Do I leverage my equity or sell and use cash?

[Brian Kalb]

Looking for some advise. I bought a condo back in 2003. I was able to hold on to it through the 2008 market crash. Right now it's renting and I have an ROI of about $500.00. Recently I've decided to start investing in rental property. I live in California and am looking to invest in out of state rentals do to high prices and rental laws here. To my point I was hoping to get suggestions on what people out there would do if they were in my shoes. First I was thinking of selling the property and using the equity I made to either by three houses in the $50,000 range or use the money to put 20-25% down on multiple loans and buy upwards of 6-8 investment properties in that price range depending on how things go? Or keep the condo in California and take a HELOC on it and use that money to either purchase properties for cash or use it for a 20-25% down payment loan to buy a few more than I would be able to if I would purchase out right. Basically same thing. Sell or use a HELOC? I hope that made sense everybody and any advise would be great.

Respectfully,

Brian Kalb

[Joe Villeneuve]

Originally posted by @Frank Wong:

Hi Brian,

I am not a fan of pulling a heloc out and using that money to leverage to buy more properties.  First I don't like the idea of increasing your debt on your investment property to buy properties with more debt.  It only makes sense if you are pulling money out to buy a 2nd investment cash.  That to me is the proper way to leverage. 

If you are going to sell the condo I would look for homes in B areas. You are going to be way better off in the long run.  Buy fewer homes in better areas. 

I would not sell the property and buy 3 $50k properties in the midwest.  Those are D class properties and areas.   Worst tenants and the worst areas.  Not worth it in my opinion.  There is a reason why they are $50k.  Buying them because they are $50k is not a good reason.  

 "Those are D class properties and areas. Worst tenants and the worst areas. Not worth it in my opinion."

Wrong!! Dead Wrong.

"Buying them because they are $50k is not a good reason."

Correct.