Purchased first multi-family...help with way ahead

God damn I love this community, first and foremost.  I have purchased a 315K duplex that cash flows 350/month.  I have an extra 1200 a month that I am looking to further my real estate ambitions.  My initial thought is to put that 1200 into my mortgage until I can sell for 250K profit and invest into 700K or 1.0M apartment complex.  Is this too ambitious or should I take a few steps in between.  I'd appreciate your help tremendously.
Keoki Kimzin
USAF/Multi-family Investor

    Comments

    • How long would it take you until you get to a 250k profit?
      Creator of Invest Four More
      If you want more help with your investing, check out http://investfourmore.com/blueprint-for-successful-real-estate-investing/


    • I don't think I would say it's too ambitious, I'd say it isn't nearly ambitious enough.

      I'm assuming by $250k profit, you're talking about being able to walk away from the sale with that amount. Depending on appreciation, you're probably looking at 10 years or so.

      In my opinion, it would be a much, much better option to put that $1,200 in a bank account, along with the $350 cash flow, and hold it until you find another deal, and try to purchase an additional property. Putting more and more of your money into a property you already own will steadily decrease your ROI, and eliminate the advantages of leveraging your money. 
    • Posts: 9
      Shawn and Mark thanks for your replies, love this feedback.  To elaborate on my timeline, if I invest my extra income and cash flow (total of 1550) into paying my mortgage I could sell assuming minimal appreciation for a profit of 250K.

      Shawn,

      Saving my cashflow and  extra 1200 I will end up with 112K in 6 years.  This would only get me around 400-500K worth of financing (assuming some equity in the MF to leverage).  In my area this would only get me another 400-600 a month in cash flow.  I guess my ideal situation would be to take my 250K, do a 1031 exchange to purchase a 1.0M apartment complex on a 7-10yr note.  I feel like that is where I'll be really building some great CF and equity.  Am I missing the forest through the trees here?

      Keoki Kimzin
      USAF/Multi-family Investor
      • edited July 2016 Posts: 0
        There's no one right way, and I've certainly got a lot more time reading than I do practical experience, so take my recommendations with a grain of salt.

        If it were me, I'd be trying to leverage more than not. I believe Mark has at least one article discussing about how it's better to have something like a car loan or a mortgage, because the return that you can get from investing that money(~10%+) is higher than the interest rate for the loan(2-5%), so putting the money towards investments is a net positive compared to paying down already acquired assets.

        That additional money could contribute to buying an additional property every year or two, depending on where you are and loan requirements. If you can obtain 3 more properties over the next 6 years, then you'll have a much higher benefit from appreciation. Think $800,000 worth of real estate appreciating instead of $200,000. Additionally, when you buy each additional property, you're gaining the cashflow that comes with that new property, instead of being stuck at the $325 you're getting now for that time period.

        In a few years time, you can do a cash out refinance on your properties if they have appreciated decently, and to pull out the money you've payed into the principal, or sell them and use the proceeds toward the next investment.

        If done correctly, you will likely end up with much higher cash flow and equity than if you were to pay that money back into the property you already have.

        Edit: Here's an article about what I mentioned: https://investfourmore.com/2014/12/24/good-versus-bad-debt-investing-real-estate/
      • Posts: 9
        Mark and Shawn,

        Thanks for your inputs gents, has me analyzing my situation with a different perspective that I needed.  Thanks gents.
        Keoki Kimzin
        USAF/Multi-family Investor
        • Yeah, of course. Good luck!
        • Posts: 9
          Thanks, Ronald
          Keoki Kimzin
          USAF/Multi-family Investor
          Sign In or Register to comment.