I did a 30/yr Cash out Refi on my primary home, to start real estate investing. With it I bought a 50k 3/1 SFH in another state, and is currently rented for 950$. The loan for the cash out refi is 675 a month without insurance and taxes included. I still Have 30k left over the cash out refi. I would like to reinvest the left over cash for a duplex or larger. What should I consider doing next? Using the 30k as down payment. Use the 30k to payback the cash out refi. Purchase smaller properties and split the 30k between them? Any advice would Appreciate.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
I would save it for reserves or pay off any consumer debt. What kind of area is the 50K one in? I assume lower end so you would want cash set aside for repairs, evictions or vacancies.
Real Estate Broker · Fort Lauderdale, FL · Member since 2018 · 196 posts · 191 votes
1y
You are in a great spot with your first rental already cash flowing well, and now you have $30K left to put to work. The next move depends on how quickly you want to grow and how much risk you are comfortable with.
If you want to scale faster, using the $30K as a down payment on a duplex or triplex could be a strong move. A multi-unit property would increase your cash flow and build equity faster. Depending on the market, you might be able to finance a property in the $150K to $200K range with 15 to 20 percent down. If you are open to house hacking, you could even go FHA with just 3.5 percent down if you live in one of the units.
If you prefer a safer play, you could use the $30K to pay down your cash-out refi. This would lower your monthly payment and free up more cash flow, but it would also slow down your ability to acquire more rental properties.
Another option is splitting the $30K across multiple small rental properties. Instead of one larger deal, you could buy two single-family rentals similar to your first one, each in the $50K to $60K range. This would spread out your risk and diversify your portfolio, but it would also mean managing more properties.
One thing to keep in mind is how you plan to finance future deals. If you use a conventional loan now, that counts toward the limit of 10 investor loans under Fannie Mae. If you plan to grow beyond that, you may eventually need to look at portfolio loans or DSCR loans, which focus on the rental income instead of your personal income.
Whichever route you take, having the right real estate team can help you find the best deals and negotiate terms that fit your goals. And remember, commissions are always negotiable, so you can find an agent who understands your strategy and agrees to terms that work for you.
Hope this helps, and looking forward to seeing what you decide next.
Disclaimer: I am a licensed real estate broker associate in Florida, but I am not an attorney, CPA, or financial advisor. The information shared is based on my experience and industry knowledge and should not be considered legal, tax, or financial advice. Always consult with a qualified professional before making any real estate investment decisions.