Two Mortgage's= Hold what I got?

[steve-o]

Anyone have any advice here:
Property#1 Single Family, Loan balance $95,000. $939 monthly 13 years remaining @ fixed 4.875% Currently renting for $1200. Est. value= $185,000.This was my primary residence, job related move makes it a rental.
Property#2 Duplex, Loan balance $95,000. $1028 monthly 18 yrs remaining @ 5.625 fixed. Currently renting for $1250(625 x 2) - $125 mgr. Est. value= $179,000.

??? Should I hold what I have??? I was thinking about re-financing the house to pay off the duplex. Good or bad idea. I want to buy another property in FL in about 3 months. Should I use some of this equity for that property? Open to all suggestions. Thanks Team.
Steve-o

[Jim Johnson]

I always look at return on equity and return on investment so I fully understand not only what my money is doing, but also what it can be doing. In deal #1 your return on equity is about 4%. That is a quick answer because you also have to figure in depreciation, principle reduction etc. But as a return on equity, well it is not so good. Deal #2 looks about the same. I would say you should look long and hard at a 1031x into a property that will yield you much more for the money in equity you have. Leverage is your key to long term wealth in Real Estate. Good luck, and be sure you really understand 1031x rules before doing a exchange. I use the guys at www.1031x.com
You should also download the spreadsheets in the "buying your next home right" area of the forum and plug in your numbers. They will tell the tale!
Anyone have any advice here:
Property#1 Single Family, Loan balance $95,000. $939 monthly 13 years remaining @ fixed 4.875% Currently renting for $1200. Est. value= $185,000.This was my primary residence, job related move makes it a rental.
Property#2 Duplex, Loan balance $95,000. $1028 monthly 18 yrs remaining @ 5.625 fixed. Currently renting for $1250(625 x 2) - $125 mgr. Est. value= $179,000.

??? Should I hold what I have??? I was thinking about re-financing the house to pay off the duplex. Good or bad idea. I want to buy another property in FL in about 3 months. Should I use some of this equity for that property? Open to all suggestions. Thanks Team.
Steve-o

[Dan Auito]

Stevoe! I'm doing the ALCAN so am limited in my access to the site. But the old adage in real estate is to buy and hold looonnggg term! If I where you I would let these positive cash flowing properties ride and use equity lines from them to buy the next one. Jim above is no dummy but my idea these days is to hold, hold , hold!

[elnuk]

If I where you I would let these positive cash flowing properties ride and use equity lines from them to buy the next one. Jim above is no dummy but my idea these days is to hold, hold , hold!

I would definitely hold for the long term like Dan says, but i would also be leveraging some - a lot :SM119:- of that equity for more investing.... Good luck :SM038:

[steve-o]

Can anyone recommend the best (cheapest) lender for an equity line on a rental property? I knew I should have taken the line out while I was still living in it. Yet another lesson learned!

[Tom Henderson]

I always look at return on equity and return on investment so I fully understand not only what my money is doing, but also what it can be doing. In deal #1 your return on equity is about 4%. That is a quick answer because you also have to figure in depreciation, principle reduction etc. But as a return on equity, well it is not so good. Deal #2 looks about the same. I would say you should look long and hard at a 1031x into a property that will yield you much more for the money in equity you have. Leverage is your key to long term wealth in Real Estate. Good luck, and be sure you really understand 1031x rules before doing a exchange. I use the guys at www.1031x.com
You should also download the spreadsheets in the "buying your next home right" area of the forum and plug in your numbers. They will tell the tale!

I am going to give another view of this situation. This is not to say mine is correct, but only to show there can be disagreement as to strategies among investors.

I am very leary of the "return on equity" approach. Because we know that equity is nothing more than FMV minus what is owed, we must rely on a subjective figure FMV to make decisions. FMV is not an objective number. It can change from person to person and from day to day. Should the real estate market take a dip, so does your return on equity.

In the 80s, the strategy was to buy anything, leveravge to the hilt, and just sit back and wait for inflation to make you rich. This strategy did not work. Those who tried to pyramid their properties did not like their end of it. Those who had properties that were free and clear, or close to it, or had cash, withered the storm and came out in great shape.

There is a lot to be said about having a base of F/C properties. If your goal is income property, I can think of no better way to increase your income than to own property F/C. These will produce income of some sort in good and bad times. If you have 30% equity or less, and things get tight, you could get wiped out and in a hurry.

Just food for thought.

Tom Henderson
H&P Capital Investments LLC
214.575.8292
www.hpnotes.com