How to re-invest rental income?

Question

Hello,

This is my first post and I hope to learn from others in a similar position.

I have 4 rental properties that cash flow between $200 - $1000 a month. Over the last 18 months that we have leased them out, we have built up a nice size "re-investment fund" of about $20K, with another $15K in reserves for emergencies. Since the real estate market has roared back with a vengeance in our city, great deals like the ones we got are no longer available.

3 of the properties are free and clear, the last one has a $140K mortgage. I am curious what you will recommend that I do with the $20K and growing fund. Leaving it in checking seems wrong. I look forward to your advice.

Thank you!!!

Lucas Kok · Answer

Hi Ali,

Great website you have! Thanks for the reply.Will definitely continue scouring for deals.

Ali Boone · Answer

I vote keep buying up rentals for cash flow while they are still around! Definitely don't leave it in checking. No cash flow there.

$1000/month net on a property? Excellent! Won't see that now, but you can still get some great cash flowers.

Dawn Anastasi · Answer

@Roland Chan

There are many ways to invest in real estate if you cannot find investment properties in your area:

1) Invest out of state

2) Become a private lender

3) Invest in REITs (as you mentioned)

4) Become a note investor

Search on the Bigger Pockets search area for each of these topics (I might be forgetting some) to find out more information and discussions regarding advantages and disadvantages.  If you are happy with a 5% return on your money, that's great, but if you are looking for more, know that there are other options out there.

Bigger Pockets can help you do research on these areas.

Lucas Kok · Answer

Hello Roland,

I have actually invested in some REITs on my own, just for the high dividends. Also allows me to invest outside my home area, not a bad thing. I will consider upping my stake in the REITs.

Hey Jake,

Thanks for the quick reply. I'd love to be in Georgia now! =) I will heed your advice, settle for less than the peak returns a few years ago, maybe i'll find a gem here and there.

Cheers guys!

Roland Chan · Answer

I have similar situation, I have 2 properties with great cashflow and now I cannot find good investment properties. I am thinking to put the money into REIT before I can get into the next good investment property. REIT is very liquid and it has a OK return (like around 5% annual return now), as I am not sure when I can get the next investment property, putting into REIT seem a good choice.

Jake Kellerhals · Answer

Hey @Lucas Kok!

First of all, good job on saving that cash flow and not spending it! I am operating under the same premise with my two partners, we don't take any of our cash flow out of the bank account and look to just keep reinvesting it to grow our "snowball".

We are in the same boat as you, we got some really awesome deals a few years ago but can't find the same returns now. Our philosophy is that we will buy the best deals that we can find, regardless of where they stack up against previous deals. We have a few properties that are generating a cash-on-cash return of 50%+ per year, which is awesome, but nothing available right now comes close to that. However, we have found many that will realize ROI's in the 20-30% range, and while not as good, these returns are still fabulous, especially when you consider the principal payments that are also being made.

My point to you would be to put your money to WORK for you, even if it doesn't get you the same results you once realized. As long as you are getting a decent return on your investment, go buy it!