Keep or Sell? What to Do When Your Rental Doesn’t Cash Flow

David:
This is the BiggerPockets Podcast show, 9 97. What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate podcast. Joined today by my handsome, dapper, clever, intelligent, and very humble co-host, Rob Abasolo. How are you, Rob?

Rob:
Good, good. 9 97, dude, we are three episodes away from episode 1000. Can you believe

David:
It? That’s right. Carrying the torch for everybody who wants to build wealth through real estate, and folks you need to know, we could not do the show without you literally because this is a scene green episode, as you can tell from the green light behind me. If you’re watching this on YouTube in today’s show, we take questions from you, our community, and answer them directly for everybody else to hear so that we can all learn and grow on this journey that we are taking together. Today’s show is a lot of fun. We have a live call in from an investor who’s trying to figure out what his first step should be after inheriting a property with almost $300,000 of equity. We talk about the best states to invest in if you’re a traveling professional, like a traveling nurse, where we combine low cost of living with high wages and future growth to be expected. We talk about what to do when tenants are receiving mail from a house that you used to live in, when to hold them, when to fold them, and when to trade your short-term rental for something better and more. So stay tuned. We’ve got an awesome show for you.

Scott :
My name is Scott Eranio and I’m a big fan of your show. I’m new to real estate investing and currently don’t have any property. I live in Boston, but the high prices here are a barrier to entry, so my wife and I are looking to relocate. I’m a nurse, so my job is quite transferable to most markets. We plan to house hack by owning a multifamily home and have about $55,000 of investible liquidity aiming for a buy and hold strategy. Initially, we considered the research triangle in North Carolina due to its strong economy and population growth, but the lowering nursing salaries there have made us reconsider. We’re now looking into markets where nurses earn more and the cost of living is much lower, such as Texas, Georgia, Arizona, and Colorado. Specifically, I would love to get your opinion on Sherman, Texas, considering the new semiconductor plants being built there. Could you also provide any general recommendations for a beginner in real estate investing who’s willing to relocate but has some constraints due to work? Any advice on the best markets to consider would be greatly appreciated. Thanks.

David:
All right, Scott. Great question. Love it. Thank you for submitting it. By the way, if you would like to be featured on BiggerPockets just like Scott is, all you got to do is head over to biggerpockets.com/david where you can submit your question. Alright, I love this. First off, I love traveling nurses because they’re all about the hustle and the sacrifice at something that I believe Rob shares my enthusiasm for. If you’re willing to sacrifice your comfort, we want to help you on your path to financial freedom. Let’s start this thing off. We’ve got a article that we are going to link to in the show notes, so if you’re listening to this on YouTube, make sure you go to the show notes and you can read the article that I’m about to quote from. It’s specifically on the best states for traveling nurses. Now, this may come as a surprise, but I think Northern California pays nurses and traveling nurses more than anywhere else in the country.

David:
At least. I’ve looked into different markets and I’ve never seen one that pays as much as they pay here. It is not uncommon for nurses on overtime in the Bay Area where I live to make over $200 an hour so you can make good money working a 15, 18, 20 hour shift, making $200 an hour. Now you’re going to pay taxes, but if you can figure out how to become a real estate professional, investing into a short-term rental boom, you’ve got a marriage of financial wellbeing. Alright, so I would think you should look into Northern California first and see how much you’re actually going to get paid. I’ve got two properties out here where I rent rooms and units out specifically to traveling professionals. Most of them are traveling nurses, so let me know and I’ll put you up in one of my places if you’d like.

David:
Scott, let’s get into what the article says. Number one, Arizona, Colorado and Nevada are projected to have the most employment growth for nurses by 2030. These are also markets where I think you’re going to see home prices appreciating, so there’s a nice little marriage of job opportunities with real estate opportunities. Number two, the state with the lowest cost of living for nurses is Tennessee. Another market that I’m very bullish on, and I think real estate’s going to continue to do well for the next decade. Number three, California has the highest average annual wage at $133,000 a year for a traveling nurse that supports what I believe to be true, and it’s probably the base wage, so if you add overtime, you can make well over $200,000 a year as a traveling nurse. Number four, Arizona is the number one state for nurses, meaning I think what that means is they have more nursing positions available than any other state. And number five, the three lowest ranking states for nurses, this is where it’d be hardest to find a job are Louisiana, Montana and New Hampshire. My guess would be that’s because their population is lower, so there’s less people to service. Alright, I have a little bit more, I can comment on this traveling nurse method. I really think that this is something that works very well for investors, but Rob, do you have anything you want to add before I do?

