Have 230k-300K in equity, moving, what to do?

Question

We  we are moving, from Indianapolis to Asheville.

Where we are:

1. I have a good job that make 3-6k month.

2. My wife has a business that makes 1.5-3k month.

3. 4 month old.

4. I know lots of people who would loan money, for a good deal.

5. ~$270K in total equity.

6. Must buy a house in Asheville this year.

Goals:

1. Financial freedom.  I would prefer to work only on my real estate investment.

2. Travel without limit.

3. Financial stability for my family.

What I'm thinking:

1. BRRR in Asheville for a multifalily, a la @Brandon Turner

a) Direct mail, I did it for a previous business and it worked well.

2. Standard mortgage duplexes in Indy

a) I have a lot of contacts there and plant to go back often.

b) The MLS has many $145-190k duplexes that rent for $900-1000 a side.

What do you guys think I should do?

Account Closed · Answer

Hows the fix and flip market there?

Wayne Brooks · Answer

@Paul H. If you sell your house now, any profit is tax free since it's your primary residence, assuming it has been for at least 2 years.  You could rent it out, but if you don't sell it within 3 years you'll lose this tax free status.....section 121, you must have lived there for at least 2 of the previous 5 years when you sell.  If you don't have a large gain, then it doesn't matter as much.  Just something I wanted to make sure you were aware of.

Paul H. · Answer

Please clarify.

Wayne Brooks · Answer

@Paul H. You need to sell your home, I assume you've got some decent gain there.  Right now the profits will be tax free, after 3 years they won't be.  Then decide where to put that money.

Paul H. · Answer

We own our own home outright, thats the $270K

Jeff B. · Answer

GO for the duplex - - live in one and the tenant will cover your mortgage.

Good intro into being a landlord and you're there to oversee when necessary.

Option two:  1031 exchange, moving your equity into an investment w/deferred capital gains taxes

Travis Sperr · Answer

@Paul H. You mention the $270k total equity - is that in one primary home or spread over a few houses?

Not speaking directly to markets (I believe you can make it work in any market), but to your 1st three goals. My wife and I have found the key to our success as we got started was to live far below our means - not top ramen - but very conscious of spending and saving to reach our goals. With that in mind, buy as inexpensive as possible and use the remainder of your equity to start buying cashflowing properties. Save your pennies and repeat.

Paul H. · Answer

Ok, It's pretty much decided that Asheville won'y be my primary market.  I'll get a cashflowing property nearby and start a yellow letter campaign in Asheville to see what i can get.

We decided to move to asheville because it is one of three places in the US we WANT to live (@Joshua Dorkin Denver is another, I'll keep watching your job board). If i have to rent in Hendersonville, or Johnson City, or even Knoxville I will.

But what is the best way to use my equity, bearing in mind I soon want to be a "happily unemployed" investor, and I'd like to do it in 5 years?

Dana Whicker · Answer

^ Pat beat me to it but yeah Asheville is an insanely hot market. If you're going to try to find something with direct mail start now and repeat and be consistent.

Pat S. · Answer

Paul,

I'm in Asheville.  Investors are active here (we have a great and active REIA).  But unfortunately at the moment we have a really low inventory on the retail market.

For example, a 6 month inventory is considered balanced, under 6 would normally be a sellers market, over would be buyers market.  Running quick numbers thismorning on single family homes under $250K in Asheville... there are 182 homes active or under contract and over the past 6 months and average of 71/month have sold.  That puts the inventory in that segment at about 2.5 months.   That's pushed up prices of even the most distressed properties.  In the $300K-500K it's more balanced and over $500K is still a buyers market for the most part.

There are a few good wholesalers finding deals for investors (Rodrigo who isn't active on the forum any more is the CRIEA president now and runs Asheville Cash Buyers.) And several investors here do their own direct mail/bandit sign campaigns to find their properties.

Mutli-Family (residential/under 4 units) in Asheville right now shows there are 17 active or under contract and over the past 6 months an average of 2/month have sold, so that looks to be more balanced market but with a smaller pool to choose from.

If you go outside of Asheville there are areas where the market is more balanced, if you're familiar with Asheville you'll know that every area outside of town has a different feel.

Hope that helps give you a quick overview of the market.

Thanks,

Pat