Help with deciding what to do next

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Last March I purchased 2 triplexes for a great price.

I know there was deferred maintenance, roof, gutters, paint, and some cement and landscape issues..

But the deal was too good to pass up. It cash flows well right from the jump..

So this summer and fall I replaced both roofs, installed new commercial gutters, cleaned up trees in yard and just cleaned up yard I. General.

Installed some new outside lighting etc.

I ran out of time to replace the windows and repaint the exterior.

Now that was all expected

The part that caught me a little off guard is I had adopted 2 horrible tenants and one great on that broke his lease 2 months in..

So two apts stopped paying rent and did not take good care of the Apts causing a total gut of 2 of them and a few thousand in repairs.

My original plan was buy and. Hold. And I believe the way I am doing the repairs and what I am doing will last for a very very long time.

But I’m getting down to a couple options

1. Leave mortgage where it is and pocket 2-3k a month. Depending on occupancy and I also want to build out a 3rd bedroom into 2 of the

And that would bring profit up to 3-4K

That being said I will be out of pocket a large chunk of money and it will tie me up a little and harder to make next purchase.

2 was original plan was fix up and refinance and move on.

Problem was this took longer than expected and also the though of pulling in 2k extra a month is a nice thought. But I do really want to continue to grow my portfolio

3 I think I could sell in spring for a hearty profit due to all of my repairs and increases In rents and get free and clear and get out


Some advice for a newer investor please

Sounds like you got a bit sick of Real Estate based on this first deal. Personally, I would scratch option #3 from the choices.

As far as option #1 or #2... it all depends on if you need more cash in order to invest in the next property and what your personal risk tolerance is. 

I think you have 3 good options here. One gets you the cash flow with option to increase said cash flow with added bedroom - analyze the ROI on that investment compared to placing that money into some other asset.

2. BRRRR is a great strategy and option to have.

3. Also a viable option as I will disagree with @Jon Reed above with the caveat that you 1031 exchange into something else to differ the taxes. (which can be stepped and repeated forever if done right).

If the long-term plan is to grow your portfolio, then selling only makes sense if you're going to 1031 into another project with more cash flow. If your loan terms are good right now and you have the funds to improve the properties, don't refinance. Part of the equation needs to be: how good are these properties, and the surrounding area(s). Are they going to be great long-term holds? Or can you 1031 into better properties. It sounds like you may have a golden goose, or two...just make sure you analyze this from every angle. And great job on an awesome start!

Originally posted by @Jon Reed :

@Will Barnard

I read "get out of it" as in getting out of RE all together... I may have inferred the meaning of that statement incorrectly.

Or you may be correct in which case my opinion would be aligned with yours that getting out all together not such a great idea as real estate is the best investment vehicle in my book, hands down. Guess we need to see what the OP has to say on it. 

@Theresa Harris

I inherited the bad.

I have replaced 3 of the six apts.

Rehabbed each one when tenant left and rented for 30% more to better quality tenant

I’m not saying my screening is top notch but much better than the previous owner.

The remaining 3 I have one bad tenant 1 great tenant and one who the rent is 40% below value, she has been there for 15 years though and the apt will need some hard rehab once she moved out. Lease is up in March..

I am not going to renew the lease for the bad tenant. They need to go.

Last owner resigned all 6 leases right before I signed all paperwork when I purchased so it’s taking a year to work these people out

@Will Barnard

Absolutely not wanting to get out all together.

I own 2 vacation properties, one 2 single family homes and these 2 three plexus.

But I will be moving next year and not sure that I want to manage from out of state or not. I am working towards using cozy or something like it.

I have a solid handyman that I can continue to use as well as a strong network of contractors and plumbers electricians etc, I have owned a business in this town for last 8 years but am moving early 2020.

If I sold them it would be to 1031 it into another project. I’m torn because these cash flow very well and the work I have done and have planned would really lock these up to be very low maintenance for the next 10-15 years.

I do need more cash on hand to continue purchasing more properties is the thing. Basically I was planning on doing a beginners BRRR on these but I just didn't buy with cash but have done all the rehab out of pocket and then was going to refinance once I got them all cleaned up.

@Mike Giallanza

These really are a couple of golden geese.

The area is a perfect in between a very nice side of town and far enough away from the bad. They are across from the big public park in town and have just been let go for too long.

Cash flow was very good right from the get go but the deferred maintenance was building up.

Both needed roof, gutters lots of trees cut down, paint or siding and windows are very old. I plan on putting another 25-30k in to them in the spring. At that point my rental income will be pushing $5500. And I’ll be all in at around $225,000-$250,000.

Mortgage is only $900 after insurance, taxes, and I pay water I’m only in for about $1900

So that’s my thing is it is a cash cow but I have also dumped a lot of cash into it.

I would like to pull out some of that cash and roll it into another deal. I’m too far away from retirement and I want to continue to grow my portfolio at a fast rate. (4 properties a year) I would like to break into larger complexes but that is more in my 2-3 year plan .

Still relatively new to this part of the game. I love getting a advise from people that have done this in the past and have the real world experience. I have read so many books and pod casts I jumped in so I can learn this through experience.

Thank you for all your help

Honestly I think whatever option you take would totally depend on how big you want to grow your portfolio.

If you get some good tenants in there your cash flow will grow.  But on the other hand if you have a property in mind that can increase your cash flow it might make sense to sell.  Or refinance cash out, or maybe a heloc.  My rule of thumb is the new property must cash flow more than the previous property.  If it doesn't then I don't sell.  Just my 2 cents.

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