Rob:
Yeah. Okay, so first of all, I like that he’s open to move. Usually the hardest part about this is trying to convince someone, Hey, go move to another market where you can make more money. Sounds like no problem. He’s willing to do that, so I think that makes this a lot easier. I definitely think reverse engineering based off of this list, what areas are you going to make the most money in? Consider things like, hey, in certain states like Arizona, Tennessee, Texas, there’s no state tax, so you can save some money on taxes there. California, I’m hesitant to recommend that to him, mostly because he’s leaving Boston because it’s expensive and NorCal would be hella expensive, as you all say, David, and then there’s also state tax, so I think it probably would, he would make more money, but he’d end up getting taxed more and I don’t know if that one would really work.

Rob:
So I would definitely reverse engineer based off of which states you can make the most money in, save the most money as a result because you’re not paying state income taxes and probably start there. I like that he had ideas with Sherman, Texas because of the semiconductor plant. I’m not privy enough to say, Hey, go do that. Maybe, I mean, I feel like there’s plants in a bunch of different places opening in companies. I wouldn’t probably base my decision on that, but what do you think? He’s a nurse, so it seems a bit incongruent to move to Sherman just because of that.

David:
That would be more of an out-of-state investing like you buy investment property there, not you move there to work. What we’re talking about here is combining how you get the most that you can for your wage with where the real estate’s going to appreciate the most with how you keep your cost of living the lowest. These are the three factors that we’re putting in our algorithm. That’s one reason I like California, Rob, because not only do we make hella much, but he doesn’t have to spend hella much on a property because he can rent a room and he can let whoever owns that property pay the high utility bills and the high taxes and the high insurance costs and the high mortgage payment. When you’re a nurse and you’re working all the time, you don’t need a big expensive house. You’re just going there to do laundry and sleep. Okay. That’s why I rent to traveling nurses, they’re not there very often. They’re often on rotating schedules, so they’re sleeping when other people are working and they’re not bumping into the roommates very often. It’s like the perfect profession to keep your cost of living expenses low because you’re always working and make a whole bunch of money.

Rob:
Okay, so that is fair. The only thing I’m going to say is that he did say he’s married, I’m pretty sure. So I don’t think, I mean I’m not going to make assumptions about his wife, but I don’t think they’d want to live in a room, hostile style in someone else’s house.

David:
Oh, in my house. My house is wonderful and I’m really hoping that he does become one of my tenants, but that is a very good point. If you’re married, you have a family, that strategy doesn’t work as well. So let’s move on to my second recommendation. I really like the state of Arizona. So with the state of Arizona, you have an aging population, which means there’s going to be more need for healthcare. You have a growing population as more people move into it, which is going to create the future need for nurses, which is going to imbalance supply and demand, which means they’re going to have to pay you more. The projected employment growth for nurses in Arizona by 2030 is almost 40%, so that’s very solid wage increases you can expect as well as job security. You also have a relatively low cost of living in Arizona compared to most other states.

David:
It doesn’t cost as much to live there. Most of the wages are low, and so the cost of living is low, but not for nursing. So Arizona is kind the really good combination of people moving there, aging population that needs nurses and high nurse salaries. So the real estate that you buy there is likely going to grow and your job security is going to grow, and what you get paid there is going to grow up. Next would be Colorado. It’s similar to Arizona in the sense that more people are moving there, the wages are going to be going up. They expect the RN jobs to grow by 29%, about 10% less than Arizona, but still very solid. And then Nevada, you mentioned that there’s no state income tax in Arizona. I think what you meant Rob was Nevada because I know that they’re right next to each other and they’re easy to mix up, but in Nevada, the average annual salary for RNs is almost a hundred thousand dollars.

