Getting 2 paid off cash flowing properties- what next?

Question

In a buyout I am receiving two cash flowing properties that are with section 8 tenants- currently cash flowing around 20K a year.

They are worth about 200K total.

I'm wondering what the next step should be.  Refi? What til rates/prices drop to refi?

Sell them and put a down payment on something bigger?

Remington Lyman · Answer

Have you owned section 8 properties before? If not I would sell them and 1031 into something nicer unless you are looking to own cash flowing properties

Jeffrey Richard · Answer

You're not concerned it's just not a great time to buy right now? I currently own MFH in the partnership in Ohio and they are a nightmare, high turnover, high complaints, constant problems.  The cash flow looks amazing on paper but in reality it doesn't come close.  You don't have this issue?

I am looking for more potential section 8 properties; but just concerned about it not being a great time to buy.

Kyle Joseph · Answer

Agree with the other comments. It depends on what your goal is. I'm happy to put some numbers together with you on your different options to help inform your decision - just let me know.

Ko Kashiwagi · Answer

Hi Jeffrey,

What's the goal here and would you rather own a different type of real estate? If the property fits within your strategy and you have equity, it would be a good idea to cash out refinance. If you want to invest in a different area/property type/class, 1031 exchange may be a good idea.

Alex Olson · Answer

@Jeffrey Richard I agree with @Ko Kashiwagi and would consider doing a 1031 exchange. You can buy a $1mm property here in KC that is nice and cash flowing in a good area. Let me know if you want to talk further on how this works.

Brittany Minocchi · Answer

Depends on what your goals are! I wouldn't keep the equity tied up if you own them free and clear. If you don't want those particular properties for whatever reason, sell them. If you don't mind hanging onto them, cash out refi. You can do a 1031 exchange and use those funds towards another investment purchase (basically a tax deferment). I wouldn't tell someone to wait for rates to drop, because everyone else is waiting for the same thing....which will drive prices up. You can refinance out of a high rate. For what it's worth, Cleveland and other parts of OH are hot right now. I don't have a problem with Section 8 but I prefer multifamily over SFHs, so if it were me, I'd probably pull the cash out and use it towards MFHs to scale. Happy to discuss if you have any questions, feel free to reach out!

Nick Maugeri · Answer

If you are wanting to scale: refinance and deploy for additional acquisitions.

If you are wanting to consolidate: 1031 and exchange into a larger asset.

If you are wanting to invest: don't wait to buy, buy and wait.

Getting 2 paid off cash flowing properties- what next?

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