How do I buy 4 doors by the end of 2024?

[Kay Bailey]

Hello everyone! 
I’m seeking some advice on the next step to take to purchasing a duplex or a triplex. My location preferences are GA, NC, or TX ( avoiding anything around the Gulf). Here is my situation.

My primary residence in South Florida is a condo with a 3% interest rate. I’m not in a position to sale it right now due to family obligations but, I want to use the $100k+ equity to finance a down payment for a rental property. I’d use a home equity loan. I’d like to find tenants that have guaranteed income so I thought it might be a good idea to rent my first duplex out to people on section 8. My goal is to have at least 4 doors  by the end of next year. My only income is from my lower middle class 9-5 income and house hacking.

1. Do I go ahead and start house hunting and utilize a home equity loan? 
2. Do I focus on paying off debt and then move on to my next property? 
- Car has $14k left at 2.7%
- Student loans, $20k left at 4% ( Federal)

3. Choose a SFH since there are more options?

4. Other options?

[Randall Alan]

Quote from @Kay Bailey:

Hello everyone! 
I’m seeking some advice on the next step to take to purchasing a duplex or a triplex. My location preferences are GA, NC, or TX ( avoiding anything around the Gulf). Here is my situation.

My primary residence in South Florida is a condo with a 3% interest rate. I’m not in a position to sale it right now due to family obligations but, I want to use the $100k+ equity to finance a down payment for a rental property. I’d use a home equity loan. I’d like to find tenants that have guaranteed income so I thought it might be a good idea to rent my first duplex out to people on section 8. My goal is to have at least 4 doors  by the end of next year. My only income is from my lower middle class 9-5 income and house hacking.

1. Do I go ahead and start house hunting and utilize a home equity loan? 
2. Do I focus on paying off debt and then move on to my next property? 
- Car has $14k left at 2.7%
- Student loans, $20k left at 4% ( Federal)

3. Choose a SFH since there are more options?

4. Other options?

 @Kay Bailey

I’m all about what you want to do.  We own 37 rental units, and have flipped 6 properties in the past 5 years I’ve been in real estate.

Here’s the hard part for you:

The cost of Your borrowed money, plus the cost of property management, plus the high cost of real estate right now is going to make it very hard in the short term to find a deal worth doing. 

Have you run some numbers yet?  Pick whatever market area you are interested in.   Pick 3 different priced  homes (real listings) you think would be good rentals - a low, a medium, and a high - within your budget. 

Calculate your principle, interest, taxes, and insurance.  Taxes you can get off the local property appraiser’s website.  Or you can cheat and just use Zillow’s estimate of all of these… but be sure to put zero down into their calculator because you are borrowing both your down payment  (Heloc) as well as the loan on the primary mortgage. 

Next, use Zillow, or any other website to look at the surrounding rentals to see what SIMILAR units are renting for.  Be sure to subtract if 10% of whatever rental income you find to pay your property management expense, and subtract off at least $100 for a maintenance reserve to help cover repairs over time.  

My bet is this:  your cash flow on each of the properties will either be negative, or under $100 after accounting for all the expenses I just listed.   It’s just not a good time to be trying to buy using borrowed money until rates come back down.  Notice I’m not saying it can’t be done.  It’s possible you find an awesome deal, so by all means try!  But realize that real estate, and interest rates are cyclical.  You have come in on the high side of the cycle.  My suggestion is that if you can’t cash flow at least $300 a month on a 1,000sf rental unit, you should wait for the market to improve. 

The other things you mention are mostly secondary. SFH or duplex… the duplex will give you a little more security in the event of a vacancy… but we ultimately figured out we can fill almost any unit within 3 days of listing it, so it wasn't as huge of an advantage as we thought it would be. SFH's are far more plentiful… so either will be just fine.

Section 8 / guaranteed rent comes with strings… inspections, rent controls (ie you can’t just raise the rent when you want to… you are subject to their rental rates.) Just be smart who you put in as a tenant (ie screen them well)… dual income is better.  Or single females have been good for us as well.  Lots of kids usually equals high wear and tear on your unit and more fixes when they leave. 

Personally I would suggest trying to buy locally to yourself and self manage your units.  It’s really easy and you make more money (no property management).

All the best!

Randy