What next? 2 CFP Rental Properties and looking toward the future

[Ron Calloway]

I'll try and make this as clear as possible. I don't know what to do next:

• 2 Cash Flow Positive rental houses 
  • Rental A: 66% loan to value, 2 year lease with good tenants, net income: 500/month
  • Rental B: 37% loan to value, 1 year lease with ok tenants, net income: 1200/month

What do I do now? We have an expensive house we live in that we would not turn into a rental, (too expensive) and bought both houses when the market was lower and rents have steadily increased in the Seattle area.

Should I buy another rental? We don't have $ for a down payment and I'm concerned refinancing either property due to the loan interest rate and positive cash flow. Not to mention, property in the Seattle area is ridiculously expensive right now. Deals can be found, but you must dig to find them and I'm not confident I could finance a deal right now without 25% down.

Any help is great appreciated! 

[James C.]

Ron,

What does your business plan say? What do you have in there as a MAX LTV? What do you think the market is going to do? Can you go with a Lease/Option deal? How about an MLO? Can you find an investor partner? 1031 exchange?

It sounds like you don't have a plan to execute, or at the least you don't have a contingency plan. So, what better time to get one than now? Create a business plan, complete with contingencies. Now may be the time to let things sit, let your cash build up ($1700/mo x 12 mo is $20,400) x 2 years is about 40K, plus any savings from your job.

While things are "sitting", I would suggest spending this time to do some additional reading, taking a serious look at your REI business, and maybe think about (GULP!) going beyond Seattle. There are places where 20K could get you a bunch of cash flow, but Seattle ain't one of them.

In short, now is the perfect time to reflect, reconnoiter and reload.

Good Luck!

Jim