David:
It’s $96,300 a year that nurses get paid in Nevada, and the cost of living there is even lower than Arizona in a lot of cases, depending on where you go. Nevada has a very low cost of living. A lot of Californians move into Nevada, but work in California because they go from having a 13.5% state income tax to a 0% state income tax smart, but they can still make California wages running a business in a state right next door. So a little side note there, if you own anything in Incline Village in Nevada, that’s one of those cities that’s super close to the greater Sacramento market, but it’s still in the state of Nevada right over there by Lake Tahoe. Also anywhere in the south I think is a good bet, especially the southwest because you’re having more people that move there, meaning wages are going to go up, meaning job opportunities are going to go up and real estate values are going to go up, but they haven’t gone up yet. This is very passionate. I like this whole idea of moving your whole self to a different area in pursuit of this real estate vision. Rob, you’ve done that. You’ve lived in the Smoky Mountains for a while. You lived in Los Angeles for a while. Now you’re living in Houston. There was a point where it seemed like every time I talked to you there was a different place that you moved to where you bought a house. What’s your thoughts on this?

Rob:
Well, first of all, I’m pretty sure you said Houston, it’s Houston, but I’m just going to let that one simmer there for a little bit. Yeah, my friends and my wife, they tease me because they say that I left California because of the state income taxes and not wanting to pay a 50% state income tax. That’s not why I left. I moved to Houston because my family was here. Now, did I get rid of the state income tax from California? Yes. Was that nice? Yes. I’m all about living in a different state to better your financial future. I’ve made that bet many times. It’s worked out for me. I’ve been very fortunate. It’s not one of those things that just because you move to Sherman, Texas, all of a sudden you’re going to be banking on it. You still have to work hard to optimize whatever living situation you’re in. So I’d keep in mind that moving is just step one, but the real journey begins the moment you’re there and you still have to kind of grind it out, work hard, start investing in real estate, put in the time and it compounds over time.

David:
Very, very nice. Let us know in the comments on YouTube if there is another profession outside of nursing that you think would work similar for this and what your thoughts are when it comes to relocating for work and real estate. Those are the two ways you’re going to build the most wealth, your job or your business with your real estate. So if you find a market that’s conducive for both, you’re going to supercharge how quickly you can build wealth. Great question, Scott. Thank you very much for asking it. Let us know how it goes and what you decided, and if you choose to go to Northern California, make sure you send me a DM and I’ll set you up with one of my rooms.

Rob:
Noyce.

David:
We’ll be right back after the break.

Rob:
All right, next question comes from Sean in Utah. Hey David. I followed the advice to not let tenants know you own the property. I like my privacy and pay for professional management problem. Junk mail with my name on it flooded my new tenant’s mailbox after I introduced myself as just the contractor. It is a duplex, not a house hack, and I’m remodeling the other side. I have never heard anyone talk about this and I hate lying. How do you stop personal mail with your name or current resident from going to your property? Have you ever had this issue? Any advice would be appreciated. Thanks. Yes, the junk mail conundrum. I don’t have a great solve for this other than trying to forward as much of my mail to my new address as possible, but even then I feel like stuff slips through the cracks all the time. I definitely put on my utilities everything to one centralized mailing address, but I think stuff falls through the crack regardless. Do you have some secret proven method for this?

David:
My mail situation is embarrassingly bad. It fills up so fast that I literally many times have had the post office stops bringing mail to my mailbox and I have to go there and sign to get all the mail, of which 90% is junk mail. This is one of the reasons I’m not a fan of these methods of just spamming people with, I’ll buy your house because my phone gets so many calls a day on all these out-of-state investor lists that I had to block, phone numbers that I don’t recognize because I just would never be able to use my phone. I get tons of text messages that are just auto sent from people that want to buy my properties. I have a lot of out-of-state properties, so I end up on all these lists. I get mail constantly because my primary residence is the registered address for the LLCs that own the properties. It becomes overwhelming, so it’s going to happen that your tenants are going to get your mail if you move out of a property. I believe that there is a way around this. You just go to the post office and say, forward all my mail to this new address that comes to the old one. I think that’s one way around it. This is kind of silly that I don’t know this. Can you talk about how that works?

