Need Help from a Pro- Kind of Stuck in my Progress

[Daniel Green]

I'll admit it.  I'm kind of confused so wondering what others think I should do.  Here is the situation:

- I own a 3 family in Weehawken.  Worth about $825K.  Mortgage of around $540K.  It makes a bit of money on the rent roll but not hitting it out of the park.
- I live in a SFH- worth about $550K. Mortgage of around $350K.
- I have about $115K in cash I can use to invest.

Here is the deal.  I don't know whether to buy a multifamily in Northern NJ and collect the rent, build a spec house (Tenafly/Cresskill) or buy a fixer upper and flip it.  Also not sure if I should refinance my other properties to get more $$$.

I feel like spec houses you make quite a bit of profit but I have no experience in this area.  I lean toward multi-family because that's what I'm used to but still my current rental isn't making a ton of cash...even though I will make money on the appreciation of the property it's a long haul.

Any ideas/guidance from the pros out there?  I'm not a complete newbie but I feel kind of stuck/frozen and I would like to scale my real estate holding to make some real $$$.

[JD Martin]

Spec house building can make or break you. I lost my *** on it 2 decades ago. I had a perfect storm of things go wrong, and when that was coupled with my inexperience and untenable cash position, it was just a disaster waiting to happen. I've sailed far since then but I have not forgot the lessons of that debacle. With spec house building, unlike things like buy & hold or rehab, you haven't made ten cents of money until the day you're selling the house, and in the meantime you are watching money fly out the door like it has wings. In our case, we used new construction loans, but the slow rate of pay meant that we were front-funding a lot of work just to keep the project moving. 

If you notice, most new construction happens in subdivisions, and this is not by accident - the builder/developer has to have enough units to cover problems and unforseen costs so that it can be factored by volume. This is really hard to do on one-off building sites. For example, our site ended up with an extra $5k of grading costs because of years of buried stumps and debris that was unknown or undisclosed by the seller. If you're doing 10 houses that's $500 per house, but on a single house that's a big chunk of money to eat.