Hi everyone, Thank you for taking the time to read about my situation and give me advice. My goal is to bring in 16k per month with my buy-and-hold properties. I plan on living on 25% of that and using the additional 75% to invest. I am currently focused on real estate 4-6 hours a day and spend the other 8-6 hours a day growing my wife marketing company. We currently live off of her income from her W2 while getting her company off the ground. We keep in a bank account an emergency fund of 3 months' expenses for all rentals.
Financials: We currently own a primary and 2 LTR single families. We no longer want to sacrifice any of my wife's income to invest in our rentals and only want to grow with the income that the business produces. The first property rents for $2,125 per month and its expenses including maintenance and vacancy is $1,350 for a total monthly cash flow of $775. We owe $168k and the home is valued at $220-245k. Our rate is a 3.5% fixed with 27 years remaining. The second property rents for $2,095. Expenses including maintenance and vacancy is $1,400 per month for a total monthly cashflow of $695. We owe $130k and the home is valued at $175-195k. Our rate is a 6.625% adjustable in 3 years.
Lending: I no longer have a traditional income. I have networked and have 2 private lenders that are interested in lending against my new projects. One is offering to lend at a 10% rate for a term of 12 months 100% the cost of the project up to 75k. The second says I need to bring him a deal and show him the numbers on the property before giving me any numbers. He said he does equity splits only at 6-12 month terms. My credit is climbing consistently with debt being paid of that was used to renovate the last property. currently sitting at a 670ish. Both rentals are in my wife's name since she had the W2 income to get the loan. She is sitting at a 720. Her D-to-I is high due to the purchase of our primary home and with us starting to supplement her W2 income with 1099 income. Potentially get a commercial loan or HELOC against the properties to fund additional deals.
Future: I will have all the debt from the prior renovation paid off this year from the rental income. My wife will have all of her credit card debt paid off by July. In July I will be receiving $50k after taxes in an inheritance for investing.
Options:
1: I try to develop one of the two current vacant lots that I own using a mobile home to bring in more rental income without needing to get a new mortgage. I could get the project done between 20-40k. I would do the renovation myself and I expect rent to be around $1,100-$1,500 per month.
2: I try to get into flipping a home in a more affordable area of Detroit. I have not done this before and I have never bought in Detroit. None of the homes I have seen have made the 70% rule happy if I pay reputable contractors other investors have connected to me to do the renovation so I would need to do the work myself.
3: I wait on the quadplex I have been working to get from the landbank. I was going to go under contract but the house had won a grant and will no longer be for sale until the roof has been replaced. I know the landbank director and she said she is unsure when it will be available for purchase again or if the price will reflect the new roof. This house does fit the 70% rule and would cashflow $3,000-5,000 per month after expenses. ARV is $250k and all in we are at $130-150k.
4: I fix our primary and have a second unit built above the garage. There is no garage currently at our primary so we need to build one anyways to accommodate my tools and our cars. It would take me 6 months to fix our primary up and an additional 6 months to build the garage. We would be into the project 30-45k. We would be only paying utilities in the unit above the garage and would have our own separate drive/yard. Expected rent is $2,000-$2,250. Expenses would be $1,550. Cashflow would be $400-600.
5: Wait and focus on getting higher-paying clients for the business we run. Get the funding in July and use that to either acquire the quadplex or add an additional unit. Our credit would be increasing and our debt load would drop by $1,500 per month.
If you have made it this far thank you! I know it is a ton of information to process and I have been going over this 5 times a day in my head. Let me know what you think and what you would do. I want to grow quickly without over-leveraging ourselves and putting everything I have worked at for the past 2 years at risk. Consistent steady monthly income is our ultimate goal so we can achieve financial freedom and work on real estate projects without the loom of our own cost of living over us. I look forward to everything everyone has to say!
