Buy and hold investor looking for another business model

7 Replies

Right now I have a property. Buy and hold using your own money is great, but it's slow. I really like RE and I'm trying to think of ways I can get more involved.

Here are my thoughts:

Property Management - I would find this very stressful and have even outsourced this on my own property

RE Agent - Sales personality, not for me

Manage other people's money - Takes time to build a track record. This is a possibility. But it would also require connections.

Bird dogging/wholesaling - I don't really find this appealing.

Flipping - I have a full time job. I don't find this appealing. right now. It's very competitive in my area, with lots of cash buyers. 

Guru - haha

Can anyone else think of another model I'm missing?

Maybe in your situation these items are similar to your "manage other people's money" comment.  

Hard Money Lender

Syndicator

Unless you are willing to become a marketing machine and quit your job to flip or wholesale, I'd recommend you stick with buy and hold and set some aggressive goals and then follow through.

1) Cut your expenses to the bone (see Dave Ramsey's stuff) and save everything you can.  

2) Take your cash flow from your rental plus your savings and keep saving toward a downpayment for next purchase. Consider 401k or IRA loan, HELOC, or cash-out refinance on your house to get more downpayment money.

3) Learn about hard-money - if the deal is good enough, this can get you in for less out of pocket so you can do more deals.  Total dollars in cash flow will be lower, but cash on cash can be higher and leave you more cash on hand for next deal.

4)  Keep buying 1 per year, 2 per year, 3 per year and saving the cash flow for the next purchase.  Use the "snowball" concept to accelerate your investing.

5) Explore private money.  If you can get family/friends to loan you money at 5-8% interest only and buy a house with cash (i.e. - don't secure these loans against the purchase property), you can use the Delayed Financing Exception for cash-out refinancing (FNMA rules) within the first 6 months after purchase - think of this as hard money with lower fees.  You get the cash back to pay principal back to your lenders OR ask if they want to keep earning the agreed rate and you can do another deal.  Rinse and repeat.

I had one rental house (former residence) until this year.  In September last year I learned how to buy, rehab, and rent single family and multi-family.  By January I had acquired 2nd rental - conventional loan.  In March, 3rd rental - hard-money.  In April 4th rental - cash from 401k loan, savings, and cash-out refi - now closing refi under Delayed Financing Exception to get cash-out.  5th house under contract and closing soon using cash from private money - some unsecured, some secured against other properties.  6th house in negotiation - will use conventional financing using cash-out from 4th rental for downpayment. 

and the fun continues . . .

I am the managing partner of Help Keep My Money LLC, a management company. We manage real estate deals for our clients (buyers, sellers, Wholesalers and investors). It sounds like you want to do what we do. We put together deals for our clients based on their objectives. We get paid two ways:

  • We receive a small transaction fee (1% of transaction amount) for each transaction.
  • We receive a portion of the net profit (50% split with the investor after the investor receives 100% of the profit up to 25% of the initial investment).

I can provide more information if you want.

God Bless You!

@Alex Silang  

Alex - Doug had some good points. I will have to disagree a little on one statement he made. `` (i.e. - don't secure these loans against the purchase property) ´´ I will explain why I disagree. The beauty of private money lending is that is secured and insured. This is a major pitch when trying to raise funds for private money. To me it´s my job to make sure I make my private money lenders comfortable with lending me money. They know their money is secured through the property and insured against loss of property. I am not saying Doug is doing private money lending wrong. There might be different variables to his private money lenders that I do not know.

Have you thought about JV deals – If you locate a property and get a contract on it, bring in another investor to help you fund it and flip it. Or whatever is best for the exit of the property.

Your very focused on what you don't want to do. What do you want to do? What are you good at? Do you have more money or time? What skills would you consider assets?

Focus on what you can offer, then the role that suits you will be more apparent. It doesn't work in reverse.

John D., Palm Vacation Rentals | [email protected] | 4155195039

Doug - interesting thoughts. Hard money on buy and hold? I thought these loans were only for 3-12 months? What rate are you getting? I calculated my current rental property mortgage with 12% and it's in the red.

John - I'd say my analytical skills, personal finance (another thing Doug was talking about earlier), prudence, determination

 @Doug McLeod:

I take that back Doug, I can be profitable at 12% interest, but cash flow is definitely down. It's very interesting. Do you aim on refinancing with a conventional loan in a few years? 

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