How I went from 4 to 19 units in 365 days!
365 days ago I had four units. I primarily stick with 3 bd 1 ba units. Average rent is $800 per unit. Then I found a quadplex and ran the numbers. Presented the numbers to a potential investor. I utilized the strategies that I have learned to utilize from Bigger Pockets to identify when and how to approach a potential investor. I wrote up a note for a 50k initial investment and my investor signed the dotted line. Just like that I doubled my units.
My investor ran out of capital and I did too. I kept looking at my market and saw a 6bd 2 unit for sale at 55k. The house needed 4k of cosmetics work. The gross rent would be $1700 x12= $20,400 and I had it under contract for 48k. That is a cap rate of 40% without deducting the usual. Who cares at 40%. How did I find the capital? I took out a 55k personal loan and then things started to roll. This property currently cash flows $800. My personal loan will be paid off in 5 years.
After I took out the personal loan and used it to buy the property out right, I had 60k in equity in the house. I leveraged 60% of the 60k appraisal of that house to buy a 4 unit at 91k (Gross $2,900). I took out another personal loan for 35k and bought a single family home . That personal loan will be paid off in 2 years from the $950 rent and I now have 45k in equity. Multiply 45k x.6= 27k in equity for another purchase or down payment.
Yesterday I bought another 2 unit with cash 75k = Net Rent $1,400 and I have another 4 unit under contract. The snowball effect is crazy and fun. Utilize your network, credit and equity and the ball will never stop. Be persistent! Get in the game!
@Isaac Hebron on your units, add more value, raise rents, increase the property value and you could be sitting on a gold mine! It’s what is referred to as repositioning the property. During that 5 year time see what higher rented places have, copy and grow your own business.
Congrats on the progress so far.
What's your overall leverage ratio across the portfolio?
What kind of interest rate are you getting on a "personal loan"?
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interest rates are fixed from 6-7%. Many people do not know, but you write off interest in personal loans if they are used for investment properties.
Great job growing quickly with super low cost properties.
Just don’t forget that there will be bumps along the way, especially when dealing with lower income housing.
Also consider longer term conventional financing with lower interest rates. The goal when using credit isn’t to pay off the property as soon as possible.
@Isaac Hebron can you explain how you leveraged the equity of 60k? Was it a HELOC or refi? If it was a refi, did you have to allow the title to season for 6 months? You lost me at that part