Newer Young Investor Confused on How to Proceed

[Nicole Jacobson]

I grew up watching my parents invest in real estate, and grow their net worth this way. I have had the opportunity to dabble myself, and how recently purchased a few homes, but concerned I am missing the boat on how I should be handling these investments.

I have 3 properties, working on purchasing my 4th. They are as follows

The 3 are all located in Phoenix, AZ and all rented

1: paid $180k was rented before it closed, paid cash with an HOA of $200 monthly and rent of $1300

2: paid $135k was rented in 1 day, paid cash with an HOA of $200 and monthly rent of $1100

3: paid $215k rehabbed total $260k mortgage on property is $100k with payment being $800 a month, and HOA of $50 a month rented for $1475

4. looking to buy a house in Colorado, where I will rent it out and also live in it. So hoping to put 20% down and pay mortgage in full with income from roommates.

I am 27 with a stable job, but being newly out of college I don't want to take on too much risk. I make a fair income, purchased these by saving and help. I save all the rent that I make monthly which is currently about $2,500 a month but I know that the cash flow is low. I am wondering if I should mortgage them and invest this money in the stock market ( I would have to pay a planner though cause I don't know the market at all).

I would love some advice about what I should be doing or am possibly doing wrong! Thank you in advance for your time I appreciate it!

[Robert Herrera]

@Nicole JacobsonGood job owning Real Estate. The reason your returns are low, are because you are not LEVERAGING Your Real Estate. You Paid ALL CASH so your ROI is low. If you were to get a Mortgage on you houses, you would have a Huge Chunk of that money back, NON TAXED. You don't pay taxes on a DEBT/LOAN. Next, use this money to buy more Properties with 20% down.

$180K CASH, $1,100 positive cashflow after HOA is only bringing in about 7% annually. HOA is eating all a huge chunk of profit. Also this doesn't account for Taxes and Insurance so its even less of a performer. That is why you are wondering what else to get into, but in my OPINION, stocks is not the answer. Lets Look at this Deal With LEVERAGE and NO HOA.

(I Know I Have Not Included Repairs/Maintenance, and Utilities, as well as Vacancy rates)

180K purchase price ,House (No HOA) with 20% down. That's $36K out of pocket. Payment is $900/month= Principle Interest Tax's and Insurance "PITI". Rent is $1,300/month.

Simple cashflow numbers = $400/month Profit. This is about a 14% return on your money! Now go buy 4 more with the remaining money from the original $180K you had cash. Your income from just the 180K cash could be around $2,000/Month if you multiply the results over 5 houses. ALSO< you will still gain ALL The APPRECIATION from EACH HOUSE, without having to pay full price out of pocket. This is HUGE. 

I would Cash Out on all my HOUSES. Then i would turn around and implement a strategy just like this one i stated above.

I think you are on the right path, you just need more Understanding about the Rental game. I Personally see Even Better returns, you just need to Increase Your KNOWLEDGE and Leverage your DEBT in the Right Location.

On A Side note... I NEVER Buy "HOPING" for Appreciation. This is Called GAMBLING. You can loose it all in a Market Shift. If you buy with CASHFLOW, it doesn't matter if the Market Shifts, you can wait it out until the market comes back, and still make Money Every Month.