Hi I'm an accidental investor... sort of.

[Elliot Fuller]

Hello everyone, short time lurker, but long-time listener to the BP podcast.  Figured I would introduce myself and my situation as a case study to solicit advice.  I'm an accidental investor, in the sense that it was never my goal to have tenants, and I have almost no actual investment experience in real estate: everything I've done has revolved around my primary residence(s) that I've generally just gotten lucky on up to this point.

About me:  

• Job: Active duty military, 11 years in, planning to do 20
• Location: Eastern North Carolina.  
• Family: I'm 35 and married with a kid.  
• Finances: Net worth including equity in two homes is about $745,000.  No debt other than mortgages.  Making about $115,000 annually after taxes from two full-time incomes, and saving/investing between 30-40%.  We have about $60,000 in cash we can tap into right now. 

Primary Residence: Greenville, North Carolina.  Purchased 2018 for $192,000 at 4.25%.  Owe about $179,000.

Rental Property: Oceanside, CA. Purchased 2013 with VA loan (zero down) for $353,000 at 3.25%. Owe about $300,000. Rented out with a management company for $2,350 and have been able to consistently raise rents about 2-5% annually. Would most likely sell for around $510,000 - $520,000 if listed today.

The California House

We've kept the house in CA due to the chance of being re-stationed there at some point.  Having a foot in the door with a low payment from 2013 rates has been a nice fallback -- military housing allowance has gone up dramatically to match market housing costs, so if we moved back into that house we would pocket about $1,000 monthly of extra tax-free housing allowance, give or take.

Unfortunately, after taking vacancy, capex, maintenance, etc. into account, the house is not currently cash flowing.  In fact, looking at the numbers unemotionally, we're probably losing $500-$600 monthly on it: PITI ~ $1,986 / Landscaping and maintenance ~ $70 / Mgmt, capex, maintenance, vacancy ~ $893. Factoring in paydown of the loan, we're still probably up around $2,000-$3,000 annually though.

Some have called the California house my "retirement plan" on other forums, and told me I'd be crazy to sell it with a locked in 3.25% rate. I'd also take a significant tax hit on a sale, and lose the long-term equity accumulation potential.

Eastern NC

There are only about 350 active listings in our current area right now. Most are priced at about market value, making them not great candidates for flips. Low income, stagnant rent, and a lot of Section 8 housing makes BRRRR challenging as well, and make it difficult to find properties that would yield cash-on-cash returns and cap rates over 5%. I know those unicorn deals pop up now and again, just haven't had any luck so far.

Plan of Attack

I'd really like to try out BRRRR, flipping, or just finding a good solid cash-flowing property. More than that, I'd like to do what's best with my money in my other house. I don't like having a bunch of untouched equity that could otherwise be earning me more money, and after reading up on BP, I definitely don't like the idea that I'm actually NOT cash flowing on that property the way I thought I was. Month-to-month everything's great, but as I've seen first hand on several occasions, those one-off expenses really cut into the bottom line.

Curious what other peoples' thoughts are on this.  I can provide more info if needed, but it was already getting pretty long-winded and wordy.  

If I have the means of obtaining capital elsewhere, would you suggest I hold on to the negative cash-flowing CA house due to its long term potential and "overall profitability?"

Or would you tap into its equity with a refi or HELOC in order to buy more properties?

Or would you sell to take profits and use the cash elsewhere?

If you read this far, thanks!  Appreciate what a great resource this is, and look forward to learning more!