Fastest way to financial freedom?

Question

Okay, let's say safe and relatively fast?

Here's one scenario that I have been tossing around this month after reading Rental Property Investing by Brandon Turner and a couple of other books.

Say I have around $250,000 cash in the bank, and I am very handy in repairing homes. I can buy at least 3 mobile homes with land for $120,000 furnished or semi furnished in NC.  I can rent them out total for $2100.00 per month. Then take half of that, which is $1050.00 and put it in a rental savings account for CAPEX / taxes, insurance, maintenance, etc.  I put the other half, $1050.00 per month in a rental checking / investment account.

I take $70,000 and pay off the loan for my primary residence. That leaves $60,000 from the initial $250,000 plus the $1050.00 coming in from the rentals each month. Now, I am 100% debt free except for the monthly normal water bill, electric, gas, insurance on the primary.

So, I now own 3 mobile homes with land and one 3/2 brick primary residence. I have $60,000 left in the bank and $1050.00 rental income each month after putting the other half in savings. I will have no home loans, car loans, equity lines, or equity loans. No debt period and a great credit score! -- The slate is clean!

What would be a good next safe move or suggestion, or do I need to start all over, rethink, and totally do something else like buying some more homes to fix and flip first? Is the mobile homes idea a decent strategy or dumb strategy. The more books that I read the more confused or dumb I seem to become, for some reason. :)

Here's a YouTube video below, of the home that I am working on right now that we intend to sell to start buying other properties. 3 bed plus bonus room and 4 full bathrooms. We paid $118,000 for it and have put around $80,000 in it. My wife and I have done about 90% of the rehab labor. All of the neighbor homes and comps are selling for around $300,000 to $400,000. It should be finished in about 2 months or so. Once it is sold, I want to get the ball rolling on my investing career.

Shallotte River House

Thanks for your feedback!

Steve Lustgarten · Answer

That's a ton of cash to have and I'd be careful how you spend it. Over past 4 years Ive carefully bought re habs in conservative Omaha market that has 3.5% unemployment and fairly high rentals. Paid $25k for a 5 plex first off and $25k to rehab it. It now throws off $3000 a month.

Samantha Klein · Answer

Here is my current plan and I thought it might help you steer in a direction. First, I would sell the River house and collect the cash because it doesn't make sense to hold a property that expensive if rent is $1200 a month max, that $300-400k could be used to produce much better income. First, I am 23 years old and I have a current 7 year plan that in 7 years I will have 2 paid off 4 plexes and 2 paid off duplexes throwing off approx 60k a year in net rent income which is double my current salary from my online business. I plan on putting 20% down on two 4 unit buildings soon that rent for $625 a unit, and then I plan on saving every dime I can, I already mostly do, and purchase a duplex with cash due to not being able to get any more mortgages due to high DTI, after the duplex purchase, I will take all of the cashflow and pay down the 2 4plexes and I should have those paid off by the end of 2023 or so, and I will be fairly debt free (I house hack a duplex that has a mortgage) while owning 1 duplex and 2 4 unit buildings free and clear. If you have any questions, feel free to reach out. With $250k in savings, I would definitely use to acquire multi-family properties, that will be the quickest way to freedom.

Mike Lynch · Answer

Thanks!

Mike Lynch · Answer

Thanks!

Our river house is totally paid off. It is worth between $300,000 and $400,000. To produce at least a 10% cap rate on it, I would need to get $3000.00 per month rent, and I do not see that happening here as most people pay around $1200.00 per month rent. If I take out a home equity line on it up to 80%, if possible, I will need to hold it and the holding costs will be $6000.00 per year ( electric, water, insurance, taxes, maintenance ) If I rent it, the renter might tear up $6000.00 worth of stuff in a year putting holes in the walls for pictures, damaging hardwood floors and carpet, overflowing the toilets, etc. Nobody has really suggested to take out a home equity line on the river home and use that leverage to buy more properties.

Say I keep the river house? The projections for market increase is around 3.5% for 2017. So, maybe next year the river home will be worth $10,500 more than it is right now. That will cover the holding costs. Maybe I can just use it as a bank keeping it pristine, using it's leverage to by some flippers for a while, or am I totally off my rocker?  -- Right now the market is climbing. If I see the market heading back south, I will dump it. A home that nice could easily have $10,000 to $20,000 damages per year from a renter. Would this strategy make any since at all, or would selling it be the best option? -- I'm digging, I'm digging! :) - I might not be very smart, but I am trying to figure something out.

Dean I. · Answer

I would stay away from trailers and as much as it may feel good to be debt free and have no mortgage, you can use that money to invest in more properties, thus making you a lot more money. Eventually, you should pay your house off, but I would work on at least getting more passive income first. Turn that money into more money.

Think of it this way, you are using leverage on your personal home, so that your don't have to pay it off and instead use it to fund more properties. It's that same reason why you don't buy investment properties with 100% cash.

Mike Lynch · Answer

Okay, seeing what I have to work with, do you have any suggestions. I know that there are dozens of ways to do it. I am trying to get my mind wrapped around the best way.

Thanks!

Chris Eaker · Answer

@Mike Lynch

If your sole source of income of 3 mobile homes, I would reconsider that plan. First, one vacancy and you have cut your income my 33%. Second, mobile home tenants aren't notorious for being stellar tenants.

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