STUCK! What to do next? Cash out? Sell? Hold?

Question

My husband and I are in a good position overall but really STUCK on our next move. Need some expert advice!! We are both working full time and have a combined income of 200K.

Here’s what we have…

We own a 3/1 block single family property we bought in 2012 in downtown Orlando for 120 K, as our first primary residence, we paid it down to 75 K, cashed out two years ago and pulled 100 k out at 3.8 interest rate - we now owe $180K and could probably sell it for 300 K. We now are still renting this property and it cash flows about 700/month as a long term rental.

We used that 100 K and bought a block triplex in Saint Cloud with pool a year ago also in central Florida for $425,000 at a 2.8 percent interest rate. We owe 318,000 and it’s now worth around 630 K. We replaced the roof, gutters, all hot water heaters, and all air conditioners. The property cash flows 1700/month to long term renters and is in great shape now.

We also bought a duplex last year that was 1.6 million in Miami Florida. The home is
historic and was converted to a 6 plex without permits by the previous owner (yikes I know haha). We were able to get it rezoned to be a short term rental and just have to do a few items to be allowed to call it a 6 plex, after a lot of work, and it’s cash flowing 10K per month after expenses. I think rezoning/fixing permitting has increased the property value and could sell for 2.1 million. Since we just purchased in October, we aren’t ready to refi or sell this one.

What’s next?  Should we cash out refi the Saint Cloud house?  The lenders said we could pull about 125 K to leave 25% in.  Our interest rate would be much higher and we wouldn’t cash flow as much (maybe 200$ at a 6.9 interest DSCR) Should we sell one?  Hold and save up again?  We don’t have much left in our accounts after all the dust has settled - about 30 k that we need to keep in there for repairs, but would love to keep going and buy a primary residence/duplex next, we are renting a bedroom at the moment and would love to have our own space as we are getting older haha but have been house hacking for a long time  to set ourselves up the last few years!  We could save up again but it may take another year or two to have enough for 25 % down especially in south Florida.  Please help, my brilliant investor friends!!!

JD Martin · Answer

I think I would take 2 grand of that profit, rent (or buy) myself a decent house to live in, and let your results sink in for a little bit. Unless you have the typical realtor picture on your profile here (taken 30 years ago), you're clearly young and likely have a lot of time to go and have kicked some serious *** to this point - there's not too many people your age that would be willing to bedroom surf while owning 2 million worth of real estate, just to make more profit.

Get yourself a nice place that you can value-add while you live in it, take a couple of years to enjoy what you've done so far, and after 2 years you can either sell what you have and keep the capital gains, or turn it into another rental and do it again.

Hilary Stalder · Answer

Hey @Cari Childers! What are your goals? Are you trying to build an empire to replace your W-2 or do you just want a few properties to make life more comfortable/plan for retirement? Are any of your properties hassles or in less desirable areas that you can trade up for more desirable areas/less hassles? I think the answer to those questions may help you to make your next move. From strictly a numbers standpoint:

1. Orlando SFH: Return on Equity = 7% (YOY Cashflow= $700*12=8400/Equity=$300k-$180k=$120,000)

2. St. Cloud Triplex: Return on Equity= 6.5% (YOY Cashflow=$20,400/Equity=$312k)

3. Miami Duplex: Return on Equity= 24% (YOY Cashflow= $120k/Equity= $500k)

All of your properties are making good returns on equity! The question about the St. Cloud Triplex refi would come down to if you think you could find a property with the $125k that would cashflow more than 6.5% that your money in the triplex is currently making? Then it makes sense to do so.

Also, numbers aside, I agree with @JD Martin. You've clearly made great investments! Maybe it's time to reap some of the benefits. You could always do a long term live in flip, or even a SFH with an ADU to keep down your mortgage costs.

Good luck! Thats amazing work! :)

Andrew Garcia · Answer

Hi @Cari Childers, the good news is that there are worse problems to have than not knowing what to do with hundreds of thousands of dollars in equity.

The question really comes down to whether you can get $1,500 per month by investing that $125k somewhere else.

If you can, then you should move forward with the refinance. If not, it might not be the wisest move.

You should look into getting a fixed-rate second lien either as a fixed-rate HELOC or as a second mortgage.

That way, you can keep your low interest rate while still accessig some equity.

Hope this helps! Let me know if I can be of any assistance.

STUCK! What to do next? Cash out? Sell? Hold?

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