All Forum Posts by: Jason Hawkins

@Jason Hawkins, Like any post, you will get multiple responses with all different recommendations. None are wrong. But like @Jordan Malara touched on, depends on your specific goals. I once heard, its like asking advise on whats the best car.

I am on the other side of the spectrum. Based on the info provided and the understanding that you are wanting to grow your rental portfolio + net worth, here are the 2 options I would consider:

Option 1

Stay put in your current primary and leverage the remaining balance on the rental HELOC to purchase a 2nd rental property. $100k will not get you anything in the springs but you could get a pretty decent rental in Pueblo. Cashflow will not really move the needle for you but your net worth will grow (tenants paying down mortgage principle, appreciation even thought it might br pretty modest the next year or so, and depreciation).

Option 2

Stay put in your current primary and leverage the HELOC on your rental and invest in a passive fund. Higher returns than stock market and do not have to deal with the management. Whether that is managing the property or the property manager. Downside to this is the interest from your HELOC will offset a good chunk of the 17-19% returns you would get from investing passively

Again no answer is right or wrong. These are just the options to consider.

Back in May we ran a deal analysis on a pueblo duplex in our high interest rate environment. Happy to share the recordings if you want… let me know

Your current 'Return on Equity' isn't terrible assuming a $1,700/mo net cash flow.

($1,700 x 12 mo) / $240,000 = 8.5% Return on Equity

I've seen worse :)

What I see a lot of investors do is get into multifamily passively. That 240k+ could be spread across 1,000+ doors with a proven operator and aim for a 2x+ multiple every 3-5 yrs while you spend our time doing other things.

I've also seen "HELOC Arbitrage" where someone reinvests the 3% HELOC for a 10% return and they profit that 7% spread.

Good luck

@Jason Hawkins run the numbers and think through your goals and priorities. 

If you can't cover the negative cash flow on the current primary when you turn it into Rental number 2, it may make sense to sell it. If you can take a cashflow hit I usually like the option of keeping a home in Colorado for the long run. 

Either way if you want to move to Colorado Springs you can get another primary here for 5% down. If it's a multifamily you can use an FHA loan (or VA loan if you are a veteran) to get a multifamily for only 5% down.

@Jason Hawkins As with all things real estate, any advice I would give would be based on what your goals are. Without knowing that I will simply provide some of my thoughts/questions for your consideration. Before selling your rental property I would first ask what your current interest rate is on that property and also how that property is or isn't contributing to your goals? Debt is far more expensive than it used to be and one of the greatest parts of real estate is maintaining long-term fixed rate debt, so I would think carefully before trading a 4% for an 8%. You're also making $1700/month (not including expenses) on that property which would be hard to find right now in any high appreciation market like CO with its high prices and high interest rates. But if your goal is cash flow and not appreciation then maybe selling and buying in a market that is opposite of CO is what makes the most sense. Again, it just comes back to your goals. 

I personally don't love the idea of trading an asset (your rental) for a new primary (a liability), but I'm married as well and can understand that sometimes you may not have much of a choice. But your rental is making money and renting your current primary would likely not net you as much cash flow, so what if you just sell your primary and take the money from that to buy your next primary. If you lived in it for 2 of the last 5 years, then you don't have to pay taxes on the sale.

If after all this consideration you find you do want to sell your rental, I would highly recommend doing so through a 1031 Exchange so that you can defer the taxes on the sale.

That's just my two cents, hope that helps. If you every need any help looking at deals in Colorado Springs, let me know. I'd be happy to help you out or just point you in the right direction!