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Question

As of today, I currently rent out a single family home and I am house hacking a duplex that I plan on renovating into a triplex (basement unit is not finished but it was meant to be a triplex). I used VA loans to acquire both properties which means I will be living in my duplex for the next year. I do not want this to be the case with my next multifamily property, assuming that in this year I can save up a good amount of money due to having both mortgages covered with rent income and making close to $600 cash flow on the single family home, what type of investment strategies should I be looking into to get another multifamily. I have been heavily looking into the BRRR strategy.

Tim Delaney · Answer

@Branden Wilkinson I wouldn’t consider 1031 at this point since it sounds like you haven’t had either of your properties very long. That is a tool used to offset gains when you are ready to sell because your Return on Equity is no longer generating good profits.

I like BRRRRs a lot, but I have been having trouble finding them lately since the refinance rates are so high. I know you said you don’t want to use another VA, but if you can and the rate is good I would really consider doing another house hack with that product.

Eliott Elias · Answer

Keep growing your rental portfolio.

Rick Albert · Answer

Great start, congrats!

I don't think there is enough information here to provide a clear next step.

What is your purchasing power right now?

How much equity do you have in your properties?

What is the cash flow on your properties?

What are your short term and long term goals?

What are your risk tolerances?

You could stick with what you know or venture out into something else. Historically, successful people get very good at one thing and stick with it. For example I've house hacked two properties in Los Angeles. I'm good at it. But I'm also learning about MFU investing out of state so those will be my two expert knowledge activities going forward.

Branden Wilkinson · Answer

@Jaron Walling

Purchase price was 255,000, Mortgage 1610, rent 2300, about 100 expenses per month

Branden Wilkinson · Answer

@Rick Albert, Thank You!

Currently I do not have to much purchase power with getting this last property.

I have little equity in my properties due to not owning them for that long

House cash flows $600 monthly, the duplex I am housing hacking covers the mortgage for the next year

Short term goal is to save enough for either FHA or Conventional Loan for my next Multifamily within this year. Long term goal, I want to cash flow $10K monthly from my properties.

I would say my risk tolerance is high, everything I have been doing is brand new to me so right now it all seems risky. But I do not go into a deal that will just break even. Minimum cash flow I go with is $500, try to shoot for properties that I think will cash flow $1,000.

Sanat Bhandari · Answer

@Branden Wilkinson BRRRR is a great strategy to use as long as you know what you're doing since it can be a complex process with lots of moving parts to it

On top of 3.5% FHA that Andrew mentioned, you can do 3% down conventional if the property is a SFH. If you're dead set on a multifamily, 3.5% FHA would work for all the way up ton 4 units (however, there are extra qualifying requirements for the same, make sure your lender knows how to navigate those)

If that's not an option, JV'ing with another investor might be the way to go. You'll learn the power of partnerships without it being as daunting as a proper syndication and is the perfect step into more complex partnership structures and investments

Jaron Walling · Answer

Seriously that's a great foundation. From my experience doing BRRR-ish deals it's a good option. The real problem right now is shifting ARV's. Keep that in mind when making offers and running the numbers. We have "trapped" money in all our properties but that's how REI works.

If you buy a BRRRR deal don't expect to get out with zero cash out of hand. Can the best investors do it? All the the time. Is that real life? Not really given the higher rates.

Andrew Postell · Answer

@Branden Wilkinson congratulations on owning 2 properties.  Only 4% of Americans own 2 and it drops off the cliff even further when you own 3.  On your next property there is still a possibility to use an 3.5% FHA loan if you have 2 VA loans...but make sure that you work with a lender that knows how to navigate those rules of how much equity you need from a property you are leaving if you need rental income from that property.  I would absolutely leave those VA loans in place (assuming you have knockout rates on those) and just focus on how to acquire the next property.  Purchasing a duplex with a conventional loan would require 15% down...that's a chunk of change for anyone.  So if you do feel comfortable doing the BRRRR method that can be a possibility but often times people have very specific needs on their own primary homes (location, commute times, school zones, etc.) which limits their options.  If you can do a 3.5% FHA then you can choose any normal property on the market.

Hope all of that makes sense.

Jared Hottle · Answer

It sounds like you have a good plan and a solid foundation to build upon. Here are some strategies you could consider to continue growing your real estate portfolio:

• BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy - you mentioned that you're already interested in this strategy and it can be a great way to generate passive income through rental properties while also increasing your equity.
• Multifamily syndication - this involves pooling resources with other investors to purchase and manage larger, multi-unit properties. This strategy can allow you to benefit from economies of scale and access properties that may not have been within your reach individually.
• 1031 exchange - this allows you to defer paying capital gains taxes on a sale of a property by using the proceeds to purchase a "like-kind" investment property. This strategy can help you keep more of your money invested in real estate.
• Commercial real estate - you could consider expanding your portfolio to include commercial properties, such as office buildings, retail centers, or warehouses. This type of investing often requires a larger upfront investment, but can also provide higher returns.

It's important to consider your own goals, financial situation, and comfort level when evaluating these strategies. Make sure to do your own research and consult with a financial advisor before making any investment decisions.

Zachariah Tuck · Answer

You have an awesome start. Brrr does sound like a great next step. And you have your numbers in a great place. If you have a high risk tolerance.  I say it depends on your personal skills or what skills you would like to pursue next. If your duplex will generate income after you move out of the second unit then your doors are wide open.

Would you like a fixer upper or to do a larger multi family?  Or even simply another duplex. DSCR financing may be an option. Especially if you can find a fixer upper multi family with private or hard money up front. with a fixer upper likely hard or private money may be required. But it could stretch you a little bit. Are you capable, willing, or have the time to put the work in yourself. Or do you have the knowledge to run the numbers, and manage contractors to do the work for you in the time frame you need to meet your financial requirements. Value add is incredible in the way of numbers. And if you can find a property yourself or buy a great wholesale deal you could easily be on your way to owning your third property with cash flow after 6, 12, or 18 months with no cash out of pocket.

If you have cash on the front end to sweeten the pot or make it easier for private or hard money it only makes it better for you.

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