Advice on acquiring more real estate

[Kaelin Koppelman]

I'm looking for some advice on acquiring more rental properties. Right now I have one rental and live in another property with my wife and Kids. Both properties have at least 100k in equity each. I want to use the equity to acquire a new property but the problem is I live in the suburbs of Seattle and the prices are outrageous...is anyone in a similar situation that I am and if you are/were did you start investing out of state?

[Alex Lucille]

I'm in the same boat, I have one sfh rental that cash-flows in northgate with $200k in equity and I am looking for my next opportunity. I've looked at foreclosure auctions and even those are going for 80% of ARV, I am personally looking at out of state investments in markets where I have boots on the ground.

[Tyler Mullen]

@Kaelin Koppelman

Have you considered out of area but within Washington, I-5 Corridor all the way north to Bellingham, Ellensburg, Tri-Cities, Vancouver?

What are your thoughts on other strategies like PML or 1031 into a larger property?

[Kaelin Koppelman]

I have considered other areas and have thought about PML's and 1031. I want to hang on to my current properties because the equity in them will continue to go up and I don't see the Seattle area getting hurt much in the near future. I think leveraging that equity to my advantage may be my best bet...not super experienced with PML's though so I may look into that more as well.

[Patrick Britton]

@Kaelin Koppelman, @Alex Lucille -- looks like you two have very good "problems."  Since it appears it's about price (barrier to entry) you'll probably have to look in cheaper areas, such as Tacoma, Everett, Marysville, Mount Vernon and Bellingham.  But also do forget that Spokane is a short flight away, and has some spectacular rental opportunities.  

I would NOT sell off any assets in Seattle though.  

[JD Martin]

One strategy: take out a HELOC on your current home, then use those funds as a down payment on another property.

[Julie Marquez]

@JD Martin I like that idea, but isn't the bank going to see those HELOC funds as borrowed and it will mark against your borrowing power?

[JD Martin]

Originally posted by @Julie Marquez:

@JD Martin I like that idea, but isn't the bank going to see those HELOC funds as borrowed and it will mark against your borrowing power?

Absolutely, and a good point. This strategy will depend on other things such as a healthy W2 income, rental history, otherwise low DTI ratio, etc. If the OP is strapped with car payments, an already large mortgage, low reserves, etc, it's unlikely that he can go this route. :)

[David Sweeney]

My home in Seattle went through the same appreciation as other homes. I went to my mortgage broker and refinanced. I had to pay for an appraisal and the brokerage fee, but it felt great to take out a large amount of cash that I am currently using to buy an apartment building in Centralia. Yes, I owe more money on the house now than when I bought it, but I'm looking forward to my new cash-flow opportunity.

[Royal Winchester]

New member here,

That sounds really interesting, David. I am considering doing the same thing. I have equity in my house and I'm pursuing a VA cash out refinance to get some capital with the hopes of investing in cash-flowing properties. I've been looking at SFH's here in the Seattle area, trying to find something close by (I live on the East Side) but having a lot of trouble so far finding properties with good numbers.

[Adrian Chu]

Originally posted by @Kaelin Koppelman:

I'm looking for some advice on acquiring more rental properties. Right now I have one rental and live in another property with my wife and Kids. Both properties have at least 100k in equity each. I want to use the equity to acquire a new property but the problem is I live in the suburbs of Seattle and the prices are outrageous...is anyone in a similar situation that I am and if you are/were did you start investing out of state?

Are you in Puyallup?  Pierce County still has good buy and hold deals.  Pull home equity lines of credit from your properties and get going! :)

[Adrian Chu]

Originally posted by @Alex Lucille:

I'm in the same boat, I have one sfh rental that cash-flows in northgate with $200k in equity and I am looking for my next opportunity. I've looked at foreclosure auctions and even those are going for 80% of ARV, I am personally looking at out of state investments in markets where I have boots on the ground.

Cool. You can consider pulling a HELOC from your rental property for your future investments. What states are you thinking?

[Adrian Chu]

Originally posted by @Julie Marquez:

@JD Martin I like that idea, but isn't the bank going to see those HELOC funds as borrowed and it will mark against your borrowing power?

 Yes, but if you are looking to buy cheaper out-of-state properties, then you can just do all cash and refi those afterwards.

[Adrian Chu]

Originally posted by @Royal Winchester:

New member here,

That sounds really interesting, David. I am considering doing the same thing. I have equity in my house and I'm pursuing a VA cash out refinance to get some capital with the hopes of investing in cash-flowing properties. I've been looking at SFH's here in the Seattle area, trying to find something close by (I live on the East Side) but having a lot of trouble so far finding properties with good numbers.

 Eastside is tough.  Cap rates are even lower than in Seattle.  

[Adrian Chu]

Originally posted by @David Sweeney:

My home in Seattle went through the same appreciation as other homes. I went to my mortgage broker and refinanced. I had to pay for an appraisal and the brokerage fee, but it felt great to take out a large amount of cash that I am currently using to buy an apartment building in Centralia. Yes, I owe more money on the house now than when I bought it, but I'm looking forward to my new cash-flow opportunity.

 Cool!

[Tyler Mullen]

@Royal Winchester

Cap rates on the Eastside are relatively low, but that hardly seems to be preventing people from investing.  Just depends on your risk tolerance and resources.

Every other house in Kirkland (Norkirk and West of Market) seems to have an ADU in a basement or over a garage. These rental "kickers" support the prices in a feedback loop. My property is a duplex and the following are each investor owned and non-residing rentals within 100 yards of my home:

534 10th Ave Kirkland WA 98033 - 3B, 1Ba, 1300 sqft, rents for about $2,450/mo.

1004 6th St Kirkland - 3B, 1Ba, 1150 sqft, rents for about $2,695/mo.

These first two have both been owned for over 20 years, probably both paid off, cash flow great and hundreds or thousands of % LT cap gains.  So you don't always only have to choose one or the other strategy.

1013 6th St Kirkland - 4B, 2Ba, 1650 sqft Duplex.  Bought in Oct 2007 for $525k, nice!

Stay positive, there are deals around.  Just have to recognize them, the obvious ones are usually snapped up before you find them.

[Royal Winchester]

Thanks for the encouragement!

I will keep looking, and would like to attend events in the area to help me make sure I'm assessing deals properly and help me find good leads.  Are there events in this area you suggest?  I see a few on BP/events, and it sounds like companies like http://vestus.com/ and I think I ran across another one, though I can't remember it right now, have weekly meetings where you can see upcoming foreclosures and analyze them.  Are these something folks would recommend?

[Curt McClements]

What kind of down payment are you folks having to come up with on non-owner-occupied rentals? I'm getting ready to start looking for my third duplex and my mortgage broker says 25% down is required (again).