Am I leverage too much

[Depak Paten]

I would like to get members opinion to see confirm that am I leveraged too much? I should hold on to further addition of rental property?

Assets/Liabilities

Primary home: Market value $300,000 (mortgage balance $139,000) rate 2.75%

Condo 1: Market value $130,000 (cash purchase)

Condo 2: Market value $120,000 (mortgage balance $89,000)

Townhouse market value $125,000 (mortgage balance $68000)

Land: cash value $40,000

401K $70,000

0% APR balance on credit cards $18,000 (planning to pay in next 3 months)

Income:

W2 take home yearly $86,700

Rental income yearly $44,400 (cash flow $21,600)

Since I don't have any liquid cash to add more properties in my portfolio. Shall I continue to buy more properties? If yes, shall I use my HELOC from primary home rate 2.99% for 10 years? Off course my wife is against it since I purchased all properties in last 16 months. Couple of non-real estate investor thinks I am going too fast? Other options are to sell land, 6-10 months to save more money?

Please provide your input?

Thanks in advance

[Sandra Roddy]

@Depak Paten

First off, congratulations on building your portfolio.  Having accomplish such in only 16 months is impressive in my opinion.   As a disclosure, I also grew my portfolio fairly fast, so I understand your predicament. 

Simple numbers (like the ones provided above) only provide part of the story.  I had to glance at your numbers for a few minutes, because there were a few assets to consider.  Yet from all angles, I would say you are very leveraged at the moment.  I will bypass calculations, to prove my point, because only you know your true assets and liabilities. 

Some useful information was left out of your post.  For example, does your wife work?  If so, by default, I would consider her income too.  If not, a gross of 86K a year is respectable but not enough to handle your debt.  If you were to be laid off, tapping into your equity would a challenge if you were to deal with major institutions as they look at all debt.  

However, not all debt is bad as most real estate investors know.   Everyone's situation is different so it is truly unfair for me to honestly judge your case.  You might have resources who can provide a lift if times get tough?  If not, you might have all your eggs in one basket and it might be time to consider liquid ... whether by saving or selling off.  Liquid is your friend and you WILL need it as some point.  From experience, it is not fun to live on the edge.  I have learned my lesson.  Luckily, I am in the process of selling just one property.  

There will always be deals to be had.  So relax, live well and get ahead the smart way.  I say this because recently I was in a tough spot and as a result it cased me to do a lot of reflection.  Yes, I got greedy and it stung.  Having to paying property taxes, income taxes, repairs on multiple properties and maintaining my modest lifestyle whipped out my savings in only three months.  It was tough and stressful.  

Ever met someone who had a lot and lost it all?  Often, greed was the case.  Don't get greedy.  Easier said than done! 

Anyhow, best wishes!!!