Leverage Current Equity or Sell and purchase multiple properties?
I'll try and keep this as clear as I can. I'm fairly new and my market is Lawrence, Kansas. For those who don't know this is a college town that has approximately 50% of it's residents as renters. I am not looking to target the college market at this time but more interested in the SFH and little higher quality tenant.
Here is my current situation. I have one investment property and am an"accidental landlord". I've come to find out that this is an investment strategy that makes a lot of sense to me. I have the opportunity to tap into the equity of my former primary residence or to sell it and purchase multiple other properties. I'm ready to grow beyond one investment property and am trying to decide which is my best route.
The rental is under a 3yr lease and was my primary residence prior for 5 years. That would mean my home meets the requirement of primary of 2 yrs within the last 5 to avoid capital gains. I realize that I will have to pay realtor fees if I go this route.
I struggle with the HELOC because I feel like I'm financing 100% and our market doesn't support properties cash flowing after expenses when financed at 100%. The concept is tough for me to grasp but I do understand the leverage. Paying back the heloc would be similar to me saving for my next down payment. I guess it's a "mental block". I'm not willing to invest outside of Lawrence at this time because that's my comfort zone and the market I understand.
Basically am trying to find out if it's worth it to sell after the 3 yrs of a tenant and save capital gains taxes... it also would allow me to bypass the 1031 struggle of buying multiple properties. Or should I keep it and tap into my equity?
Current Value- $245k and was built in 2010. Low maintenance finishes.
Current equity is- $90-95k so I would have access to $76-$80k in equity via the HELOC. Yes I was quoted at 85% HELOC from my lender. My lender however can not offer interest only. I will be looking for interest only. With a little of my cash I could probably buy 3 SFH.
A really good deal is meeting the 1% rule in my market. I have a great realtor who is experienced in investment properties. A recent great deal and similar to what I'm looking for was a home for $140k (Actual value was $152-155) that was rent ready and rented in a few weeks for $1325.
Details and analysis of current property. It's a high end rental for my market and cash flows very well for our area. It's a slab home that's 3/2 and should be fairly low maintenance due to it's age.
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