How should I continue to grow my dad’s portfolio?

[Navid Sadighi]

Hi guys,

I need some advice from the pros on if and how I should try to grow my parents real estate portfolio. My dad invested in some real estate 10-15 years ago. He has 6 investment properties and his primary home. His investment properties are all single family homes in California.

He now has dementia and we sold his business and he and my mom are living off of the rental income. California though is so expensive that I want to try to create more streams of income with more properties. But I’m nervous to invest their money as I’m pretty new and an amateur to investing. I personally have one property that I purchased in 2017 that’s built some equity but I’m definitely an amateur investor.

So some basic numbers on these homes:

Total estimated value of all homes including their primary home: 5.8M

Total remaining loans on homes: ~900k

Interest rates on these homes range from low 3’s to mid 4’s

So two questions:

1) Do I need to cash out refi each individual home if I want down payment money or can lenders lend based on the entire portfolio?

2) Should I look into multi family or continue the single family route?

Any and all advice is greatly appreciated. Thank you.

[Theresa Harris]

Honestly, I'd talk to a good CPA or estate planner about starting to sell off some of the properties while trying to reduce their capital gains taxes.  What they are bringing in vs what the properties are worth likely means you could put that money in a high yield savings account, reduce the risk and probably get as much in interest as you net with the rentals. Annual interest on $500K @ 5% is $25K per year. Plus do you have the time (and knowledge) to deal with rentals?  You are likely going to have to spend more time helping your mom and better to enjoy the quality time you have left with your dad.

Go through each property and write out what it brings in, expenses, etc and rank them as to the one you want to get rid of first.