Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
General Landlording & Rental Properties
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 11 years ago,

User Stats

41
Posts
11
Votes
Ryan M.
  • Investor
  • Minneapolis, MN
11
Votes |
41
Posts

Buy another property vs. improve existing property?

Ryan M.
  • Investor
  • Minneapolis, MN
Posted

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.

User Stats

308
Posts
61
Votes
Justin Case
  • Real Estate Investor
  • Seattle, WA
61
Votes |
308
Posts
Justin Case
  • Real Estate Investor
  • Seattle, WA
Replied

Cash is king. Sit on the cash until something better comes along.

Spending $30k is not worth $300 month.

User Stats

33
Posts
10
Votes
David Sugg
  • Real Estate Agent
  • Jackson, MS
10
Votes |
33
Posts
David Sugg
  • Real Estate Agent
  • Jackson, MS
Replied

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.

Equity Trust logo
Equity Trust
|
Sponsored
Avoid taxes when you sell your next investment property Savvy real estate investors can save thousands with a 1031 exchange

User Stats

214
Posts
140
Votes
Val Csontos
  • Rental Property Investor
  • Annapolis, MD
140
Votes |
214
Posts
Val Csontos
  • Rental Property Investor
  • Annapolis, MD
Replied

@Ryan M.

If you have long term goals, and you are buying in solid "bread and butter" areas I would go for two houses.

Just think of it: if your home's values are going up X % per year, with two houses you will double your equity/net-worth!

ps. of course your hassle will go up too!

But more pain = more gain. :)

User Stats

41
Posts
11
Votes
Ryan M.
  • Investor
  • Minneapolis, MN
11
Votes |
41
Posts
Ryan M.
  • Investor
  • Minneapolis, MN
Replied

Thank you @Justin Case @David Sugg @Val Csontos

I appreciate your comments.

David, to answer your question (I realize you weren't necessarily looking for answers but more for me to ask myself those questions, but incase others want the answers for their feedback).

The current tenant will be moving out this fall (building their own home) so the improvements are for the next tenant, the idea was to complete the work while the current tenant is in place and completed before marketing for next tenant.

Yes the addition (finishing lower level - 1 bed, 1 bath, living room) would add value if I were to sell, and more important to me increase rental income.

No super sexy deal as an alternative to this option

It would take me 6mo to replenish my war chest to the same level

Wife doesn't have an opinion either way, she trust my decisions

Thanks again.