What are your strategies to obtain more properties with limited cash?

53 Replies

Hello, 

Can you share what some of your strategies are to obtain multiple properties and continue to grow your business? I see people out there with several million dollar portfolios and I wonder how they obtained this large portfolio. 

I am currently buying a fourplex and moving into it to start. Any suggestions what to do next with limited money to grow my buisiness? 

Matt,

Spend any money you have on marketing for seller directly.  There's plenty of marketing info on this site and elsewhere for how to do that.

You'll get a host of different kinds of deals.... wholesale what you don't want or can't afford... Make sure you keep enough to keep that marketing machine rolling.

By doing so, you'll run across property you can purchase Sub2 (subject to the existing lien).... basically where you take over someone else's payments but you own the home.

Start your collection :)

If you have cash to start (or a "cashlike substance"), and good credit, or can partner with someone that has what you don't, you can accomplish your goal very easily...and  quickly.

Basic Steps to success:

1 - Buy property and rehab using cash
2 - Season property long enough to refinance all your cash back out
3 - Re-use cash on next deal
4 - Repeat previous steps until you've reached you goal.

Since you are re-using the same money for all the properties, the only cash/money you would need is enough for the most expensive property.  This means you must invest in a market that provides enough of these properties to execute this system.  In the end, since you are refinancing the cash out of every property and using it on the next, you never actually spend the money.

I am interested in learning about marketing strategies. I will check that out! I do feel as though it is difficult to turn the marking strategies into solid leads? 

I do have very good credit and a small amout of cash. I am buying a fourplex with an FHA loan. Total amout of cash I will need is around 7,000. I will live in this property for at least a year so I will not be able to pull cash out since I already have a locked rate of 3.5 percent. Do I just wait until I have 10,000 and do a flip to gain more capital? This seems like a slow way to build a business. I would like to buy and hold and flip. Do I partner up with someone who flips and I buy buy and hold? I live in the Midwest.

@Matt Heath  you're starting out smart, that's what @Brandon Turner  would call "house-hacking".  Getting into a 4 unit property for 10k where you can be a landlord will be a great learning experience for you.  In terms of building your portfolio quickly, that book will give you more ideas than you could ever possibly execute in an investing lifetime!

What kind of condition is the property in? Are there things you could add to make it more valuable; Washer/Dryer, Paint, Carport/Garage, landscaping, safety upgrades. You may be able to force some appreciation with very little effort and increase your equity. Refinance or get a HELOC (Home Equity Line of Credit) and you've got cash to work with!

Join a local REIA, get to know local investors, network your heart out... I've heard it said multiple times, if the deal is good enough the money will find you.

You're off to a great start, would love to hear about your progress!

The property is in excellent condition with amazing tenants. I could upgrade the kitchen, but everything else is pretty nice.  It has a washer and dryer in each unit. I will  keep you updated!

@Matt Heath  The answer is really simple.  You need to do two things.

1 - You need to be able to use the same funds more than once.

2 - You need to keep those funds moving.

By doing both 1 and 2 above, you really have an unlimited amount of funds available to you.

Joe V

The only problem I see is that you are only allowed up to 10 financed properties. So how do you acuire more once you get to that point? Each bank only allows up to 4. Do you switch to cash purchases then? 

Originally posted by @Matt Heath :

The only problem I see is that you are only allowed up to 10 financed properties. So how do you acuire more once you get to that point? Each bank only allows up to 4. Do you switch to cash purchases then? 

 No, you take on partners that can get the loans, and split the returns.  You put your cash in, and recycle it through a new set of refis with your partner, then when that partner runs out of loans, you get another partner.

Remember, every house will give you back your cash when it's refinanced, so you continually are able to use the same cash over and over...never actually spending it.

is 9 percent typical? That seems high, how is there room for cash flow or do you use that just for flips? 

Originally posted by @Matt Heath :

is 9 percent typical? That seems high, how is there room for cash flow or do you use that just for flips? 

