Advice for somebody who needs to make up for lost time

[Vince Light]

Hello BP!

I am pretty new to BP and I am more of the lurker type…. However, I am struggling to formulate my plan for financial independence and feel like I need to seek out some outside view points and opinions…. As I mentioned, I am pretty fresh to BP but have been soaking up via forums, blogs, podcasts and audio books.

First, let me go through some background…. I live in Austin, TX and 19 years ago my Dad was smart enough to urge me into buying a duplex (house hacking, essentially). I lived in the place for a while…. My future wife joined me there for a bit…. We moved to our first SFR for future family space…. Ended up selling the SFR and moving to our current home thanks to awesome appreciation in town. Since then, we've had kids and all kinds of career and life changes. Now I am 45 and still have the duplex but waking up to the realization that I've wasted many years in not building a portfolio to support retirement years and beyond. After reading and listening, I've realized I've made some mistakes in managing and saving…. Though, overall, I count my blessings and am grateful for what I have.

So, where am I now? The duplex is in a great central part of Austin, TX and value appreciation and rent increases have been good to me. I owe about 99k and a realtor said it could easily sell in the 575-600k range. Rents are a combined $3350/mo and payment of around $2000/mo (with appreciation comes insane property taxes). I’ve been self-managing the property all along and been very fortunate to have quick turnover whenever a tenant leaves. I have had to do some updating and repairs to the duplex in recent years so any cash reserves are near depleted. We do have some savings but those are for the family and primary home…. As we’ve also had medical bills, kid costs, daycare for one more year, etc.

So now I am trying to figure out the path to getting more doors through more multi-family properties (du-, tri- or quad-plex). At first, I entertained the idea of selling the existing duplex to get a quad…. Or two duplexes. However, then I started questioning why I would sell a great cash flowing property with only 13 years left on the mortgage. Texas law forbids a HELOC on an investment property. So then the idea of doing a cash out refinance on the existing duplex to get enough money for a 20% down plus rehab money for a second multi-family property as well as around 50k to handle some more updates to the existing duplex and have 30k left over as a repair and CapEx fund boost. Yes, I'd be paying around 3.6% to have cash sitting in the bank…. But waiting to save up enough for a down payment would just set me back too long. Is this idea crazy or dumb for one/more reasons?

An additional challenge would be meeting a 45% DTI with a third mortgage. My rough figures would put me in the 49-52% range.

I will say that I’d like to keep my investments around Austin for now. I know the population/job growth is strong and I know the area well as well as rent ranges, etc… So investing out of town is…well… scary to me.

My wife and I are also at a point right now where a major drop in income would hurt our current path of paying down debts and cards built up over years of life stuff.

So all this being said, what would you all do in this position?