What should I do sell my SF so i can buy multifamily or rent it?

Question

I'm in active duty military currently stationed at Shaw airforce base but I bought a SF house in 2019 of May for $170k. I have 8 months left until I get out the military and really start full time investing into multifamily. My question is Should I sell my house which is brand new construction since 2019 in Lexington SC redbank area which is currently growing and new construction of businesses and more houses being built in my neighborhood. Or should I sell my SF for about $250k-$270k and take the profit and start buying multifamily properties? I live in a 4 bedroom 2.5 bath house 1900sqft 2 story. I believe I could maybe even refinance and lower my APR and lower my mortgage and put renters in there where I might be making about $1000 in passive income. But depending on what I buy as multifamily which I was looking at buying and starting my business in Colorado Springs area and make about $1200 passive income. I've been doing crazy math so please bear with me. I also was thinking...Sell my house make $50,000-$70,000 cash use my VA loan to purchase 1st multifamily with no down payment and house hack the 1st property than buy another multifamily with the cash I make from my single family, allowing me to live for "free" and make $500+ on passive income and than make $1200+ with 2nd multifamily and if finances allow buy a 3rd multifamily from what I have left from single family. I'm trying to start investing in Columbus Ga area since it's cheaper there and it's close to military installation and in Columbia SC as well. That is just to help me build my portfolio and than partner with great people.

Colin Smith · Answer

@Larisa Dalekorey - I see a lot of opinions on this thread which can be great but I think you left out a key ingredient to the equation. What goal are YOU trying to accomplish? Depending on how you answer this will greatly vary what strategy you want to take. Are you trying to get the most passive cashflow? Are you trying to build a bigger portfolio? What do you need for your business? etc.

Marc Rice · Answer

Could you refinance your new build SF, take some cash out, and free up your owner occupancy VA credit and use the VA loan for a 0% down 2-4 unit? Then you could use the left over money from cash out refi to buy another investment property at 15-25% down payment?

David Ginn · Answer

Hi @Larisa DalekoreyWe are at the height of the market. Best way to move into a rental position. You might have a cash flow for five hundred bucks. if you make a thousand a month in cash flow, which is $12k a year, which is just as a super-duper return. If you make it thousand a month and $12k a year, and the market corrects back, make it this year. If that house was worth $170k and it jumped to $250k, those games will be given back, so the amount you will lose was in that property won't be $30k to $50k on a daily cycle, so the $12k you make in a year will be blown apart by the loss inequities you will sustain. They tell this by at the height of the market and wait it out. Your loss inequities will out peace, your cash flow gates, and your market will correct back on. So number one is fundamentally my answer. Your hurry, Don't go into multifamily investing, go into flipping, so the smartest move you can do right now sells. That house got out of it, pulled seventy Grande out and equity, and then took that money and bought it. Another house and renovated it into flip it and pulled those revenues out. So the smartest thing you can do right now is at the height of the market. You keep pulling to a cash position. You literally go in and you sell that house, make your $70k net, buy another house renovated, flip it, make another $30k grand or whatever it is, and build. You are in your cash right now, you're in a high market. You buy, renovate quickly, and flip quickly, and you continue to do that. If your market clubs that liquor correct spec, you still flip through a down cycle. You don't buy an old cause, you don't want it to go from a million eight hundred thousand, so you flip quicker and you pull profits out the whole time that the market corrects back. So in this case, my advice to you is to sell your house and pull the profits. what'd, you get those profits, even if you have to sell your house and become a renter which is not going to be like me saying you sell the house because of a rancher because, at the end of the day, when you buy a home, the majority of your payment goes to interest. You can also sell your house and buy another house because right now the numbers are going to go up, but it's not going to climb up to where it's going to be worth it. So you sell your house, become a renter, eat beans, rice and we're all rich men. So don't rent a nice big home, very small homes so your payments are low, because if you bought right now all your money, he would be going. You should start flipping homes by renovating flip by renovate flip and start to pull all those profits. So that's my advice to you. Your other thing is what you say here, this idea of the BRR method is set all over that, but what you really need to do is don't refinance, because if you refinance now you're stuck in a house a year from now where the market collapses, your equities are gone and you can't pay the debt off. that one of the things is she talked about cash out, refinance. You can do that if you go borrow money against its property right now and you get a hundred percent out, which most lenders aren't going to do this much as you can get out. The providence is only going to probably give you 70% or even 50% of your value. The idea of cash-out refinance seen is unlikely because most of the banks are looking for the correction also and so they're not really getting a lend you a low internet house hacking. Basically, what you need to do is get into the mode where you're buying, renovating, and flipping. They often tell you to do this by renting it and refinancing it. Don't want to refinance anything right now. The reason is that if the market went from $200k to $300k and it's getting eventually corrected back here at some point you're going to lose your equities in that home. In that lonely, you got that you pulled the money out of is now there to be upside down and you're in a short self Position. The other thing is when your cash-out refinance gets 70%-80% even you're. Still even 20% of your equity is on the table. You'll pay to resell fees which getting data, but at the end of the day, I don't recommend cash-out refinance. I know it's completely contrary to what everyone else is telling you at the end of the day, sell the asset, pull all the cash out of it, and then move that cash into another asset and do it all by rent, wash rinse, and repeat, wash rinse and repeat over and over again.

