What purchase plan is better

Question

Good day team.  I'm currently working through a plan for my second rental property.  My current rental is free and clear and has about $220,000 of equity.  I am considering doing a cash-out refi but I don't want to leverage more than 50% of the property.  I'm trying to decide what the best path would be with the $110,000 that I pull out.  Is it better to use that money as a down payment on one property or split it and use it for a down payment on 2 properties?  I'm looking in the Central Texas area at SFR, 3br 2 bath and can find good properties around the $250,000 price range.

Brandon Ja · Answer

Thanks for the input, Noah.  That was very insightful.  I was hesitant about joining the group because I've never had good luck with forums and web groups.  In my short time here I have learned so much and it's amazing how many people are willing to share their knowledge.

Noah Wright · Answer

Hi Brandon! It sounds like you’re at an exciting juncture in your real estate investing journey. With a free and clear rental property and a solid equity position, you're well-positioned to leverage that equity effectively.

Evaluating Your Options

• Cash-Out Refinance:Given that you want to maintain a conservative leverage ratio of 50%, pulling out $110,000 from your property makes sense. This strategy allows you to tap into your equity without overextending yourself financially.
• Given that you want to maintain a conservative leverage ratio of 50%, pulling out $110,000 from your property makes sense. This strategy allows you to tap into your equity without overextending yourself financially.
• Investment Strategy:Single Property vs. Multiple Properties:Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.
• Single Property vs. Multiple Properties:Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.
• Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.
• Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.

• Given that you want to maintain a conservative leverage ratio of 50%, pulling out $110,000 from your property makes sense. This strategy allows you to tap into your equity without overextending yourself financially.

• Single Property vs. Multiple Properties:Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.
• Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.
• Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.

• Single Property Purchase: Using the entire $110,000 as a down payment on one property could allow you to acquire a more desirable asset or a larger property, potentially leading to higher rental income. This route can simplify management since you’ll only have one additional property to oversee.
• Multiple Properties: Splitting the funds to purchase two properties can diversify your investment portfolio. This approach mitigates risk; if one property underperforms, the other may still generate income. Given that properties in your target area are around $250,000, a 20% down payment for two properties would indeed be achievable with your cash-out funds.

Market Considerations

• Central Texas Market:The Central Texas market is strong, especially for single-family rentals (SFR). Research the neighborhoods you're interested in to identify areas with growth potential, strong rental demand, and favorable appreciation trends.
• The Central Texas market is strong, especially for single-family rentals (SFR). Research the neighborhoods you're interested in to identify areas with growth potential, strong rental demand, and favorable appreciation trends.

• The Central Texas market is strong, especially for single-family rentals (SFR). Research the neighborhoods you're interested in to identify areas with growth potential, strong rental demand, and favorable appreciation trends.

Financial Impact

• Cash Flow Analysis:Perform a cash flow analysis for both scenarios. Calculate potential rental income, expenses, and any projected appreciation to see how each option would impact your overall portfolio. Look for properties with a solid cash flow to ensure your investments are self-sustaining.
• Perform a cash flow analysis for both scenarios. Calculate potential rental income, expenses, and any projected appreciation to see how each option would impact your overall portfolio. Look for properties with a solid cash flow to ensure your investments are self-sustaining.

• Perform a cash flow analysis for both scenarios. Calculate potential rental income, expenses, and any projected appreciation to see how each option would impact your overall portfolio. Look for properties with a solid cash flow to ensure your investments are self-sustaining.

Final Thoughts

Ultimately, your decision may come down to your risk tolerance and management preferences. If I were forced to pick, I’d lean towards purchasing two properties to diversify and spread the risk while potentially increasing your overall cash flow. This strategy aligns well with the goal of building a more robust portfolio over time.

Feel free to share more details if you have specific properties in mind, and good luck with your investment decisions!

(for the low 200k properties, I'd look around military bases - good demand and disciplined tenants..)

Brandon Ja · Answer

Absolutely Noah.  I'll message you directly.

Noah Wright · Answer

Hi Brandon,

I’m glad to hear that you're finding value in the group! It’s always refreshing to see a community where people are eager to share their knowledge and experiences.

Regarding your plans for financing, have you considered the benefits of working with a specialized lender? I offer services that can help streamline your financing options and ensure you get the best rates available, especially given your position.

Let’s connect, I'd love to bid on these numbers!

Best,

What purchase plan is better

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Evaluating Your Options

Market Considerations

Financial Impact

Final Thoughts

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