Should I buy another property or force cashflow in my duplex?

Question

I recently purchased my first duplex. I was so eager to get my first property I convinced myself that I just needed to get started regardless of it not cashflowing (terrible mistake). Currently the rent will cover the mortgage but that’s it. I’m coming out of pocket 700$ every month to cover reserves for vacancy, repairs, capex, etc. In order to make this property cashflow I would need to do about $15,000 in repairs to get higher rents and refinance the property at 40% equity ($90,000). I am extremely frugal so the $700 really doesn’t affect my way of living. Should I devote all my money towards making the property cashflow or use the experience gained from my first failure to buy and rehab another duplex that is under market has the ability to force equity and will cashflow? Both would take about the same amount of time and money.

Jake S. · Answer

Hey @Zackary Martin how confident are you that the rents will be that much higher by sticking just $15k into it? I commend you on taking action but also learning from the actions.

Unless you are positive that it will cash flow after (cash flow well at that) I would get rid of it. Get an asset and sell off the liability

Bryan Devitt · Answer

@Zackary Martin at this point it is all math. How much will it cost to get your money back? If it's only the 2 years it looks like, do it! Obviously selling and taking a hit at this point isn't worth the losses if they can be mitigated by a $15k investment. Chances are you would lose $15k by selling anyways and I would much rather spend $15k to have an investment that breaks even and will get me money later than $15k for nothing. So if it was me, I would get that rehab done, get it rented at market rate to hopefully turn a profit or break even and then move on to acquiring another one.

Jess White · Answer

@Zackary Martin like Jake said, congrats for taking action. You learn and become successful by getting out there, taking action and making mistakes.

Since you’re house hacking it, I would likely just keep it, since you already need a place to live.

House hacking isn’t all about cash flow. If you’ve got half the mortgage you would’ve with a regular home, you are doing alright. If you live there a couple of years you will at least get loan pay down which is awesome.

I would slowly DIY renovate the side you are living in while you are there. Then, when you move out you can get higher rents for that side. Likely making that whole place cash flow positive, and with less loan to pay down.

Keep it up bud, you are doing great!

Anthony Wick · Answer

@Zackary Martin

Cut bait and run. And make dang sure you know how to evaluate a property in the future.

Theresa Harris · Answer

I'd do the rehab, increase rents, but aim to sell it in a year or two.

Gerard Charles · Answer

@Zackary Martin , would have been nice to offer the tenant the place you are currently living ,  you move to theirs, rehab it while you living in , and get out after a year and raised the rent.

Joe Villeneuve · Answer

Sell this property, take whatever you get out of it in cash, even if it's less than what you put in it (don't get emotionally attached to the money), and do it right with the nest one.  Keeping this one is holding you back...get rid of it.

Sam Shueh · Answer

If you can sustain current investment and trying to get most of it consider you have accomplished a lot.

While Feds claim there is no signs of recession, talk to people in the trade they will tell you price maxed out 1-2 years ago. Feds said the same just before every past recessions.

Bryan Devitt · Answer

@Sam Shueh the government will never tell anyone bad things are coming, but if people cant read between the lines it is their own fault. They say "best economy ever" while saying any downturn domestically or globally will give them reason for a rate cut. They also stopped selling off their debt and said they might start buying again soon. These are things they do right before a recession (not the buying, that was a "once in a lifetime" event that they recently said is now the new norm to manipulate the market and they have been very unsuccessful doing so unless the goal was to saddle the tax payers with more debt and give it to bankers)

Zackary Martin · Answer

@Sam Shueh I appreciate everyone’s input thank y’all so much.

Should I buy another property or force cashflow in my duplex?

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