Rob:
Yeah. You pay like five bucks and then you have your mail forwarded to the new address, but it expires after, I want to say like three months to which case I think afterwards maybe you can renew it, but it’s unsustainable to always have to do that. So I think the best thing you can do is activate all of your utilities, all your mortgages, make sure that you’re sending them to your correct address. I just don’t think there’s a way to completely stop mail from ever coming to your property. If it’s a problem of you say you hate lying, well, maybe you don’t lie. I guess at this point they’ve already been, what’s it called, compromised, but my dad used to say, if you don’t lie, you’ll never have to think twice back in the day. Just kidding, you never said that, but that sounded right. But that is the phrase that comes to mind. If you’re worried about it, if this is something that’s happening, maybe just be honest and say you’re the owner. For what it’s worth, I always say I’m the owner. I mean, I’m sure it could backfire. I’m sure it has, but I’d rather them have my phone number and call me if something happens, it’s a little easier for me. That’s my thought.

David:
I don’t think there is an easy answer around this one. I think it’s a legit problem and I’m curious if anyone else here has figured a work around for this, let us know in the comments on YouTube if you have encountered this problem and if you have a good solution,

Rob:
Like a hundred percent of your mail. If you figured that out, I definitely would want to

David:
Hear it. Alright, up next we have a question from Mike Rendon who previously asked us about debt to income ratios on episode 8 43. If you’d like a little background into Mike, Mike has a short-term rental in Blue Ridge, Georgia and another short-term rental in St. Augustine, Florida. I have properties in both areas. I’m in the process of buying a primary in St. Augustine with plans of living in it for one to two years and then selling for or renting depending on what makes sense at the time. Mike says, hi, David and Rob, thanks for taking the time to review my question. I love all the content that you guys create. My question is whether I should sell a short-term rental in order to decrease expenses or stick it out and keep holding. Secondly, what would you do with the money from that sale? Right now, for several years, my wife and I and now two kids have been moving around in order to create a short-term rental portfolio with as little money as possible.

David:
Sounds like he’s using the sneaky rental tactic of buying a primary living in it, moving out and making it into a short-term rental. We now have two short-term rentals. One cashflow is about 40,000 a year, while the other cashflow is about 6,000 a year. We’re also about to close on a primary that needs $30,000 worth of renovations, although we’re not in a rush to complete them. We figure that we will sell or rent the primary in two years while we have some decent cashflow, our expenses are high and we operate off of one W2 job and our short-term rental portfolio. So minimizing expenses is important. More specifically, my question here is would you sell the short-term rental that produces six grand a year knowing that would allow you to walk away with $205,000 after taxes? Side note, it is a great home and a great location with a great interest rate, and it cash flows with my eyes closed. Doing this would decrease cashflow by $500 a month, but would allow me to decrease my expenses by a thousand dollars a month by paying off student and auto loans with 45,000 of that money. That would give me about 160,000 leftover. I also have the ability to get a HELOC on my other short-term rental if I need cash. If I did any of this, I would need a plan for the 160,001 thought was to buy something with cash, fix it with a HELOC, and then refinance or sell. All right, Rob, are the wheels turning?

Rob:
Yeah, there’s a lot going on here. I mean, $6,000 a year to cashflow after managing a short-term rental is definitely on the low end because short-term rentals can be a ton of management. Typically, you’re going to manage between five to seven guests a month. So if you take the average of that, that’s six guests times 12, that’s over 70 guests that you’re going to be managing, which is, I think that’s actually at 74 guests that you’re going to be managing on any given year. That’s a lot of people management for 500 bucks a month in cashflow. Now, they do say that at cash flows with their eyes closed, so if they have a property manager, that’s a different story. But if they’re self-managing and only making six grand, I could see the decision to sell. I mean, I’d be more inclined to keep it, do a cost egg, save a ton in taxes, but I do like the idea of knocking out their student loan debts and their auto loans and decreasing their monthly expenses. So I’m not going to fight them on that too much. I would say if it’s a truly a passive $6,000 a year, I might try to hold onto it, but I also hate student loan debt, so I don’t know. What do you think?

