Plateaued on REI - Out of capital, maxed out borrowing capacity

[Neha Groves]

In the last 2 years, my husband and I have bought two 3-unit multifamily homes - both on FHA loans. We're living in a unit in one of them - the other two units are paying the mortgage and basic utilities. So we're not making money on that one. On the 2nd house that we bought just this past June, we have a cash flow of ~2k/mo. We'll have to keep most, if not all, of that money, however, to do some rehab and repair work on the house within the next year. We're also still paying off my husband's student loans (another $28k to go).

That leaves us in this uncomfortable position where we don't have enough income coming in from our investments to realistically be able to invest in our next property in the near future.  We have 2 mortgages and have maxed out our borrowing capacity from traditional banks.  If we buy in MA again, I don't think we'll be able to get another FHA loan, which means that we'll need a 20% down payment (or 30% if we go commercial) and that seems like a crazy amount of money right now.  We've tried looking for partners amongst our friends, in vain.

I know there are other ways to borrow money - private lending, hard money loans, etc - but I'm also hearing a ton of stories about how we should be getting rid of all our debt, not taking on more.  I have to admit, borrowing more scares the crap out of me.  With the interest rates on these types of loans, it feels like we'll have an insurmountable task ahead of us if we go that route.  

Long story short - we would appreciate any advice we can get on next steps to expedite our journey toward financial freedom and early retirement.  My husband is presently taking real estate classes and will be getting his license shortly.  Hopefully, we'll have more of an inside look on the market once he gets a job in the field.  Thoughts?  Thanks in advance!

[Steve Vaughan]

Just a couple quick observations.

When I ran out of or didn't have much capital, I learned all I could about seller financing. Then I targeted tired plex owners that like the monthly cf but not the headaches of ownership. Most of mine were obtained with 10% down at 6% over 24yrs.

Try and separate your loans if you can. Isn't always possible, but don't overburden your credit capacity if you don't have to. 

Limit all consumer debt.  No cc or car payment is worth having now vs what it will cost your future.  Good luck!