Metairie, LA · Member since 2015 · 6 posts · 0 votes
What's up BP? So I have been a member for a while but really hesitant to take the leap and I am finally there. I will be relocating to the Raleigh Durham NC area this summer and am searching for a multifamily(duplex to fourplex) to house hack.
Here is my question.....
I currently own 2 single family homes in New Orleans La. I have 100% equity/ zero mortgage on both.
House 1: 3 bdrm 2 bath 1500 sqft- appraised at $120000.
House 2: 3 bdrm 2 bath 1900 sqft- appraised at $160000.
Total equity: 280k.
My overall goal is to buy and hold with aggressive 10-15 year mortgages. Cash flow is not priority initially but when the properties are paid off(target age :50) then I will retire.
That wasn't a question. So I am stuck between pulling out a line of credit on both properties and buying a multifamily or selling both and putting the capital into a larger complex. Thanks for your help.
Ps. I cannot wait to get back to North Carolina.
Thanks BP
-Stephen
How long ago did you purchase and how much did you pay for them? And therefore, what kind of capital gain and/or depreciation recapture will occur if you sell? (Ask your CPA) Or did you live in either (or both) of them 2 of the last 5 years? If so, then you could (and probably should) sell now with no gain. I agree to take into account being an absentee landlord. There are countless nightmare scenarios that can happen to absentee landlords. I also agree with the 1031 exchange idea with the caveat of making sure that you have your ducks in a row on the selling side and be knowledgeable of what you want that is realistic on the purchasing side. 45 days to identify is not a long time and if you identify first, then you need to make sure that you can sell the NOLA properties in a reasonable amount of time. What area(s) are the the two properties in? This could make a difference whether to hold or sell if there is a chance for appreciation (or not).
I do think that the multi-family vs. single family strategy really depends on the market area. Personally, I stick to historic, small multi-family properties for middle/working class tenants that could be converted to singles and sold if it makes sense. Some people don't want to live in the large complexes, but can't afford to buy or rent a whole house. The large apartment building market definitely seems to be getting a little to overheated these days, so I try to stay in my easily understood wheelhouse with good cash on cash returns. FYI, I am on the same 15 year Am retire around 50 plan.
Real Estate Investor · Denver, CO · Member since 2012 · 83 posts · 17 votes
9y
It's seems since you have zero leverage now, you could afford to borrow a bit more. But why multi families? Every major city in the US is setting records when it comes to the building of luxury apartments. Vacancies are increasing, rents flattening. Your multi will be competing with this supply.
Investor · Miami Beach, FL · Member since 2016 · 486 posts · 216 votes
9y
Stephen,
You should really compare the numbers and take in account that you will be an absentee landlord. I am not sure how possible is to get a heloc against investment property & how high is the rate but if you decide to sell you should consider doing 1031 exchange into the new property so you won't have to pay gain taxes on the sold properties.
Metairie, LA · Member since 2015 · 6 posts · 0 votes
9y
Good question Erik. House hacking was my next step and seemed to be a no brainer but if the completion is that fierce then you would recommend me sticking with single families?
New Orleans, LA · Member since 2016 · 20 posts · 8 votes
9y
@Stephen Roche, where are you properties located? That may help you in your decision as to what route to take. I mean how much would you be able to rent them for. If your rents don't cover your PITI plus monies for repairs as well as PM, you may just want to sell them. You can private message me or contact me on Facebook and maybe I can give you some insight.
How long ago did you purchase and how much did you pay for them? And therefore, what kind of capital gain and/or depreciation recapture will occur if you sell? (Ask your CPA) Or did you live in either (or both) of them 2 of the last 5 years? If so, then you could (and probably should) sell now with no gain. I agree to take into account being an absentee landlord. There are countless nightmare scenarios that can happen to absentee landlords. I also agree with the 1031 exchange idea with the caveat of making sure that you have your ducks in a row on the selling side and be knowledgeable of what you want that is realistic on the purchasing side. 45 days to identify is not a long time and if you identify first, then you need to make sure that you can sell the NOLA properties in a reasonable amount of time. What area(s) are the the two properties in? This could make a difference whether to hold or sell if there is a chance for appreciation (or not).
I do think that the multi-family vs. single family strategy really depends on the market area. Personally, I stick to historic, small multi-family properties for middle/working class tenants that could be converted to singles and sold if it makes sense. Some people don't want to live in the large complexes, but can't afford to buy or rent a whole house. The large apartment building market definitely seems to be getting a little to overheated these days, so I try to stay in my easily understood wheelhouse with good cash on cash returns. FYI, I am on the same 15 year Am retire around 50 plan.
Investor · Lancaster, CA · Member since 2015 · 111 posts · 38 votes
9y
From my experience being an absentee owner isn't so bad if you have good property management in place, or even building a great relationship with your tenants would work in helping you manage your properties. My two cents would be to think about renting the two houses out, pulling a heloc out of one or both (if you can find a lender who will allow a heloc on an investment property) and buying your next property cash. That way you have no mortgage on the new property. You can then use that heloc account as your new checking account to pay the heloc off in about 5-7 years (give or take depending on your income vs expenses. I'm not saying purchase their management products, unless you want to, but check out the pill method or replace your mortgage on youtube). Use the rents from the rentals plus the income from your job to increase the speed of paying that interest only heloc off. If you can't find a heloc for the investment properties then you can simply do a cash out refi and allow the rents from the investment properties to pay off the new loan(s).
I also think that looking at purchasing a multifamily is a great way to go simply because you're receiving extra rents from that property that you purchase cash which would assist you in paying that heloc or cash out refi loan off even sooner. Just a little food for thought.
Investor · Fuquay Varina, NC · Member since 2016 · 77 posts · 26 votes
9y
Depending on your target location, multi family can be a great option in the Triangle. There are several older areas, with no big high rise apartments, that have a strong rental market. Since you'll be occupying it as well, it will all depend on where you feel comfortable living. Do you have any particular areas in mind?