Hi, Greetings! I'm brand new here, I'm curious what you guys think of what we have going, and hope that you can answer a question about financing the upgrades we have planned.
I've been interested in the assorted rules of thumb that are mentioned in the threads I've read so far (e.g. 1%, 50%). [Where can I find a summary of other good things like that I should know?]
We own four buildings, rent out three and live in one, we manage all the properties ourselves.
We got into real estate because we hate Wall Street.
Here's the portfolio. We have great tenants. Learned a lot over the years about screening.
A: 2 family house - purchased 2001($171K), gross total rental income $1800 monthly, 5% 30 yr loan (Loan balance to current value ~55%)
B: 2 family house - purchased 2001 ($156K), gross total rental income $2000 monthly LOTS of upgrades being done on this house. 4% 15 yr loan (Loan balance to current value ~ 50% or better)
C: single family - purchased 2006 ($130K), rental income $1000 monthly, ARM interest only loan, want to SELL this house before we have to start paying significant principal in 2016. Loan balance to current value ~58%
D: single family (where we live) purchased 1995, added on twice, recently refinanced, 3% 15 yr loan (LTV~60%)
House B needed a new roof and at the same time we decided to turn the attic into living space, adding dormers. That project is still in progress, we're currently taping drywall and installing hardwood flooring (reclaimed). Doing this work ourselves. When it's done, we're guessing this unit will rent for $500-800 per month (500 if no kitchen, 800 with kitchen). We've paid for the roof and all the upgrades so far in cash, pulled out by refinancing houses B and D in 2011, as well as our rental income cash flow (see below). Once we're done, of course the property taxes on this house will increase.
If we weren't putting money into house B, we'd pay down the house A mortgage. Of our rentals, House B is in the most desirable neighborhood, and we intend to keep this place long term. We also intend to hold house A. If we sell C in the next year or two that could change my question below. We also want to add on to our house (D) again.
Cash flow from rental income from houses ABC right now allows us to pay all four mortgages, taxes, and insurance with enough left over to (barely) live on without counting any income from either of our day jobs. So we have a free place to live, basically.
My logic in the slow remodel on house B is that we would do most of the finish work, we hire contractors for all the framing, plumbing, electrical, HVAC. There's no rush in getting the attic finished. We just want to do what makes the most sense.
Now, here's my question.
I have about $30K liquid in cash (just sitting in a checking account, not smart for long term), no debt outside of the mortgages. I can use this cash for speeding up the upgrade to the attic, paying down loans, investing otherwise, or keeping on hand since my day job is not permanent (soft money) and just in case we need it (which is why I have it sitting in checking - while I learn what is the smartest thing to do).
We could speed things up. Having it rentable a year sooner would mean $5K-$9K (accounting for prop tax increase) more annual rental income.
Since I'm a newbie here, if there's a post or thread I should be reading, please point me in that direction.
So, what would you mustachians do, and how am I doing? Is there a rule of thumb for cash flow?