Buying a Second Investment Property after a Refi

[Charles Buckley]

Hi all,

I purchased a 3-unit multi family back in December 2019 for roughly $315k. Currently receiving 7k in total rent from this property. 

I’m towards the end of my first refinance and my appraisal value came in around 800k. My current plan was to take out around 250k by refinancing to a 550k 7% loan from a $290k 3.25% interest loan. My payment (including escrow for insurance, taxes, etc) of $2500 would go to roughly $4500. Note: would be using 50k to pay off my debt at closing.

Plan a: Buy into a 1.2m retirement home style 18 unit property (18 doors, 5 bathrooms, commercial kitchen, etc) with $200k. By buy into, I mean the plan would be to take 50% ownership of the current 600k loan. After expenses the property makes around 7k-10k depending on occupancy, which would be split two ways. Additionally I would have 300k in equity.

Naturally, a con for this would be having a partner. However, it could also be a pro as the plan would be to buy more buildings like this together in the future.

Plan b: Purchase another multi on my own. Most 3-4 units in my area are currently around 750k with market rents around $2000-$2500. On a low end that would put me at $1500 left over after all expenses.

Notably, my long-term goal is to continue buying 3-4 unit multi’s and these retirement style commercial buildings. Eventually I would like to fund these deals through doing 1-2 flips and / or spec houses a year. I’m currently self-employed in construction making around $60k a year with an additional 40-50k coming from my investment property.

Appreciate any insight from the community.

Thank you.