New Member from San Francisco - Need Advice on our Next Investment Opportunity

[Ana Marie B.]

Greetings, BP! My husband and I have been lurking on this site for the past month and finally decided to create an account on this special day -- we officially closed on our 1st investment property today!

A little about us, we are in our early 30's and own and occupy a SFR in So. San Francisco, CA, which we bought before the price of housing sky rocketed. After a great deal of research and the help of a wonderful team of real estate professionals, we purchased our 1st investment property (condo) in a highly desirable neighbourhood of Seattle, WA. We kept the existing tenant but increased the rent. However, we will only be breaking even for the first year.

Now we're torn about where to go from here.  Our ultimate goal is to generate enough cash flow so that at least one of us can retire in the next 10 yrs.  Below are some options we're considering: 

1.) Should we focus on paying down the mortgages on these 2 properties "quicker" (i.e putting additional payments toward our principal each month)?

2.) Should we save this extra money for a down payment on our next investment property?

3.) We have also gained about $200k worth of equity in our SFR. Should we take out a HELOC to finance the down payment on our next property?

Would appreciate any insight. We're trying to make wise moves and learn from the experience of others. Thanks!

[Account Closed]

@Ana Marie B. have a viewpoint based on their business of selling turnkey properties in the midwest so take that into consideration. I own several turnkey homes in the midwest and also a couple of rentals in the Bay Area. I would never recommend selling West coast properties or even taking equity out to buy "cash flow" properties in the midwest. And its not that my midwest properties are bad. So far they generate decent returns. But just for comparison just the INCREASE in rents on the Bay Area homes this year equals the TOTAL net income for TWO of the midwest properties. And I got 20+ % appreciation on the BA homes to boot. The midwest properties can cash flow but one bad tenant wipes out a year plus of cash flow and thats the risk you are always sitting on. And there are constant maintenance costs, PM costs and other things that eat away that cash flow. Again, they are giving me good ROI and I am not unhappy with them and I think they fill a place in a diversified portfolio. But I have 5 to 10X greater equity tied up in Bay Area compared to the midwest and wouldn't change that.