Investor · McKinney, TX · Member since 2016 · 50 posts · 26 votes
Can anyone share thoughts or experiences on buying one rental every year strategy?
On paper it looks like I could essentially replace my income when I get to two dozen rentals cash flowing a few hundred dollars a month.
Is this a good strategy for a part time investor? Has anyone done this? Did you stick with it? If this is not a good plan, what would you suggest instead?
I thought I would only be able to buy 1 property per year when I started last Dec. I'm on my 10th property one year later. Lets say I learned ALOT on how to creative finance/find investors. here's some more motivation. After PITI, Expenses, Reserves, Dividends to investors. I'm cashflowing $8.6k a month.
Sure, its a great way to go about it. Buy one a year, then every 6 months, then every month. When I got started I bought one or so every year or two. Once I got a good understanding of the business ups and downs, I started adding a lot more with saved cash, then starting using cashflow money to by them. Now of days, I'm buying around 10 per month. Good luck!
Yes, that was my strategy and i am so glad I followed it. 1 a year gives 'full-time job holders' like me a chance to research and be patient. After the first few years it changed a bit. When a different market crashed I might buy 2 in a year. Since the market has been a seller's market for sometime now I haven't purchased anything, that plus the fact that I've been too busy to do solid research, etc..
This is going to be my strategy moving forward. I started with a FHA loan on a 3 family and plan to refinance out after 12 months living there and get another 3 family with an FHA loan. For my next deal I wil use a FHA 203k loan to group the repair cost into the mortgage requiring even less saved cash. I'm only on my first property but would also like to hear about others who are further along with the 1 property per year strategy.
@Kevin C. one rental per year is a great strategy however reaching your goal of 2 dozen rentals....well you do the math. Another 24 years to get there?
My wife and I built our first home and paid it off, moved and rented it. Cashed out on it, built our second rental. We have since cashed out on the second rental and have broke ground on the third.
we'll keep doing this every year or 6 months (depending on land availability) until we can find a couple duplex/triplex(single floor) to put down on or build. It's kind of the same thing, 1 per year.
Levi Thornton , so you reinvested the cash flow from each property which allowed you to speed up the rate that you bought them? I love that! Have you mixed in any flips into the equation?
All depends on your REI path; flip vs b&h. The issue will sooner or later become the limits of your energy, time and ability to find financing. Shopping for REI properties is not like going to the bigbox stores and picking items off the shelf. The due diligence and financing will eat time and if you're b&h, your tenants and maintenance will eat more of it too.
Perhaps you've not read yet on the SFR investor's issue of DTI limiting your financing OR that different lenders will limit the number of outstanding loans they will allow. You see there are external forces that we are coerced into facing like it or not.
Many shy away from MFU-5+ units, but they do avoid the DTI problem.
The practicalities of life and RE will keep at least one foot pinned to the ground.
Kevin Colwick it all depends what market your in. I'm here in the NYC market and getting even 10 properties require high capital but if I was somewhere in Virginia or NC then homes there is easy.
It's what your market allows you to do.
Levi Thornton , so you reinvested the cash flow from each property which allowed you to speed up the rate that you bought them? I love that! Have you mixed in any flips into the equation?
Yes. I've nicknames it the two-step. Buy two properties and sell/flip one, buy two or more with the one you flipped, then sell one again and keep on keeping on.
I thought I would only be able to buy 1 property per year when I started last Dec. I'm on my 10th property one year later. Lets say I learned ALOT on how to creative finance/find investors. here's some more motivation. After PITI, Expenses, Reserves, Dividends to investors. I'm cashflowing $8.6k a month.
As Shawn Ackerman was saying 24 years is way too long.
I reran the numbers assuming reinvestment of all cash flow and that gets me to 24 houses in about 12 years.
Adding in (successful) flips could get me there even sooner I hope.
I can buy two houses right now and stay under 30% DTI. But when will lenders start counting rental income so I can stay at acceptable DTI?
@Kevin C. most lenders will start counting 75% of rental income once you have a rental contract and deposit. They you can use the full amount once it shows up on your taxes.
@Kevin C. If your bank will sell the mortgage on the secondary market, you can only have ten residential loans. If you can talk the bank into keeping the loan in-house, or if the seller will finance it for you, you can get more. I've yet to see a seller want to go more than 5 years, but you might find one.
You guys are a treasure trove of great information, thank you!
David Kang , the houses I'm looking at are $100k-$150k which rent for $1,000-$1,500 in my area (30 mi north of Dallas). I'm assuming 20% down payments on each.