All Forum Posts by: Cynthia Oistad

@Bill B.- thanks for your response and for sharing for the difference on the HELOC vs. the home equity loan! good point! I agree with you on 20% down also to avoid PMI. I am reading "Rich Dad's Real Estate Advantages" and the authors reference a $1:$9 accelerator to borrow 90% of cost of an investment and use your own money to cover the remaining 10%? I questioned that when I read that but just figured I was just not yet aware of potential opportunities out there where you can get a bank loan for 90% of the cost (and pay PMI) or maybe bring in a partner or private investor to cover the other 10% of the 20% down payment to avoid PMI? We do have approx $150K equity in our primary residence but not as much as our fully paid off rental home which has about $300K equity. I'm intrigued .....Why is the primary residence considered a cheaper source of funds?

We are fortunate to own a single family rental home in our area outright.  The mortgage loan was paid off earlier this year and now we are seeing higher monthly cash flow.  The home value has appreciated considerably.  We bought it for $155K in 2002.  Our 2018 tax assessment was $300K.  It is in a great location which has kept vacancy super low in the past 9 years we have rented it.  We want to keep the property as a cash flowing rental.  

We are interested in investing in another cash flowing rental property this year to BRRR. We are open to properties in our local area (Anchorage, AK), or Denver or Las Vegas because we have some personal connections in those areas.

Here is my question: 

Should we take out a HELOC (home equity line of credit) or a home equity loan on our existing SFR home (that is paid off) to finance a 10% down payment on the new investment's mortgage? Estimating we would need $20K to $30K for a $200K - $300K property.

OR

Should we keep this SFR home paid off to maximize its cash flow and use other sources of financing (personal savings or piggy back a home equity loan on a conventional 30 year mortgage loan) to finance the down payment on the new investment?

Pros for NOT taking line of credit; keeping home fully paid off: We worked hard to pay this rental home off the past 10 years and it is finally cash flowing nicely.  Lower financial risk if we had a longer vacancy or costly repairs because the rental expenses are lower.  Peace of mind from less debt.

Pros for taking out the line of credit: We could capitalize on the SFH's equity (while still keeping it as a cash flowing rental- although the high monthly cash flow would decrease - and avoid "parking our money" in the home's equity. In this scenario, we are leveraging OPM "other people's money" to invest with a 9:1 accelerator. Seems the downside is that we would reduce our equity and monthly cash flow. We would assume more financial risk if there is vacancy or costly repairs because higher rental expenses rather than keeping it paid off. Less peace of mind due to increased debt, but trade off is better use of OPM.

I will say we are leaning to taking out the line of credit for the pros mentioned above, but excited to hear your perspectives.  This BP community is awesome to share ideas/experience.

thank you all for your comments!  @Spencer Cornelia, we purchased the Vegas property from family below market value.  We were very fortunate to get a great deal in an appreciating market as I know good cash flowing deals are hard to find.  Our townhome is in Clark County in a gated community and comes with a long-term tenant. :)  The multi-family properties have my interest, but we have a LOT to learn before we make that leap; this thread has been helpful to see both sides.

thanks everyone!  These are really great responses and interesting to hear from both sides!! 

Is anyone out there seeing cash flow with single family home investing? Are we ignorant to avoid cash-flowing multi-family properties?

Hi Everyone!  My husband and I are newbies to real estate investing and we are trying to learn as much as we can!  When we purchased our primary home, we decided to rent out our first home (a single family duplex). We have been able to self-manage it and keep our costs relatively low and the home is paid off this year so we are seeing good monthly cash flow.  We are going to close on another single family 2BR/2BA property in Las Vegas this fall.  Because we only have experience self-managing the ONE single family town home for past 9 years,  we lean to acquiring Single Family homes because it is what we know.  With single family rentals we like that the quality of tenants are higher and we don't have as many issues with non-payment, eviction, vacancy, tenant issues, and overall hassle for us as owners.

However, It seems most Bigger Pockets and Real Estate education points to multi-family being a more solid investment for cash flow, due to economies of scale, cash flow spread across multiple units, vacancy not all at once, etc. We would of course use a management company if we were to buy a multi-family building to lessen the stress/hassle of owning the property. 

 Can investors make good cash flow solely off a portfolio of single-family rental homes?  or do we really need to start considering multi-family properties (w/ a reputable management company)?

@Phillip Dwyer, I'll look into that!!  How could transferring the property to us via a DEED and us owning the property outright, hold up future sale?  We are looking to buy and hold this property, but always good to know for when we sell it sometime in the future.  

thank you SOOO much to everyone who took time to respond and provide your feedback!!  This is our first time buying a home with an occupied tenant, so we were unsure on best way to move forward.   Appreciate this BP community very much. 

Thanks! The HOA covers all the maintenance and tenant maintains the grounds. Desert landscaping so not much maintenance. aside from us wanting to make rent more align with market, there isn't much more tenant could take on to keep costs down. Unless water/sewer? We currently pay that as landlord.

We are purchasing a 2BR/2BA single family rental in Las Vegas from my family.  The current tenant has lived in the house for about 7 years now and have been on a month-to-month agreement since 2012.  My family has increased the rent for this property ($25 every few years) over the rental period.  Current rent is $900 month.  Last rent increase from $875 to $900 was in January 2017.  As the new owners, we would like to rent the property out at $950, but we also want to keep the existing tenant who has been excellent and not start relationship off poorly.  According to rentometer.com, Median rent for that size of property and zip code is $960.  Average rent is $995.   Should we bother raising rent or keep consistent with previous increases and only raise it $25?  We would sign a new contract with her as the new owners.

 thanks for your help! 

Can anyone recommend a good Property Manager in Las Vegas (89108 zip code) that would maybe do "on-call support"?   We have an existing tenant so we really just need someone local we can call to respond to maintenance calls/perform inspections as needed.