Trying to figure out my next investment strategy? - Please Help!

[Mike Lynch]

Hi,

I have been visiting this site now for months and have purchased "The Book On House Flipping" and "Estimating Rehab Costs" by J Scott along with "The Book On Rental Property Investing" by Brandon Turner, plus several other books. I have read them and they are great. Wow! - There are just so many ideas on how a person an do things in this business.

My wife and I purchased a foreclosure with cash for $118,000 that needed a ton of work. We will have invested around $90,000 in it on rehab when finished, so that brings it to $208,000. ( New sewer, new windows, new HVAC, retaining wall, hardwood floors, carpet, driveway, etc. ) According to an appraiser, a contractor / home builder friend of mine, and a realtor, the home will be worth $360,000, give or take, when we get it finished in a few months. All of the homes in the neighborhood are $300,000 to $500,000 and ours is the third largest one in the neighborhood at 3008 sq., on a saltwater river, waterfront community. Currently, we owe $75,000 on the 1988 small ranch 3/2 home that we live in now.

After plugging in the numbers like on page 116 of "Rental Property Investing", by Brandon Turner, our Capex will be $437.00 per month to keep the home. Within the next 15 years, this home has $50,000 of vinyl siding to be replaced, $15,000 worth of HVAC units, $12,000 of Balcony Decks, $18,000 hurricane roof, $7000 appliances, and more!

My wife fell in love with the view and all of the sea birds and has been dying to live in it. Heck! --- We can't afford or want to save up $437.00 Capex per month. That's like a total house payment from now on. We just don't have that kind of income now! Also, short term rentals are now out of the question, after I made a few calls and asked some neighbors about it. All of our neighbors are just way too quiet and I have been warned that they will not tolerate it at all. It is like Retirementville USA. Not gonna work in this neighborhood, I can tell you!

My goal: -- Get out of my current situation of owning and operating a small plumbing company. Why? -- Getting too old to Army Crawl under houses all day long for a living with never ending aching bones and muscles. I am sick of it. I want or need to go in to Real Estate Investing full time.

What to do, what to do?

What am I going to do with the river house? ( Sell it, rent to own it, lease option it )

Do I first need to sell it and pay off the home that I am currently living in for $75,000 and get that out of the way or are there much better options? Would there be any good reason to try and keep the big river home? -- I can't think of any right now. It looks like it will eat us alive!

Please give me some ideas of some strategies that you would do if you were in this situation today of the safest way / smartest way to be on the road to full time investing so maybe I can quit my hard manual labor job that I have been doing for over 25 years. I am all ears and totally open minded to your suggestions! :)

Thanks so much!

Mike

[Karen O.]

You don't say if the $90k invested is cash or credit.  And you say you owe 75k on your current home, but you don't say if it has appreciated in value. So, it's hard to make a comparison.

Were it me, I'd finish the flip, payoff my home, get a heloc on the primary and start looking for the next project.

Selling the foreclosure will generate $150k before carrying & closing costs. Presumably, selling it will allow you to payoff your primary residence and will free up over 200k to allow you to do your next project.

[Eric Davey]

Perhaps if the numbers work, could you sell your current home, if you have lived in it for more than 2 years, in order to pay a more favorable capital gains rate, then move into the new house. Then refinance and get cash out that way, in order to move to the next project?

[Mike Lynch]

Karen O,

The $90,000 is cash that we are spending not credit.

Our home that we owe the $75,000 has not really appreciated. Pretty much all Real Estate around here has dropped by 30 or 40%. We live near Holden Beach, NC. Actually, at the river house, I can see Holden Beach from the top balcony, 4 miles away.

Eric,

We could do that I suppose, but It will be give and take. We have no HOA at the home that we live in now. There's nobody to tell us what trees to cut, what colors are acceptable to paint the home, when to mow our lawn, what kind of vehicles can be parked in the driveway, where to place our garden hose and trash can, etc. We have 100% freedom, pretty much.

At the river house, there are quite a few rules, and we are not really used to having such a tight grip on our every move. The homeowners president swings by our house when we are working on it to snoop around on what we are doing. The law is, do not cut trees larger than 6" in diameter. We had a tree company to clear out some old dead trees and vegetation. As soon as the HOA heard the chain saws, the came a running and banging on our door to ask all kinds of questions. I felt like I was in kindergarten again. A person really has change their way of living, if living in that neighborhood, for sure. The HOA law says that they can come over and do an inspection of our entire property anytime that they feel like it, to see what we are doing in our back yard. I have never liked people snooping around my home or cars.