David:
Let’s weigh what went in my head when I was reading this. It was a teeter-totter of constant going back and forth, alright,

Rob:
It absolutely is

David:
$6,000 a year in cashflow fields poultry. So I was like, yeah, sell it and get your equity out. You can do better than $6,000 a year in cashflow. But then he said, it’s in a great area and we’ll continue to appreciate. I’m like, well, then you’re not just improving your ROI on the cashflow. You’re losing some ROI because you’re losing out on future equity growth, so this only makes sense if you have a plan to put that money into place in another property that will grow at the same rate and get better cashflow than you’re currently getting. Then he said, well, I need a plan for that extra 160 K and I don’t know what I would do. That makes me lean towards, well, if you don’t have a plan for the money, then you shouldn’t be selling a property that’s breaking even or making a little bit. But then he said, I could pay off some student debt and auto loans that would increase my monthly income by $500.

Rob:
No, no, by a thousand dollars.

David:
Yeah, he would increase it by a thousand dollars, but he would decrease the cashflow by $500. So it was a net of $500 overall. So I’m like, all right, well that’s good. But then I thought, well, what if you just go run up those credit cards again because you paid ’em off and buy another car? In which case that didn’t help you. So this was a tough one as I went back and forth with what the options are. Ultimately, if it looks like it’s not going to do better than 6,000 and you could have 160,000, I would wonder what if you just paid cash for another property? Would you get more than that 500 a month? Probably not. With $160,000, you probably wouldn’t be able to get more than $500 a month. You don’t think so cashflow not in an area that’s going to be appreciating.

David:
Maybe if you go into an area which is going to be stuck for a long time, you can maybe get something that rents for like 12, $1,300 a month, but that typically comes with all the expenses of tenants breaking things you could possibly, but you’re probably losing out on the upside there. So that brings me back ultimately too. I would do this if you thought you could buy another short-term rental with $160,000 down, be disciplined enough to not run your debt up once you’ve paid it off. Now I’m going to go to you, Rob. Are you seeing markets where you can buy short-term rentals that will make more than $500 a month with $160,000 down?

Rob:
Yeah, yeah, for sure.

David:
Give me some ideas of what these could be.

Rob:
Probably some Texas markets, the Houston, San Dallas, the Houston, San Antonio, Dallas, Austin markets. I’d feel pretty good about that. I mean, if you just think about it from a return standpoint, he should be aiming for at least like a 10% return cash on cash for a short term rental. So just buy that logic alone, $160,000, $16,000 a year, about 12, 1300 bucks a month. Yeah, he should be able to double up his cashflow, in my opinion, with $160,000 if he strategically picks that short-term rental. So yes, I like that, and then he can get out of debt. I’m going to say, I mean, I want to know what this auto loan is. I want to know what kind of car it is. Is it an expensive car? Is it a cheap car? Is it a beater? Can they maybe get into a more affordable car? I’m making assumptions, I don’t know, but I like the idea of getting out of student loan debt, decreasing your expenses by a thousand bucks, and then finding something that cash flow is more. So I think it could work in this situation. I wouldn’t be against it so long as he was very strategic with how he purchased his next property.

David:
Alright, so we’re at a consensus. We do think you should sell this short-term rental. You should buy another one. Look in some of these Texas markets in addition to the 10% cash on cash return you’re shooting for. Of course, if you can do better, go for it. I want you to try to buy something under market value and I want you to try to buy something that you can add value to, and I want to make sure that you’re buying in a market that you believe the appreciation in the future will be equal to or greater than the market that you’re currently in. If you can combine all that together, this will become a very sound and solid financial decision, even if you’re going from a lower interest rate into a higher one. Good job there, Rob.

Rob:
Yeah, yeah, that’s a good one. This would make sense to me. I think he could keep it and be fine, but if he’s trying to really maximize everything, sell it, get something better.