If you have more questions, let us know how we can help.

Good luck

Jeremy Gaal · Answer

@Larisa Dalekorey you're finding multi-family in Colorado Springs? In terms of the question you pose, for me it would come down to finding a good PM because investing out of state has its own set of fun associated with it. I look at always trying to keep what I have as opposed to selling, but thats me. Gotta love the VA loan though, its a huge part of the reason I'm doing as well as I am investment wise.

Larisa Dalekorey · Answer

@Caleb Brown Yes I have a good PM to help me with my SF home. I'll give them a call to set up a meeting.

Larisa Dalekorey · Answer

@Jeremy Gaal I eventually will move out to Colorado Springs to start scouting the area in person and connect with good experienced investors. I have a good PM in line in my area that I will be working with so I can continue to grow in investing.

Colin Smith · Answer

Hey @Larisa Dalekorey,

I think you are starting to put a great game plan together. Slow growth makes for steady gains!

I would recommend talking to your lender in terms of the refinancing the current VA loan. There has been some changes to the VA lending world that allows you to have significantly more, possibly unlimited, VA loan lending with the stipulation that you're moving to a new market for each new VA loan. If the sole purpose is only to convert the VA loan to conventional to make it conventional then you may not need to. I helped many Buyers over the last several years get very good interest rates with the VA eligibility and you may want to maintain those loan terms and monthly mortgage payments. The cost to refinance isn't cheap.

Certainly as you're coming out to Colorado Springs we will want to connect. I've helped many investors use their VA loan ot purchase small multi-families, to include fourplexes. Many fourplexes also need light cosmetic remodels which might make these be a perfect fit if you're up to the challenge. And of course there are always options in the single family world.

3 properties by the end of the 2022 is absolutely an achievable goal!

Larisa Dalekorey · Answer

@Colin Smith Yes it makes sense. I'm trying to turn my VA home loan into conventional loan where in my specific area I'll be making 10% CoC ROI which will be $504 a month. Than use VA home loan to buy either SF again or multifamily that can have a little TLC like (new paint, new floors...I'm not looking for crazy major construction project for my next property) But that will add value to the property after a year because 1. it's been renovated 2. it's going to be close to military installations 3. I will repeat the process of turning my VA loans to conventional loans (if it gives me good outcome) But what's important to me right now is to be able to build passive income more than getting 100 units in 1 year. I'm trying to make the best move possible and not get myself into a situation where it will be harder to get out of. With income coming in and after refinancing I'll have some cash to put towards minor renovations to build equity. Also, my goal for 2022 is to have a total of 3 properties before 2023. I may have to go again with SF than for 3rd property go with 2-4plex.

Jeremy Gaal · Answer

@Larisa Dalekorey awesome. I started my investment journey be refinancing a VA loan to conventional then bought another house VA. You have some great options in this thread and let us know where you end up choice wise!

Colin Smith · Answer

Hey @Larisa Dalekorey,

I ask what your goals are as passive income and building your portfolio are two opposite ends of the spectrum if you're only utilizing the current assets. If you have a large amount of cash in the bank that you can deploy then you could increase your portfolio and cash flow but I get the feeling that isn't the case.

You could sell one property to pay off another which thereby increases cash flow but doesn't increase the portfolio. Sell one to buy another which might be an even exchange but keep in mind selling real estate isn't cheap. Or you do a cash out refinance to purchase another property which will grow your portfolio but is going to decrease your cash flow as more leverage (borrowed money) means a highly debt servicing cost. Does that make sense?

If it does, then what part of your goal is more important? Growing the portfolio or increasing the cash flow?

What should I do sell my SF so i can buy multifamily or rent it?

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