Advice for making our money go as far as possible

4 Replies

My wife and I are actively putting together a business plan and trying to get a grip on our financial needs. Our primary focus at this point is SFRs up to a four-plex for a buy-and-hold. We both have full time jobs but want to establish a revenue stream so we can retire early. We have not found a loan advisor or realtor as of yet.  

We paid cash for our primary residence a year ago (no mortgages) and have money in savings. We do not want to waste all of our liquid savings on a 20% down conventional loan for (1) SFR. We prefer to start with a two, three, or four-plex that can provide a steady return then venture into more SFR's after that. We'd like to start out with 2-3 purchases per year for 3-5 years.

Do you have any advice you can provide us for making our money go as far as possible?

Hi @Mark McKeny

Congratulations on being loan-free! I used to work for a Turnkey provider and seldom had clients that started in as good a spot as your household, so you're starting on good ground.

Based on your stated goals, I would recommend you consider refinancing your primary residence, take the pulled-out cash, and buy a 1-4plex that needs work. 

In a basic example, buy a rough(er) house (that will Appraise for $80k) for $40k and then fix it up for $20k. Rent that house for $800+/month. After it's rented, go talk to the bank and say you want to refinance the now-rental. Since the bank will lend you 75-80%, you now have $60-64k in your pocket and are collecting rent checks every month. In summary, you invested $60k (40+20) and then got back $60-64k. The prior process can be repeated 2-3 times a year for 3-5 years.

After seeing over a hundred Turnkey deals come across my desk, the universal margins were (1) acquire the property for 0-50% of the FUTURE value, and cap your rehab budget at 25% of the FUTURE value.

The above example assumes you're open to buying properties that need work and will coordinate all of the contractors. If you want a simpler investing option, partner on a deal or buy a Turnkey rental, though you'll run out of cash faster.

Excited to see you what moves you make next!

Originally posted by @Mark McKeny :

My wife and I are actively putting together a business plan and trying to get a grip on our financial needs. Our primary focus at this point is SFRs up to a four-plex for a buy-and-hold. We both have full time jobs but want to establish a revenue stream so we can retire early. We have not found a loan advisor or realtor as of yet.  

We paid cash for our primary residence a year ago (no mortgages) and have money in savings. We do not want to waste all of our liquid savings on a 20% down conventional loan for (1) SFR. We prefer to start with a two, three, or four-plex that can provide a steady return then venture into more SFR's after that. We'd like to start out with 2-3 purchases per year for 3-5 years.

Do you have any advice you can provide us for making our money go as far as possible?

 You can get up to 10 mortgages on non owner occupied 2-4 unit properties. You can push that out to 20 if you buy 10 in your name & your wife buys 10 in her name.

Welcome @Mark McKeny

Nice to find someone nearby and Thanks for your great post! There are so many options out there and many people advocate from the standpoint of what they like or currently do. However your stated goal of many purchases over the next few years will ultimately run your reserves down no matter! You should consider it as investing in your future - the biggest thought you should give is to ‘what is the acceptable timeframe’ to retire early?

If eventually you want to own 20+ units but want that to be a smooth transition with a large margin of safety then you might be fine with doing it slowly over time and playing the long game. If you need a faster and greater leveraged method then to  @James Wise discussion you can finance multiple 2-4 unit properties, their financing will be based on cash flow. You’re certainly better off than most with a zero mortgage but you’ll have to think through whether (or not) to tap into that reserve if your need is for speed. The difference is which approach matches your goal.

Your next consideration might be in choosing the right property.

A cash flowing $800 Multi-Family is ‘better' IMO than dealing with 4 cash flowing $200 SFH's. As you probably know in our area (and many others) the MF market is red hot so I'm not sure you're going to find many deals that others aren't already chasing or prepared to pay more for. But the MF is still a good option with good returns if managed right. Depending on what time your full time jobs take, often time is a restriction on what you can do. As you are on the business planning stage, you are starting out perfectly esp. here on BP asking and checking!

if you’re still needing a margin of safety think about partnering with someone to start. Wish you the Best of Luck and keep in touch and let us know what worked for you.

IMHO, you should have never paid cash for your primary residence in a market with < 4% mortgages that are now going up. In Florida, you could itemize paid interest and also qualifying property taxes since there are no state income taxes. You tied up a bunch of working capital.

Odds are we have seen the bottom in interest rates. You cannot get a fixed rate HELOC either. You may want to refinance with a cash-out and put the money to work in a commercial investment. Take some of that cash and pay off all credit cards if any.

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