Am I moving too fast?

[Derrick W.]

August 29th will be my one year anniversary as a REI. So far I have a duplex that pays for itself plus creates profit. A SFR that is paid for. A weekend place on the coast with a small loan on it. The remodel will be complete in it and I will rent it out on weekends I'm not there. Then I am closing on the 25th on a 3/2 that will pay for itself plus create profit.

My next step is to A. Wait 3 years to save up enough for my next purchase. Or B, cash out my paid for house and buy 1 or 2 more income properties. 

I  Am aggressive but don't want to make foolish mistakes by moving too fast. 

[Allen Fletcher]

@Derrick W.

What is your financial situation? What other loans do you have (i.e. credit card, vehicle, consumer loans, personal loans, student loans, etc.)? Do you have a personal emergency fund? Do you have cash reserves for your rentals? Do you have retirement accounts setup?

By answering these questions you are giving us (your fellow investors with more experience) enough info to give you good advice. At a glance I would tell you to do things in this order before purchasing more properties:

1) Build enough cash reserves to cover large emergency expenses on your current properties say $5k-$20k depending on age of the property, value of the property, and your risk tolerance.

2) Build a personal emergency fund that will cover you for 3 to 6 months (depending on your risk tolerance again) if you suffer a financial set back (i.e. loss of job, medical problem, etc.)

3) Pay off all other debt besides loans on investment properties.

4) Make sure you are setting some assets aside for retirement outside of real estate.

If you follow this basic formula you are setting yourself up for success no matter what life and the markets throw at you. One of the reasons people quit investing in real estate is because they become stressed out when things do not go smoothly. You have a great start and have moved forward aggressively, I advise you to take a short period of time to consolidate your financial position before charging on again. That way a minor setback cannot cause your burgeoning financial empire to crumble.

Keep up the good work,

Allen Fletcher