David:
Alright, Mike, thanks for your question. Let us know what you end up doing. We want an update on this. All right. We’re going to be heading into a live call that Rob and I took with an investor who’s trying to figure out what he should do with equity from a house that he inherited. So stick around because we’re going to dive into this situation and give some advice. All right, welcome back. Coming up, we have a question about what to do with an inherited property with no mortgage. Let’s dive into this thing. Dylan, welcome to the BiggerPockets podcast. How are you today? I’m

Dylan :
Doing good. How are you?

David:
I’m doing great. Hopefully we have some great news for you. So tell us about your question.

Dylan :
So as you know, my name’s Dylan. I’m 23. I last year inherited a house. The value is a little under a 300,000 and I’ve been living there for about a year, and I come from a workplace that has a lot of people who accumulate a lot of wealth through real estate, and I’m trying to take my first steps in the financial freedom using the asset I have because the house has no mortgage. I want to figure out what’s the smartest thing to do given my goals. My goals are I kind of want to retire by the time I’m 30. I think that’s just a good one, or at least have a strong passive income monthly with the property and expanding a portfolio. And I just want to know what’s the smartest step next step towards financial independence.

Rob:
Where are you currently living now? Are you living in this house? Are you renting an apartment? What’s the story there?

Dylan :
I’ve been living in the house for about a year now. I’m still living there.

Rob:
Okay, and are you the only person that lives in this

Dylan :
House? Yeah, unless we count my cat that I count as a roommate. Okay,

Rob:
That’s fair. That’s fair. How many rooms is it?

Dylan :
It is two bedrooms and one bath.

Rob:
Okay. So I think you have a few options. Obviously you could probably sell the house, take the money, blah, blah, blah. I don’t like that for you. I think the best accelerator to wealth is house hacking or having getting out of your mortgage. If you don’t have to pay a monthly mortgage or a monthly rent, you can stack cash very quickly. You are already living in this house, meaning you don’t pay a rent, which is awesome though. You’re not maximizing the amount of income that you can have though because you’re not renting that other room. So my first gut would say, you have a gift. You have this paid off asset for 300 k. Amazing. Take it, run with it, rent out the other room, make an extra four to 600 to 800 bucks. I don’t know what rent is for a room out there and just cruise on stacking capital for the next year or two. What do you think, Dave?

David:
First question I’d ask is what’s your borrowing power? Are you able to get a loan to buy more real estate?

Dylan :
I would imagine so. Last time I checked with my banks, I’ve never tried to get a loans. I don’t need to, but my credit score is perfect and I don’t have anything that would seem like it’s a ding against me. So I’d imagine I can take out a loan.

David:
You have decent income and not a lot of debt.

Dylan :
Yeah, I have no debt and my income. Yeah, I would say I have decent income.

David:
Okay. Does your cat get along with other people?

Dylan :
I imagine so. He is more of a scaredy cat, but when he does open up to people, he does.

David:
But you got Rob to smile there with the scaredy catt comment. Well done. All right, so well, you being 23 years old, I’m assuming you’re not married. No family.

Dylan :
Yeah, I’m not married, no family.

David:
I think you get roommates in your house asap and get some extra income coming in if you can rent out. What do you think a bedroom rents for in your area? Like seven, 800 bucks a month?

Dylan :
I would say probably around like 600 would be good. I talked to some friends about moving in because I feel a lot more comfortable just a friend than someone else, and even then I’m still conseque because man, I don’t know about you guys, but living alone is definitely making a habit in my body. But yeah, I definitely do think if that is the next best move, that is just what I should do. So

David:
You put some roommates in your property, you make some money from the rooms. Now you can theoretically buy another house next year. You just house hack, you put 3% down on another property. You don’t need a ton of cash. You might not even have to take any equity out of this house, and now you’ve got two homes at 23, 24 years old. Probably do a similar rent out the room structure here. Try to find a way to get that house to pay for itself. Writing out the rooms to other people. You’re now building momentum, building equity, learning how to be a landlord, learning how to get things fixed, building up your Rolodex of tan men and people that can come make some stuff, getting some momentum going. At a certain point, you’re going to feel confident like, okay, I want to buy more houses. I want to go bigger.

