RE: Need some advice from experienced investors

[Edwin W.]

Good morning All,

My mom owns a 4-plex in the Bay Area. She is currently living in one of the units. Zestimate according to Zillow is over $1.2 million. It's a 11 bedroom and 7 bathroom. Current mortgage amount is $290K. My dad is getting ready to retire soon. What are some of the best strategies for her to make passive income using the equity?

I have thought about some of the below options:

-refinancing to buy another huge apartment complexes in other states

-using HELOC to privately lend on new construction projects at 10 -15%

I would like to hear from the more experienced lenders and investors.

Thanks,

Edwin 

[Account Closed]

Edwin,

That's a good size 4-plex. Unfortunately, you didn't give us enough information to work with. Do you have experience owning apartment complexes in other states? How much do you know about private lending? 

Don't know if it's in one of those rent control cities. How low are the rents? When was the last time the units get renovated? If they own it for a long-time, there's a high chance that rents are way below market and the units are not updated. If that were the case, consider taking out +/- $100k to remodel and bring the units to fair market. That should increase a good $2k+/month in cash flow. Debt service will be about $500/month for each $100k they're borrowing. That should still net them an additional $1,500/month in income.

As a son who wants to take the burden off of the parents so their retirement can be more enjoyable, consider helping them with handling the tenants by answering the phone calls and booking for repairs, etc...

Personally, I don't like either options you proposed for a retired couple. They're approaching retirement. They don't need the headache and uncertainties dealing with the proposed options.

Just my 2 pennies of course.