Hi guys. I wanted to get your opinions on my next steps for an investment. I'm gonna put my business out here a bit so here it goes: we recently bought a 2 family. It makes us about 12k net income a year. We have about 100k left on a HELOC. A comfortable amount in savings. No debt except for 50k we used to purchase duplex. What do we do next?
1) focus solely on paying down 50k loan?
2) use 100k to buy a small SF? We don't have time to rehab. Somewhat turn-key SFs are over 100k around here. So we kinda can't afford it.
3) just sit and save for another property?
4) get another loan?
5) find a partner? I don't know any other investors but I'm trying to talk to people in the community.
Did I miss something!? Please let me know your thoughts!! I'm doing my homework in the meantime. I'm really enjoying investing/real estate so I'd like to keep the momentum going. Thanks!!
It's a little hard to answer your question when we don't know your goals. Do you hate debt and don't mind slowly building wealth? If so, then yea double your mortgage payments, get that debt paid off. Save as much as you can as well. Also, while you're paying off your loans, you can gain experience as a renter. Within a year or two you can apply for another loan and include that net rental income as part of your monthly gross income. Please keep in mind that every lender is different, but generally that's the case.
Do you want to build wealth faster? If yes, then I suggest you leverage your debt. Like you mentioned above, get another loan, find a partner, get private lending.
Not sure if I understand your numbers correctly, but if you have equity in your main home you can always refinance and take out cash and use that as a down payment for the next house.
Before you decide to move on to another property it is very important that you have a reserve to cover around 3-6 months of the rental expenses for each rental. That way if you lose a tenant, you will be able to cover your minimum payments.
Have you read many books on real estate investmenting? I suggest you do research and soak up as much information as you can! Learning from other people's mistakes is much less costly. I have read: Millionaire Real Estate Investor and am currently reading on investing in duplexes, triplexes and quads.
I also suggest you read the beginners guide that this website offers for free and do a quick search in the forums to find other very helpful reads.
thanks very informative!
I think @Nicole B. has the right idea about goal assessment, that should definitely go hand in hand with your risk assessment. Given that she has already said that, I will go a slightly different direction:
What did you do on your last deal that could be substantially improved?
Sometimes you don't negotiate hard enough, get bad loan terms, work with poor contractors, forget to look at the expenses and CapEx with a critical eye, and the list goes on.
Knowing what you now know, what would you do differently? I suggest that the answer to that question is what you should consider in your next deal. Best of luck.
thanks @Trevor Ewen ! Very well put.
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