Buy another property vs. improve existing property?

[Ryan M.]

I'm interested in feedback on which option to pursue. I have enough cash to either:

1. Purchase another SFR - or
2. Improve an existing SFR.

I've run the numbers for both and given my capital ($30k), it is about the same out of pocket to do either, and both scenarios will net me roughly the same monthly cash flow ($300/mo).

Purchase another SFR

• Pros - diversification, another property in my portfolio, another property that someone else is paying down the debt, new property would provide add'l depreciation,
• Cons - more leverage, another property to maintain, rent, mortgage, take on more debt for same monthly cash flow

Improve existing SFR

• Pros - improving an existing asset, no addition debt for the same monthly cash flow, less to manage (property, tenant, etc...) long term, increase equity
• Cons - increase my exposure/cash in a single property, less leverage, more to damage by tenant, more equity tied up in one property

I recognize the pros/cons are not an exhaustive list but just some of the things I'm trying to think through.

Are there other "big rocks" I'm missing?

What would you do, and more importantly - why?

Thanks in advance for your time & feedback.

[David Sugg]

I think it really depends on your situation. I'm guessing you are thinking of applying the 30gs to your single Sfr and either increase the rents or use the addition to entice the $300 return.

Q. To know

1. Is the current tenant expecting that ,or are you going to spend time and cash to find a new appreciative renter. Will you loose your current tenant if you dont build out?

2. What would your addition add in value if you wanted to sell or draw equity?

3. Is there some super sexy deal that you are pondering or are you just crunching numbers because your hooked on analysis?

4. How long would it take you to save your 30k? Are you okay with waiting that long to buy your next? Which delay dissatisfies you the greatest?

5. Whats your wife think?

Anywho, all those questions being answered may get you closer to your ultimate conclusion, but the important thing is that your doing all this inventory and deliberation with your $ safe for now and waiting for the best scenario to present itself. Keep building the war chest. Your in a good spot. Run numbers on a hundred homes. Make offers on 10. Buy 1.

Lastly, you will be able to tease different numbers with a new deal. Hunt. Hunt. Hunt. I run numbers all the time just for practice. You may find a great whole sale. The market is much more dynamic than the static construction cost.