Investor · Kent, WA · Member since 2017 · 3 posts · 0 votes
I'll try and make this as clear as possible. I don't know what to do next:
2 Cash Flow Positive rental houses
Rental A: 66% loan to value, 2 year lease with good tenants, net income: 500/month
Rental B: 37% loan to value, 1 year lease with ok tenants, net income: 1200/month
What do I do now? We have an expensive house we live in that we would not turn into a rental, (too expensive) and bought both houses when the market was lower and rents have steadily increased in the Seattle area.
Should I buy another rental? We don't have $ for a down payment and I'm concerned refinancing either property due to the loan interest rate and positive cash flow. Not to mention, property in the Seattle area is ridiculously expensive right now. Deals can be found, but you must dig to find them and I'm not confident I could finance a deal right now without 25% down.
Rockledge, FL · Member since 2016 · 493 posts · 427 votes
9y
Ron,
What does your business plan say? What do you have in there as a MAX LTV? What do you think the market is going to do? Can you go with a Lease/Option deal? How about an MLO? Can you find an investor partner? 1031 exchange?
It sounds like you don't have a plan to execute, or at the least you don't have a contingency plan. So, what better time to get one than now? Create a business plan, complete with contingencies. Now may be the time to let things sit, let your cash build up ($1700/mo x 12 mo is $20,400) x 2 years is about 40K, plus any savings from your job.
While things are "sitting", I would suggest spending this time to do some additional reading, taking a serious look at your REI business, and maybe think about (GULP!) going beyond Seattle. There are places where 20K could get you a bunch of cash flow, but Seattle ain't one of them.
In short, now is the perfect time to reflect, reconnoiter and reload.
Rockledge, FL · Member since 2016 · 493 posts · 427 votes
9y
Ron,
What does your business plan say? What do you have in there as a MAX LTV? What do you think the market is going to do? Can you go with a Lease/Option deal? How about an MLO? Can you find an investor partner? 1031 exchange?
It sounds like you don't have a plan to execute, or at the least you don't have a contingency plan. So, what better time to get one than now? Create a business plan, complete with contingencies. Now may be the time to let things sit, let your cash build up ($1700/mo x 12 mo is $20,400) x 2 years is about 40K, plus any savings from your job.
While things are "sitting", I would suggest spending this time to do some additional reading, taking a serious look at your REI business, and maybe think about (GULP!) going beyond Seattle. There are places where 20K could get you a bunch of cash flow, but Seattle ain't one of them.
In short, now is the perfect time to reflect, reconnoiter and reload.
Rental Property Investor · Everett, WA · Member since 2013 · 389 posts · 222 votes
9y
@Ron Calloway if I were in your shoes I would do one of two things:
1) 1031 exchange both properties into one large multi family building
2) combine the two existing properties and a new third multifamily property into a portfolio loan and buy that new third property with zero money out of pocket
My philosophy (to some extent) at this stage in my investing career is "Equity is where money goes to die". Good Luck, you are in a great position no matter what you do.
Investor · Kent, WA · Member since 2017 · 3 posts · 0 votes
9y
Originally posted by @Account Closed:
@Ron Calloway if I were in your shoes I would do one of two things:
1) 1031 exchange both properties into one large multi family building
2) combine the two existing properties and a new third multifamily property into a portfolio loan and buy that new third property with zero money out of pocket
My philosophy (to some extent) at this stage in my investing career is "Equity is where money goes to die". Good Luck, you are in a great position no matter what you do.
Thanks! Where can I get more info on a portfolio loan? Will they refi single family rentals into a portfolio loan? Is it something big banks do or is this like a hard money loan?
What does your business plan say? What do you have in there as a MAX LTV? What do you think the market is going to do? Can you go with a Lease/Option deal? How about an MLO? Can you find an investor partner? 1031 exchange?
It sounds like you don't have a plan to execute, or at the least you don't have a contingency plan. So, what better time to get one than now? Create a business plan, complete with contingencies. Now may be the time to let things sit, let your cash build up ($1700/mo x 12 mo is $20,400) x 2 years is about 40K, plus any savings from your job.
While things are "sitting", I would suggest spending this time to do some additional reading, taking a serious look at your REI business, and maybe think about (GULP!) going beyond Seattle. There are places where 20K could get you a bunch of cash flow, but Seattle ain't one of them.
In short, now is the perfect time to reflect, reconnoiter and reload.
Good Luck!
Jim
Thanks Jim - it's hard to let go of the rental that cash flows so much' my loan on it is very low and net profit high. Any markets you'd recommend outside of Seattle?
Rental Property Investor · Everett, WA · Member since 2013 · 389 posts · 222 votes
9y
@Ron Calloway don't mess around with Fannie/Freddie backed lenders (bank of America, keybank, etc) or hard money lenders. Go talk to local banks that hold commercial loans in house like Coastal Community Bank or Bank of Pacific. Also search portfolio loans on bigger pockets and you will find a slough of info.
Rockledge, FL · Member since 2016 · 493 posts · 427 votes
9y
Ron,
It all depends on your business plan. Some like straight cashflow, and don't worry about appreciation, some want cashflow and appreciation, some will take c/warzone properties for cashflow.
Right now, finding the cashflow/appreciation is a tough go. I'm more of a cashflow person, simply due to time horizons. I'll let my heirs deal with appreciation or lack thereof.
I think taking a gander through BiggerPockets and doing some research to fit with your business plan is the best way to go.
I hesitate to recommend specific markets, because everyone's business, risk tolerance, and goals are different. I look at those things more than chasing every last dollar.