David:
I want to go faster. I want to do more. That’s where I would consider tapping into the equity that you have Right now. You said it’s almost $300,000, maybe using a HELOC to do a brrrr or do a flip or buy a short-term rental. In today’s market, it’s very hard to just buy a traditional rental that it’s going to cashflow. You pretty much have to put down a lot of money to do that. If your only money is coming from an equity line of credit on your existing home, it now becomes even harder to find something that cash flows. Not only do you got to find cash flow, but now you got to pay to borrow the money that you just used. So for someone in your position, I’m not a huge fan of taking out the equity on that house until you’ve got a little bit of momentum and a little bit of a foundation here that you can build on safely.

Dylan :
Yeah, that’s definitely a good idea. That’s kind of what I’ve thought. And similar to expanding vein of what you were saying where, yeah, I was thinking maybe save up for a year or so and then put that down towards the next house. Ideally maybe multifamily, like a duplex or something. If I feel confident with that range, I’m lucky enough to have a lot of people who already are in real estate that I feel confident to talk to people. That was another question I was actually curious about is I have friends who are, I would say experts in all different kinds of financial real estate investing, and I’m not sure which one is the one I would like the most, and there’s so many and so much information. I always get para decision paralysis with that, trying to decide which option would be best in terms of brrr flipping, house hacking, things like that. Which one would be the best next step to get into

Rob:
After, are you asking after you kind of get through the first hump of this house, or are you saying utilizing this house

Dylan :
After having a roommate and saving up both from Paychex and from that money, then I’m ready to move onto a next one. Got it.

Rob:
You’re asking how do you overcome analysis paralysis sort of once you’ve started stacking cash? What’s that next step? I think for me, here’s what I want to see you do, Dylan, because I think you have a lot of options and it’s kind of like what would work? Well, the answer is anything could work. If you want to do anything, any strategy works. What I want to see you do before you make any decisions is really find out how much money is available to you, how much capital can you save? And so the way you would probably do this is you would house hack in this property, you would put another tenant in there, you would then turn that into a rental where it’s a hundred percent cashflow. You would then take that money to go basically invest in another home, and then once you stabilize that first asset, actually David, maybe you would have to do this beforehand, but at what point could he take out a HELOC on that initial property? Because I feel like having some of that home equity line of credit on a paid off house could possibly be a lever that he pulls that gives him a few options down the road, like a brrrr or something like that.

David:
He could take out the money now if his debt to income ratio would support it. You’re talking about for the down payment of future properties? Yeah,

Rob:
No, or like a burr if he wanted to do that, because basically he’s saying, how do I know what to do next? And it’s kind of hard to know without knowing what he qualifies for, how much money he’s going to have. We don’t have a clear financial understanding of the money in the bank account. So I think step one is to kind of figure that part out. What can you qualify for with the bank? How much of a HELOC can you get and how much can you save up? And once we have those three answers, I think you can actually carve out a plan, but without knowing those, it’s kind of like we could give you a little bit of guidance, but it’s a little unclear without knowing the actual capital backing you. Does that make sense, David?

David:
That’s half of it. The other half of it Dylan’s going to be what opportunities are in your market? Are there fix or upper properties in a low enough price range that they would cashflow after they were fixed up? Then you could brrr are there fix or upper properties, but they’re too expensive to keep as a long-term rental? In which case you could flip. Is it a market where there’s medium term rental opportunity and do you have the capital then to go furnish it after it’s done? So you kind of got to find what your market’s offering you, what game is available in the forest with what ammunition you have to be able to go take it down. I think you should be looking at this more like how do I get my financial house in order with this awesome boost that I just got inheriting a property worth almost $300,000.

