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multi-family financing / don`t want to sell what I have

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adamzihla

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Hello!



I am interested in investing in multi-family real estate in the next 6-12 months and am wondering

if I can do that without selling any of my current properties.



Goal:

Multi-family (6 units+)with a purchase price of $600,000 - $1,200,000

No selling of current real estate



Current assets:

3 rental properties with equity totaling ~$615,000 ( equity pretty evenly split over the 3 )

Combined positive cash flow of aprox $1600/month

Liquid cash $100,000 (within 6 months)

Net worth ~$720,000



I haven't worked for the last 2 years and don't plan to work any longer than the next 6 months.. So my personal income wont help. I don't own a primary residence, as I've moved out of mine and rented it out. Will be a renter in the near future.



Any and all advice welcome. Really interested in whether or not second mortgage / HELOC options exist for me. Again, would prefer to avoid selling what I have already.



Thanks,



Adam
 
get cash from:



a) re-finance existing assets (albeit they seem too tight)

b) a JV partner [that could be the property seller, too, btw]
 
So hanging onto all 3 is pretty unrealistic?



Forgot to mention I currently have a $40k heloc available from one of the properties.



- Adam
 
[quote user=adamzihla]So hanging onto all 3 is pretty unrealistic?



possibly ..



look at opportunity cost: not selling yields X .. but selling + buying another asset class yields Y .. [after taking into consideration selling costs like realtors, legal, taxes and TIME invested to sell PLUS time invested for asset acquisition / education / beginner mistakes]



Usually a multi-family (MF) asset is more efficient from a TIME point of view as opposed to multiple single family (SF) assets .. but: MF is always treated/evaluated as an income property vs. SF is a "change of use" i.e. you buy from an owner, then operate as an income property and usually sell to an owner with possibly far higher, rent unrelated EQUITY VALUES and thus, possible a better cash-on-cash ROI !!
 
Seems like you are generating ~3% cash return on equity - have no outside income and minimal other assets - you are in high risk territory already

If I were you I would NOT Be looking to expand holdings at this time - but possibly selling a property to minimize risk
 
[quote user=housingrental]3% cash return on equity


likely FAR higher as the mortgage (undisclosed) is being paid down every month .. plus there may be equity upside depending on asset location.



So, if in rising market like AB or SK: consider keeping it .. if in flattish market like BC or ON or US consider selling it .. but more detail is required for a more informed opinion !
 
All 3 properties are in Alberta ( 2 Fort McMurray / 1 Edmonton ), and yes they do all have mortgages. As for high risk territory, I'm not quite sure I understand. At 29 retirement is a ways off and I can always work if forced to. I have enough liquid reserves for any emergencies / vacancies / trips to Europe, with the added backup of that HELOC.
 
There's several good commercial brokers who can provide financing advice. The lack of a job is pretty killer with that size of a portfolio, but get clear answers from good brokers. Try Garth Chapman (Gencor), George Hilton (Montrose) or Ahmed Assif (Excel).
 
I'm hoping, naively maybe, that I'll be able to secure funding for future deals based on the merits of the deal itself. I'll take care of my own personal costs as I need to.
 
Hi Thomas



Your first portion is incorrect - I think you are misreading my posts this week - note I wrote CASH in my above post - the last sentence you wrote is correct - more information ...







[quote user=ThomasBeyer][quote user=housingrental]3% cash return on equity


likely FAR higher as the mortgage (undisclosed) is being paid down every month .. plus there may be equity upside depending on asset location.



So, if in rising market like AB or SK: consider keeping it .. if in flattish market like BC or ON or US consider selling it .. but more detail is required for a more informed opinion !
 
Very high risk markets too...

Increase your cash position - you have huge wealth for your age..... secure it while you can...



[quote user=adamzihla]All 3 properties are in Alberta ( 2 Fort McMurray / 1 Edmonton ), and yes they do all have mortgages. As for high risk territory, I'm not quite sure I understand. At 29 retirement is a ways off and I can always work if forced to. I have enough liquid reserves for any emergencies / vacancies / trips to Europe, with the added backup of that HELOC.
 
[quote user=housingrental]you have huge wealth for your age indeed .. why not work a bit too to live on and just let your equity grow with little to no cash-flow ?
 
Well, I'm currently in the process of switching jobs/careers. I will be working, but future income is highly uncertain at this point. Thanks for all the replies in this thread so far, they're really helping me to think things through.
 
Think about this - how long will it take you from working income to save up a few hundred thousand dollars? If market falls in price this might be the situation you are in to get back to where you are - and for many people this might be a ten year + process.....

If I were you I'd sell some properties now and secure gains..... an opportunity has presented it self to you... will you take advantage of it???



[quote user=adamzihla]Well, I'm currently in the process of switching jobs/careers. I will be working, but future income is highly uncertain at this point. Thanks for all the replies in this thread so far, they're really helping me to think things through.
 
housingrental:



I definitely hear what you are saying. The cash flow on equity is a little skewed as only 2 of the properties are responsible for it. The third property, which I initially purchased for myself, is basically break even. It's hard to sell the properties in Fort McMurray, as they do cash flow so well and any other market will be a weaker rental market ( I believe ). At the same time, I have been wary of investing into more properties up there. If I do sell then I will lose the income & potential for mortgage paydown in the future, making it hard to weigh with the risk of a cool down in the real estate market here.



- Adam
 
Sell one.... you still have more weighting (and potential upside) in real estate than most people would be comfortable with.... and more wealth in real estate than most people and 99% of people your age....

And see how you feel..... you might decide it's time to sell a second... or not...



Ask yourself: What's the worst that could happen if you sell one? if you do not?
 
[quote user=housingrental]What's the worst that could happen if you sell one? You have cash and have to find a home for it .. and cash will be FORE SURE worth 5% less next year !



Some cash is necessary .. of course .. but better is a cash-flowing REAL (i.e. inflation protected) asset !
 
Hi Thomas

If that's the worst case scenario that does not sound like much downside risk vs alternate choices :)

Right ??
 
Exactly Thomas, exactly :)



OP - Sounds like you have agreement on what we'd do from both me and Thomas, a rare event. Have you made a decision?



[quote user=ThomasBeyer]Cash is King - Cash-Flow is Queen (TM) !!
 
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