at $1,500 per month but later said you had no mortgage.  Almost every property with a paying tenant and no mortgage will give you cashflow.  You would probably make different decisions if you looked at RoE. What is the annual return that equity is giving you?  For example, if that house was worth $400,000 your RoE is 1,500*12/400,000 =4.5%.  You could get about the same return in Treasuries.  This means you are doing a lot of work and taking on risk for essentially zero added return.  

 - Look for investments that give you a much larger RoE.  I typically like to see 20% plus.  In many cases the best way to improve RoE is to take on debt.  Taking on debt will reduce your cashflow.  I never buy a property that doesn't also have good cashflow. It is harder to find one that both cashflows and gives you good RoE, but it can be done.

 - Your original home is rented, and that covers the mortgage, but presumably not taxes, insurance, maintenance and vacancy.  On the surface, this looks OK. In reality, this is a money pit.  If you still are in the window where you could sell this and avoid capital gains, it is worth considering.

- You rented to family members.  This is definitely not recommended.  There are too many nightmare posts on BP about people that rented to friends and family.  See if you can unwind that tactfully.

 - New construction has additional risks.  There are too many to go into in a short post.

 - Condos have a lot of additional risk.  Just google what happened in Florida last year.  I'm glad you are selling this property.

- The Georgia idea you mentioned at the end.  This is typically done in areas where flipping is impossible.  Either the homes are too inexpensive and nobody wants to write a mortgage on them or the buyers have rough credit and most lenders won't finance them or require crazy high rates.  Either way, you are taking on a lot of personal risk in those areas.

Based on what you have said, I would encourage you to look for existing fixer-upper SF homes as rent properties. You already seem to have good skills in rehab and are clearly not afraid of being a landlord. Look for a property where you can capture a lot of equity. (Example, purchase price $250,000, rehab $50,000, ARV $350,000). Use a hard money loan to minimize out of pocket. Do the math up front. What is your equity capture? What is your cashflow? What is your ROE?

Good luck