 I get it for 4.35 - 4.75; 30 years

What types of contracts do you suggest using with a partner? Also, can you explain refinancing. How do you pull out your cash refinancing? Do you just do that to get a lower rate and switch loan types or how does that work? I am not too familiar with that. I know you can get an equity line and pull out your equity as cash but I am not familiar with refinancing methods. 

you get private loans from individuals  for 4.35 - 4.75 for 30 years? 

Originally posted by @Matt Heath :

you get private loans from individuals  for 4.35 - 4.75 for 30 years? 

 Yes

@Matt Heath  Come up with a solid plan in writing and talk with family members and friends. Those are what some might call warm leads. Maybe one of them will finance your first deal. Partner with an investor who has experience investing in real estate and hopefully make some money on your first deal. 
Patience is key. All of your investments will compound as they grow. If I start with $100,000 this year and make 40% (Lets assume you make 40% even after taxes and expenses) then I should have around $140,000 to invest next year. It takes a while to start your snowball, but once you get it rolling you will really start to see results.

The other option being you might have to get really creative. Wholesaling, bringing in income from an outside job, buying property sub2 or owner financing.

Where there is distress, there is opportunity. 

Originally posted by @Matt Heath :

The only problem I see is that you are only allowed up to 10 financed properties. So how do you acuire more once you get to that point? Each bank only allows up to 4. Do you switch to cash purchases then? 

 A slight flaw in your statement...you can only get 10 conventional loans. As others have mentioned there is private money, but that can be somewhat difficult to get (comparatively speaking since you need to do more searching to find lenders). But there are also plenty of commercial and portfolio type products out there. They are not as commonly available as a conventional loan, but more so than private money. Rates will be a little higher than conventional, but not too bad.

@Matt Heath  

I talked a bit about financing in BP Podcast # 82.  The first 11 properties that I bought were all essentially 100% financed.  I used bank first mortgages, second mortgages, signature loans, borrowed $2,500 from parents, bought 2 properties with a partner, etc.

I started literally with nothing and scraped together however I could to put the first 11 deals together with nothing down on my part.

Be careful if you're strapped. My first big failure was focusing on closing the deal and making money on the flip side. I didn't account for hidden operating costs, emergencies, and good-turned-badly-disgruntled tenants.

@Matt Heath  Congrats on the "house-hack". I've been jealous to try that for a few years, but haven't had the opportunity.

I'm using the same strategy as @Joe Villeneuve  but he is probably further along. I purchase, rehab and refinance. I've only done two so far and my numbers were on my estimated repairs. But I'm starting my third one now with many lessons learned. The first two are cash-flowing now, I just didn't get all my cash back out in the refinance. In the next one I hope to end up with a cash-flowing property and get all my cash out.

You are personally limited to the 10 conventional loans, but once you get a bit of experience you should be able to find partners or portfolio loans with smaller banks.

Mike

@Michael Wentzel  How fast are you able to go from property to property?  For my area, because the opportunities are so plentiful, we can usually do it every 6 or 7 months.  The two defining factors are:

1 - Number of available properties that fit the criteria for using this system

2 - How long the seasoning period is from the refi lender before you can refi.

The really good ones are the ones where you can refi AND cash out (get more out than you put in).  I have students that are cruising using this method.  I also have investors from out of state doing it here due to their state not having the criteria needed to make the system work.

You have to admit though, it is fun.

Oh, and it still works when you can't get all of your initial cash back out.  I will allow for that as long as the deal fits two requirements (again with the two requirements):

1 - I have to get at least enough out when I refi to move onto the next deal

2 - I have to be able to get the rest of the cash I "left behind" in the property within 1 year.

Joe V

@Michael Wentzel  

After you reach the FNMA 10 limit, then your spouse, if any, can borrow Another 10 mortgages.

Then you can borrow "portfolio" mortgages from institutions, not sellable on the secondary market and not meeting FNMA limits.  These mortgages are held in house by the lender and the is NO limit on the number of mortgages.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.