First post, starting out (kinda)

8 Replies

Hello BP! 

Just recently joined after starting to look more into acquiring more properties with the aim of eventually being able to replace my current income with rental income. I'm in the Triangle area in NC.

I have actually been a landlord for a couple years now, having rented out my existing house in Carrboro/Chapel Hill when my partner and I wanted to move to Durham so she could be closer to her job at the time. I purchased the first house with part of a life insurance payout so the mortgage was low enough that it was worth more to us as a rental than just selling it. I've lucked out with tenants & haven't really had any major issues, currently on my second set of tenants. The rental income from this house currently covers half the mortgage on the house in Durham, which we financed 100% (may not be ideal, but it's worked out so far).

So here's the part where I ask for advice from the BP community: Given how well the Durham market has done in recent years, we have seen pretty decent appreciation on our house (purchased for 215k 2 years ago, now valued at 295k, hopefully 300k or more next year). We are considering putting the house on the market next year, & hopefully getting close to 300k. We are currently thinking about a couple different things to do with the proceeds:

-Refinance our first, currently rented house to get a lower monthly payment & move back in to it. This looks good to me because my partner would like to go freelance soon & this would significantly reduce the monthly bills we're responsible for, limiting the risk of her launching her own business. The house could also use some updates & it would be easier for me to do while we are living in it since I could work at my own pace and do much of the work myself. When we turn around and rent it out after moving again, we'll get more monthly cashflow thanks to the lower mortgage payment.

-OR, take the proceeds from the sale of the Durham house and invest in another property, one we could live in, fix up then potentially rent out as well. Our current rental (Chapel Hill/Carrboro house) does need some work, but nothing terribly urgent that can't be done with a tenant in place. The mortgage just went up a bit due to property taxes--$711 & it is rented for $1400, which I plan on raising $1500 when the current lease is renewed. So the cashflow isn't bad as it sits now. I figure if we get another property, it will be easy to get a mortgage since we will live in it for at least a year and my credit is excellent, we can fix it up while living in it, then we can move on to another property and rent it out--hopefully with some good cashflow since we will have put a large down payment thanks to the equity from the Durham house. This option has a bit more risk with my partner trying to launch her own business soon however, but it seems to me may yield more monthly cashflow in the long run, not to mention building equity on 2 properties rather than one.

SO...those are the two strategies we're currently looking at. Just looking for some thoughts, advice, tips, etc.

Thanks!

@Braden Leonard If the income from a new business is a wild card, then it may make sense to choose the lower cost living.  I don't think I would refinance the house, though.  Rates are higher now than they were a few years ago, so unless you can find a better deal than what you have, it would be a no-go for me.  I would just hold the cash and use it to cash flow expenses while your partner works on her business.  How stable is your income?

Thanks @Dawn Brenengen

My income is very stable & I can easily cover the mortgage on the old house with just my income even without refinancing. The interest rate on that mortgage is currently 3.25% so I see your point about not being able to find that kind of rate if we do refinance now. As far as just pocketing the proceeds goes, I was originally somewhat concerned about capital gains tax, but the more I've looked into it, it seems we won't be on the hook for anything since the profit will be less that 250k after paying the bank.

@Caleb Heimsoth That had crossed my mind as well, the way the market is going in Durham I know we'd gain much more equity if we just waited an additional year.  My main concern is limiting our liability right now though, especially with my partner trying to launch a business soon. I don't want to be on the hook for two mortgages if I can't cover them on my income alone, at least for the time being. Another option is renting out the Durham house--I'm not sure we'd do more than just about break even--mortgage is $1300 and I'm not sure we could rent it for much more than that. That said, it is a 3br 2 1/2 bath, built in 2016 in Duke Park, 30 min walk or $5 Uber to Central Park or Downtown & the Durham Beltline Trail is coming soon & will end a block from the house. So I guess there's another option. Should I rent out the Durham house and wait for more equity?

I'll look for the details on the next meetup, I'd definitely like to attend!

Originally posted by @Braden Leonard :

@Caleb Heimsoth That had crossed my mind as well, the way the market is going in Durham I know we'd gain much more equity if we just waited an additional year.  My main concern is limiting our liability right now though, especially with my partner trying to launch a business soon. I don't want to be on the hook for two mortgages if I can't cover them on my income alone, at least for the time being. Another option is renting out the Durham house--I'm not sure we'd do more than just about break even--mortgage is $1300 and I'm not sure we could rent it for much more than that. That said, it is a 3br 2 1/2 bath, built in 2016 in Duke Park, 30 min walk or $5 Uber to Central Park or Downtown & the Durham Beltline Trail is coming soon & will end a block from the house. So I guess there's another option. Should I rent out the Durham house and wait for more equity?

I'll look for the details on the next meetup, I'd definitely like to attend!

If you’re breaking even then no, sell take the equity and redeploy it somewhere else where you’ll make money. 

Hello! @Braden Leonard

Welcome to BP, and congratulations on making the decision to invest in your future via real estate.

I have written a few blog posts that may help you get started here on BP, and with your investing. Please click on the links, give them a read, and share your thoughts in the comments.

First is a post that I feel will help not get overwhelmed with the amount of info that is here on BP:

https://www.biggerpockets.com/blogs/5868/52761-the-simple-guide-to-getting-started-on-bp

The second is a post that will help get you focused with your real estate investing goals:

https://www.biggerpockets.com/blogs/5868/52743-im-new-to-bp-any-advice-would-be-appriciated

The last one is a post that will help you choose an “investor friendly” real estate agent.

There are many agents out there, but it’s important to choose the right one.

https://www.biggerpockets.com/blogs/5868/52724-im-new-to-investing-how-do-i-find-an-investor-friendly-agent

I love answering questions if you have any! Good Luck :)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you