Where do we go from here?

Question

My husband and I are able to pull about $350K in equity from our primary residence. We have 1 duplex rental with 3.7% interest rate on the mortgage. It cash flows $1000 per month and it has $200K in equity.

We want to use this equity to grow our rental portfolio.... we are interested in multifamily (5+ unit), mobile home parks, possible LTR or MTR smaller multiplex. Our main goal right now is cash flow.

Any advice on which direction to go in? Should we take equity from our rental and/or primary residence? Invest in multifamily or mobile home parks? Invest in multiple duplexes?

Side note... we are looking for a real estate investor mentor as well.

Thank you for reading and taking the time to give a response

Bill B. · Answer

Just a couple hints.

4 units or less will almost always have better financing

It will be hard to access the duplex equity without refinancing your loan, giving up that interest rate will make the effective rate very high on borrowed funds.

I assume your current primary would make a bad rental and you wouldn’t want to buy a new primary and rent it out.  I also assume you don’t want to sell your primary and downsize to raise capital.  (Or move in to one of the 4 units in four plex.)

Cashflow is going to be a hard ask at today’s rates and today’s prices outside of remote markets where you have zero experience or local knowledge. Don’t risk your current good performance chasing returns in investments you know as well.

Mohammed Rahman · Answer

Hey Monique,

I’d just be careful about pulling equity out of everything at once because the goal is cash flow, and leverage can work against you pretty quickly if rates or expenses move the wrong way.If your main goal is cash flow, I’d start with the asset class and market that gives you the best risk-adjusted cash flow rather than deciding upfront that it has to be 5+ units or a mobile home park. I’d also be hesitant to touch that 3.7% mortgage on the duplex unless there’s a very compelling reason. That’s a great piece of debt.

And before looking for a mentor, I’d start networking with investors who are already doing the specific type of investing you want to do. Local meetups, REIA groups, BiggerPockets events, etc. can be great for finding those relationships. You’ll probably get more value from someone who has actually built the type of portfolio you’re trying to build than from a generic real estate “mentor.”

Best of luck to you both. I am always available for any questions you guys may have along the way - just send me a DM!

Nicholas L. · Answer

@Monique Swanson

hello.  if you finance 100% with "equity" it will be very, very difficult to make money, on any asset class.  rates are too high.

i would try to use cash, or use the borrowed money for something short term.

i hope this helps

Where do we go from here?

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