Have One Multifamily Under My Belt. How to Keep Momentum Going

[Devlin Harding]

I have a multifamily that I purchased through an FHA loan. I live in one unit and rent the other. If I were to move, I could definitely cash flow approximately $1100 a month after expenses. The property has appreciated about 50k higher than what I paid for it according to appraisal. Any strategies for my next move? Thinking about getting a Home Equity Loan and using for a down payment on the next property. Any thoughts on if I should possibly do a conventional loan and purchase a single family that I believe is undervalued? Keeping in mind reserve requirements, it just seems as though the first move to purchase was hard enough as it is, but now as I prepare to make my second purchase/investment it seem to be dragging my feet as I look for "The Most Value Maximizing Decision". A big part of that is due to my fear of opportunity cost and knowing how long conventional financing takes and how many hurdles it has.

[Jacob Sampson]

In my calculation, the -30% is for vacancy and maintenance, long term. Most beginners think that cash flow is everything left over after you pay PITI. That just isn't accurate for a long term buy and hold. You will have vacancy, you will have bad tenants, you will replace expensive items. If this is a long term hold then you should use long term numbers.

Also, remember that setting aside some percentage of rent for maintenance is just a rough average.  There isn't anything that directly ties the amount of rent you collect to repair costs.  If you have 2 identical homes, one renting for $500 and the other $1000, replacing the roof is going to cost the same it won't be cheaper for the lower rent home.

If the buy, live in, fix-up, then rent out works for you and you are comfortable with that strategy why not stick with it.  Do what you know and enjoy, getting creative doesn't necessarily make you more money, it likely means you are taking on more risk and playing a game you aren't prepared for.

Everyone's goal in real estate is to create a machine, where in, you stick $1 in the front and it spits $1.20 out the back.  Once you have that machine built, tested, and working consistently, the problem becomes how do I get more dollars to stick into this machine.

But, you are more likely to be successful building that machine, doing what you know and enjoy.  If you master your own strategy, you will be much more successful than the guy that executes many strategies marginally.

Whew! Man I ramble.