David:
You have a chance to take that property and turn that into monthly income, which is crazy powerful for you. If you could rent out three rooms at 600 bucks a room, you’re at almost $2,000 a month that could be coming in in addition to the money that you’re able to make at your jobs. Now you’re making money with your time and you’re making money not with your time in a year’s time. What did I say there? Almost $2,000 a month becomes just shy of $24,000 in a year that you can have over three years. That’s $75,000. That’s a lot of money. It also is a lot of income you can use to qualify for future loans. So I don’t know that you picking the strategy, am I going to bur, am I going to flip? I know people say you got to choose your strategy and then drill down on it.

David:
It’s more what opportunities do I have available and of the strategies I’ve learned, which ones would apply to what I have in front of me. So we kind of use all of these like Rob will buy a fixed upper property, use the B strategy to make it better, then use short-term rental strategies to maximize the income that he’s getting on it, and then combine that with flipping strategies in case he’s going to sell it later. What I really want you to figure out is in the market that you’re in, where are the opportunities? That’s why I asked you what your friends were doing. Are they flipping homes? Are they buying rental properties? Are they buying short-term rentals? Are they buying small multifamily? What are they doing? Because that’s going to give me a better idea of what opportunity you would have, but I don’t want you to feel like there’s pressure on you to run out there and just do something.

David:
You’re in a great spot, you’re sitting on a really good situation. I want to see you play defense with protecting what you have more than trying to rush in and go build something bigger before you’re prepared. That’s how you should look at that. What advantages do you have? You have friends that have it in the market. They can share an agent with you, they can share a contractor, they can share what they’re doing. That opens up possibilities. Maybe you become a Philadelphia investor and you do that for a while until you move on to a different market. But rather than asking what strategy to use, ask what benefits and resources you have available, then choose the strategy that works for those.

Dylan :
Okay. There you go. Thank you. Yeah.

Rob:
Yeah. What benefits and resources, that’s a great way to put it, David. I think that’s what I was getting at with how much capital do you have? What do you qualify for? That’s step one. Step two is you said you’re in a workplace where a lot of your coworkers have built their wealth through real estate, and as much as I’d love to tell you house hack, house hack, go do this, go do this. I think what you’re going to get more out of is actually talking to people on the ground that are investing in close proximity to you. They work with you. You can actually talk about strategies that are working for your local market, and I would probably take the cues or the guidance from some of those coworkers because maybe they’re willing to be your mentor. Maybe they’ll give you some advice, maybe they’ll let you shadow. Maybe they’ll let you partner, but you have a lot of options. And I would say before we get to this point of what’s next, what I think you should focus on is what’s now, how do I maximize what I have right now? How do I stack cash with this amazing paid off asset that I have right now? And then we can talk about what’s next.

Dylan :
Yeah. Yeah, I think I fully agree with that. I think I really resonate with what David said of playing defense, kind of securing what I have, maximizing what I can with what I have now, and then moving on to the next step, like you said, Rob. Yeah, thank you guys so much for having me and answering my questions. I really appreciate this opportunity and it definitely helped me a lot.

David:
All right, folks, that’s our show for today. We hope you enjoy that conversation that Rob and I just had with Dylan. We also got into traveling nurses, which states work the best and where we think real estate is going to grow in the future. What to do about moving out of a house where your new tenant might be receiving your mail. If you should sell, hold or trade a short-term rental that’s not performing well, and if it is actually Arizona or Nevada that has no state income tax, as well as the proper pronunciation of Hugh Stun. We appreciate all of you guys. We think of you as friends, just like Rob and I think of each other as friends, and we love that you’re a part of the show. We get to do together helping everybody to grow well through real estate. If you’re as passionate about real estate as we are, you can find our information in the show notes and give us a follow and let us know what you thought of the show. You can also subscribe to the podcast to get notified anytime a Seeing Green episode drops. Thank you very much for being here. Rob, anything you want to say before I let you go?

Rob:
For as much as I busted your chops on how you said Houston, I still prefer a hundred times over to how New Yorkers say it, which is howton. I’ll never get it. So you know what? Count me in on Team Houston. Let’s rebrand this thing.

David:
Thank you very much. This is David Green for Rob. When Hella met Houston Abba signing off.

Rob:
That’s good. That’s funny that look at you.