Speaking of down payments: Don\u2019t blow your cash reserve on this purchase. Put only the minimum amount down\u2014you\u2019ll need a lot<\/em> more cash for your next two deals. Take advantage of the low down payment requirement, and keep your cash for now.<\/p>\n Your new home’s rental income should cover your mortgage (no housing payment!) and ideally provide some positive cash flow to boot. The average person would just spend all that extra money they\u2019re saving by not having a housing payment\u2014a new ride, dinners out, new clothes, etc.<\/p>\n Related:<\/strong> 4 Steps to Finally Tackle Your Debt\u2014and Start Growing Real Wealth<\/a><\/em><\/p>\n You\u2019re not going to do that.<\/p>\n Take every penny that you\u2019re saving by not having a housing payment and funnel it right in with your other savings. Heck, live on half your income<\/a>, and really accelerate your savings!<\/p>\n Over the next 12 months, while you\u2019re saving money like a champ, you\u2019re going to gain experience managing rental properties. You\u2019re going to practice filling vacancies, screening tenants<\/a>, reading up on rental investing. You\u2019re going to learn how to calculate cap rates, how to budget for CapEx, how to accurately predict rental property expenses.<\/p>\n In addition, you\u2019re going to talk to lenders about investment property loans. You\u2019re about to need one.<\/p>\n By now, you should have developed some confidence that you can manage a small multifamily property<\/a>. After all, you\u2019ve been doing it for a year and taking every opportunity to learn even more.<\/p>\n It’s high time to double up and buy another one!<\/p>\n At this point, you have a choice. You can borrow an investment loan for this next property. Typically, investment loans require 20% down.<\/p>\n Alternatively, you can borrow another owner-occupied loan and move into the new property. Keep in mind, you usually can\u2019t have two FHA loans simultaneously, so if you went FHA the first time around, you\u2019ll need to either go conventional this time or refinance your prior FHA loan.<\/p>\n Once again, don’t allow any lifestyle inflation! You should be earning substantial income from your two multifamily properties now, but don\u2019t spend a cent of it. It should go back into your investment fund because next time around, you\u2019re going to need a lot more cash.<\/p>\n Your friends and family may be increasingly interested at this point about what you\u2019re doing. Whenever they ask you about what you\u2019re up to, tell them about your success with multifamily properties. If they express enthusiasm, tell them to let you know if they\u2019re interested in investing funds when you buy your next multifamily property.<\/p>\n Give yourself another 12 months to acclimate to managing two multifamily buildings and set aside more cash. Keep devouring as much information as you can, particularly about investing in apartment buildings.<\/p>\n Start reaching out to commercial lenders. Your next loan will be a commercial loan, and the rules are different.<\/p>\n Start looking for 5-10 unit buildings. Commercial financing varies, but you\u2019ll need a significant down payment. Hope you\u2019ve been disciplined about saving all that rental income you\u2019ve been earning!<\/p>\n Go back to all of your friends and family who expressed an interest in investing with you. Offer them a 7% return on their money, paid in interest payments every month.<\/p>\n Bear in mind that if you raise funding from friends and family, it\u2019s an enormous responsibility. No matter what happens, you must<\/em> pay that money back or you endanger the most important relationships in your life. Not everyone is comfortable with this responsibility, so follow your gut.<\/p>\n There is much less competition for multifamily properties with five or more units because they require commercial financing. You\u2019re now competing with only serious real estate investors, not every Tom, Dick and Harry. While that might sound scary, it actually means you\u2019ll have far less competition and should earn better yield and cash flow per door.<\/p>\n Related:<\/strong> 6 Ways to Get Started in Real Estate While You Save Money to Invest<\/a><\/em><\/p>\n Managing your own rentals has served you well through this point. It\u2019s taught you valuable lessons about what kinds of properties to buy, what kinds of renters and neighborhoods you want to work with, and countless other experience that will inform your future investments. Although you\u2019ve been able to manage your properties on the side of your full-time job until now, it may be time to consider hiring a property manager<\/a>.<\/p>\n After all, you now probably manage more than 10 units! Welcome to the big leagues.<\/p>\n You\u2019ve probably chewed through your initial savings (and then some), but you should now have significant income from your three multifamily buildings\u2014what will you do with it?<\/p>\n![\"BRRRR-strategy-deal\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2016\/12\/BRRRR-strategy-deal-1.jpg\" "\\"\\"")
<\/p>\nPhase #2: Buy another 3-4 unit multifamily.<\/h3>\n
Phase #3: Buy an apartment building.<\/h3>\n
![\"landlord-lessons\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/02\/landlord-lessons.jpg\" "\\"\\"")
<\/p>\nTo Infinity and Beyond<\/h2>\n
![\"\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" "\\"\\"")
<\/a><\/p>\n