Own 7 units, now what?

7 Replies

New to the site so be gentle with me... ;)

I own: 3, 1 bedroom rentals that produce $1300/month and 2 duplexes that produce $2100/month.  Positive cash flow is around $2130 (not factoring my personal mortgage of $755).

I love it so far, but have basically stepped into units that are in great shape and have long term tenants that pay on time.  No complaints.  I've also stayed in the smaller market of my home town and surrounding.  (25-40k population).

I'm ready to go a little deeper into this, but don't know if I should continue my strategy of finding clean, already rented, newer units OR try my hand at flipping to gain some cash flow.  I have about $48k in savings that can be used for more purchases, but with putting 20% down on each purchase, it will be gone quick.

How do I secure more units after my "20% down" money is all gone?

If flipping, should I look for foreclosures to purchase?

Is there a way to gain more capitol?

I'm curious what a few of you pro's would do if you were in my situation?  Feel free to ask me questions if more info is needed.  Thanks in advance!

Jerod in Oklahoma

If you find a good deal, the money will come. Lenders need deals to fund, and they will fund good deal for people with experience. 

If your current strategy is working for you, then why change it up? If you want to try a flip, then go for something along the line of what you are comfortable with now in your rental wheelhouse. Find something decent you can get at a nice discount that doesn't require major surgery. Put the cosmetic touches/refinishes into that it needs and cut 'er loose. It's a safe play, but you will learn a lot in the first one. 

As for continuing to grow you portfolio, I'd recommend you do a search here for BRRRR strategy. It stands for Buy - Rehab - Rent out - Refinance - Repeat.

Basically, you buy something at a discount that needs a little work, fix it up, rent it out, refinance it for the value that makes sense with your NOI, pull as much cash back out of it as you can (again as long as it makes sense with your NOI) and then use that money to go buy the next one and do it all over again. Depending on how long it takes you to fix them up, about the time you're done with it and have a tenant just getting settled in, you should be able to refinance it. Lender terms vary, and are always changing, so you need to seek out lenders that will allow refi sooner than later to make the process as efficient as possible

Originally posted by @Matt Motil :

If you find a good deal, the money will come. Lenders need deals to fund, and they will fund good deal for people with experience. 

If your current strategy is working for you, then why change it up? If you want to try a flip, then go for something along the line of what you are comfortable with now in your rental wheelhouse. Find something decent you can get at a nice discount that doesn't require major surgery. Put the cosmetic touches/refinishes into that it needs and cut 'er loose. It's a safe play, but you will learn a lot in the first one. 

As for continuing to grow you portfolio, I'd recommend you do a search here for BRRRR strategy. It stands for Buy - Rehab - Rent out - Refinance - Repeat.

Basically, you buy something at a discount that needs a little work, fix it up, rent it out, refinance it for the value that makes sense with your NOI, pull as much cash back out of it as you can (again as long as it makes sense with your NOI) and then use that money to go buy the next one and do it all over again. Depending on how long it takes you to fix them up, about the time you're done with it and have a tenant just getting settled in, you should be able to refinance it. Lender terms vary, and are always changing, so you need to seek out lenders that will allow refi sooner than later to make the process as efficient as possible

 Thanks for the advice.  I'll search for this now and will be asking my lender about refi restrictions.

@Jerod Smith @Jake Stenziano

You're doing a great job, and investing for cash flow is key.  You can always look to partner up with someone who has capital, take a percent of the deal and earn an acquisition fee for putting the deal together.  Once you own the deal, charge a management fee to run the property and split the cash flow with your partner.  You can negotiate anything with a partner, but in the beginning you may have to take smaller equity in the deal to prove yourself.  Once you have a few properties and you are performing, investors will be seeking you out and you have more leverage when negotiating

Good Luck and keep growing!

@Jerod Smith @Gino Barbaro Adding on to Gino's comment, push the banks for 15% down. This will free up some of your cash. Find the banks in your area that are looking to grow and share the specifics of your current deals them. This will help build your credibility. You could set your sights on something bigger...maybe 20-30 units on the next one. Also, if you buy an underperforming apartment complex, you may be able to pull your money out within a few years after you reposition it.  Sounds like you are currently buying right. Congrats!

Jerod Smith Awesome that you've got a couple properties and (more important) some solid experience self-managing the things.

Hard to tell what you mean by your cash flow number - are you netting ~$24k per year from those rentals? What price point are you buying at?

There's absolutely nothing wrong with operating the portfolio and simply re-investing the net profit in whatever additional investment offers you the best return at the time (more houses included). That sounds like your base case.

As for going deeper, having the skills to rehab successfully is an incredibly important one. As someone else wrote, you'd be well served to find something in the market you know that needs some rehab and go through that process. It's not as easy as many think and will build skills for you that open up many more possibilities.

Good luck!

@Justin R. I bought the duplexes at $144k and the 3, 1 bed houses at $60k (all three). My mortgages are low so my net is good. 

Thanks for all the advice. I made a bid on a rehab today. It's a 3/2 1700sf on 3 acres. I bid $55k. Houses typically go at $140k-$160k in that area. I know that's way different than what some of you guys are seeing. Oklahoma rural market is this way.