Best way to invest 30k, BRRRR one property or multiple turn key?

Question

My wife and I currently live in a home we purchased for $12,000 seven years ago.  We are located in the Buffalo/Niagara region of New York.  The home was zoned two family and we left it as such but have lived in it while we rehabbed and utilized as a full home.  We used hard money to rehab with a mix of our own money and refinanced once all repairs were done.

The home was assessed at 70k upon completion, seven years ago, and comps in the area are now between 80 and 90.  We will be closing on a single family, for us, in August.  As soon as we close and move we plan to rent the two family out for approximately 1400 per month (combined) which allows us to cashflow 1,000 with the 15-year mortgage payment.  The cash flow is only taking mortgage, ins, and taxes into consideration.  We plan to put all cash flow in an account with a goal to reinvest prior to the money being considered income so we need to make sure we are reinvesting it relatively quickly (outside 30% for repairs and incidentals).

We are looking to leverage the equity as soon as we are fully moved and this place is fully occupied (goal is by October 1st to be occupied).  I have found a lender willing to lend 85% of the assessed value minus what is owed (30k).  This leaves us 29,500 to invest (at 70k assessment).  We have personal money saved for incidentals and cushion in case of something unexpected hitting while we build up savings from cash flow for cap-ex.

Now that I am done with the long-winded intro, on to the question.   Would we be best to focus on a single BRRRR with a target to refi by jan/feb 19 or is there a potentially better strategy one may recommend to build out a stack and increase available capital to reinvest?

The longterm goal is buy and holds.  We plan to focus on BRRRR's but are not opposed to turnkey or flips if the deal is right but it is not where our focus is.   We truly believe our area is at a low end and has a ton of upside before we look to expand to other areas.  Any help, direction, or reference material is greatly appreciated.  I have read the book on rental property investing as well as other sources of information, but am always open to more knowledge.  I value real-life experience just as much so please feel free to share.

Anthony Dooley · Answer

@James Partsch Jr It sounds like you got a great rental. The rental income is considered income by the IRS. Reinvesting it has nothing to do with your tax return. I would not borrow on the rental to only get $29K. You only owe $30K on it, so I would use the new rental income and your regular income to pay off the rental. How cool would it be to get $1400 per month in cash flow with no mortgage? Then you will be able to save aggressively for your next purchase. If it were $100K of equity, then you could buy another rental with cash, but $29K is not going to change your life.

Anthony Dooley · Answer

@James Partsch Jr you missed my point Jimmy. By paying off the duplex, which sounds like you only have $42,000 invested, you increase your cash flow which allows you to buy more property and handle expenses. I'm not talking about parking your money for years. You can do what you want, but I have a lot of paid for rentals and it doesn't matter what the economy does, if jobs increase or decrease, or who the President is. I cannot be foreclosed on and that is peace of mind. Once you have several properties, you will have enough equity to leverage into a bigger investment, like an apartment building or mobile home park. One duplex will not change your life, but 20 -30 units will.

Anthony Dooley · Answer

@James Partsch Jr keep in mind, some areas of the country are at all time record home prices. Not the best time to buy. If you stash $1400 per month away for a few years, the housing cycle will turn over again and you will not only have dry cash on hand, but prices will be lower. Getting rich slow is the fastest way. Best of luck.

James Partsch Jr · Answer

Thank you @Michael Pearse and @Gary Lipsky.  Looks like I have my goal to focus on tomorrow.  I’ll get the HELOC resolved, or at least begun moving towards execution.

Michael Pearse · Answer

@James Partsch Jr You are in a great position to get started. I recommend finding a house a house that needs some rehab, and add value to it. Following the BRRRR method is a great way to keep up momentum and making deals happen. This will give you tons of experience and build up the empire you are looking for. Use a small bank for investment loans as they will give you better mortgage options (they could let you refinance immediately after rehab, use equity as a HELOC, use multiple properties equities combined for the next deal, ect). Keep on learning and taking action. You are on the right path.

Gary Lipsky · Answer

@James Partsch Jr Get the HELOC now.  Don't wait for a deal so when one presents itself you are ready to go and potentially beat out the person that has to work on their financing.  Good luck and keep us in the loop in what you do.

Gary Lipsky · Answer

@James Partsch Jr I'm in the leverage camp.  If you have an opportunity in your market, grab it now.  Don't forget that taking out money will increase your monthly payment so account for that.  Assuming you want to maximize your money, turnkey is not the way to go for you.  If you can show a few profitable deals then raising some money to scale up shouldn't be a problem.

Mike D'Arrigo · Answer

@James Partsch Jr You don't need to wait until Jan/Feb to refi and pull your money out of a house that you paid cash for. The Fannie Mae Deferred Finance program allow you to refinance within 6 months. In fact it requires you to do it within 6 months or else you have to wait 12 months. That would free up your cash quicker and allow you to build a portfolio much faster.

James Partsch Jr · Answer

Thank you @Gary Lipsky .  Good catch on my miss of that fact.  The payment will go up.  We will not refinance the home as we have six more years (originally a 15 year).  Going to go the HELOC route if a deal warrants.  I do have this in my math but failed to even mention it above which is a HUGE miss.

James Partsch Jr · Answer

@Mike D'Arrigo , thank you for that information.  I was unaware of this information and what you shared is exactly why I love the BiggerPockets community.

Thank you!

Best way to invest 30k, BRRRR one property or multiple turn key?

Most Popular Reply