Question on what to do with the current properties in the portfolio

[Ali S.]

Hey Everyone,

Happy new year! I’m 25 years old and just graduated in 2023 with bachelors in finance and work a 9-5 job as my main income driver: I want to continue it to build my family and I’s portfolio and was wondering if anyone can provide some insight on what I can do next because I feel like I’m stuck on what to do. My goal for 2024 is to add more than one door this year whether that’d be in my home state (Illinois). I’ve been listening to the BP podcast and other podcast and hear others stories on individuals building their portfolio at crazy speeds and having so many doors and I want to do the same and build long term wealth and add more doors to my current portfolio and also have my parents retire. My family and I own three condos and below are the ideas I have for one of them. If anyone can help me understand what I can do next to continue to scale I’d appreciate it a lot! My family mainly relies on my income from my job and for future investments going forward. Thank you in advanced and hope everyone has a great 2024! :)

State: Illinois

Average market rent: $1,350 -$1,450

Property #1 (under mothers name):

2 bed/1 bath

Purchase date: February, 2022

Mortgage: $1324

Rate: 4.625%

Purchase price: $148,000

Loan amount: $136,799

Rent: $1,350

HOA: $100

Property #2 (under fathers name and I co-signed):

2 bed/1 bath

Purchase date: February, 2023

Mortgage: $1324

Rate: 5.99%

Purchase price: $132,000

Loan amount: $119,952

Rent: $1,250 (will go up to $1,400 this year)

HOA: $100

*Note for this property: currently making additional payments to reach the 20% equity but not sure if we should do this or not?*

Property #3 (under my name):

2 bed/1 bath

Purchase date: May, 2021

Mortgage: $874

Rate: 3.625%

Purchase price: $143,000

Loan amount: $119,042

Rent: $0: Myself and parents live here

HOA: $110

• Question for this property: Bought this under a program where I cannot refi or take out a line of credit for 10 years as their is a second lien of $5,000 which would be forgiven 10 years after the purchase date and each year $500 is taken off the lien until the 10th year where it would be completely forgiven. Todays value is around $3,700 for the second lien. If I want more cash to invest into other properties should I pay off the lien value right now at $3,700 that would’ve been forgiven in the next 7 years from today or wait it off? Feel like my equity is locked for the next 7 years.

Thank you in advanced!

[Alecia Loveless]

@Ali S. Hi Ali. One reason I don't like condos is because they have HOA fees. While yours are very low compared to what ours are like where I live, one is about $400/month and the other is $800/month with a second fee around $150.

If the price point is much less than a house than I can understand starting with condos but they don’t look like they’re really providing you with any real cash flow at the current mortgage levels. However you are gaining equity and hopefully are getting some tax benefits.

The only real feasible ways I see to grow faster is to find private money either through friends or family or through networking, BP has a book on Low and No Money Down Financing. I think Brandon Turner wrote it. That could give you some ideas. Or through partnerships. And if you go that route be sure to have a formal partnership agreement with a solid exit strategy.

I think if you only have enough money to continue buying condos in your area and houses are too expensive then that is what I would recommend unless you decide to go OOS. If your condo market is strong and the rental market is strong where you will be able to rent them then as long as you won’t be losing hundreds of dollars a month on them you should be fine. While if may not happen this year, or it may, interest rates will likely come down a bit at some point and you will be able to refinance if you have higher interest rates. Then you should be able to start seeing some positive cash flow.

I’m personally not a fan of partnerships because I got burned twice many years ago doing partnerships because I had no formal agreement and no exit strategy. The first one it probably wouldn’t have mattered because it turned out we just didn’t know the people in the partnership and they were total frauds. The second actually ended up probably about the same because the bank that had the loan on the deal took over and resolved the issue and dissolved the mortgage but it was a huge stressor at the time.