Plan in place, trying to see if it makes sense

[Joe P.]

Hi all,

Thanks to BP I'm just about finished with my business plan to get serious about investing in real estate. My current holdings:

SFH - Primary Residence: 85% LTV (10% conventional)

SFH - Rental property: 84% LTV (FHA loan since 2010)

I'm ready to start investing and seeking good buy and hold properties. My cash is somewhat limited so I am considering selling my rental property, which does not turn a profit (only benefits -- good ones -- have been paying down the mortgage, no major issues, and tax benefits). I purchased the rental in 2010 for 190,000 and I think I can get ~250,000 for it now based on home improvements and neighborhood improvement.

The idea is to use the proceeds from that sale to purchase one or two properties, preferably multi-family, in the Philadelphia area. I don't think private money is an option, and I don't think any bank would fund the down payment needs. I don't see any other option to raising that sort of capital (40,000 to 60,000) in such a short amount of time.

I like the rental property but it will likely never turn a profit. It is a 1 bedroom "loft" style townhome with a lot of cool features, but the reality is unless I undertake a major renovation, it will always be a 1 BR and I think its value is limited from a rental and sale perspective.

Any thoughts? I've thought about refinaning my rental property from FHA to conventional (which might save about $120 a month in MIP) but the fact is it doesn't increase my cash flow beyond the MIP savings. And again, because its a 1 BR and the rent is already at the high-end of the neighborhood, the mortgage/taxes/insurance/maintenance costs won't allow me to turn a profit any time soon.