But, how do they do it.

30 Replies

how are people able to buy so many houses so quickly? My boyfriend is buying a house (duplex) and I am also buying a duplex( we will be living in mine). Are are you able to save for federal tax on rental income, money for if things go wrong and money for a down payment for another house? Listening to some podcasts and people are buying 30 houses in 3 years, but I can't understand how. Ideas? Tips

@Tasha Davis ,

The key phrase to this is Other People's Money (OPM). There are so many different ways to do this, you have to find your particular niche. For me, I found a local bank that offered me an interest only loan that finances the purchase AND the repair. Banks usually finance 75%-85% Loan to Value (LTV) on investment properties. The local bank I used, did 90% on my first BRRRR deal. If you are able to find properties below that threshold, the equity in the house covers the "down payment", so you don't really come out of pocket. I am currently working on a 5 property portfolio, for which the bank is covering 85% LTV. As long as I can negotiate them low enough to where the purchase (including closing costs and anything other costs incurred), are below this 85%, I can finance the whole deal with no money out of pocket.

I hope this helps! Let me know if you have any questions.

Originally posted by @Allan Rosso :

@Tasha Davis,

The key phrase to this is Other People's Money (OPM). There are so many different ways to do this, you have to find your particular niche. For me, I found a local bank that offered me an interest only loan that finances the purchase AND the repair. Banks usually finance 75%-85% Loan to Value (LTV) on investment properties. The local bank I used, did 90% on my first BRRRR deal. If you are able to find properties below that threshold, the equity in the house covers the "down payment", so you don't really come out of pocket. I am currently working on a 5 property portfolio, for which the bank is covering 85% LTV. As long as I can negotiate them low enough to where the purchase (including closing costs and anything other costs incurred), are below this 85%, I can finance the whole deal with no money out of pocket.

I hope this helps! Let me know if you have any questions.

I guess I didn't think about equity. Do you take out loans on homes that you have for down payments for other homes?

@Tasha Davis ,

I have only been investing for about a year, so I have never leveraged my equity that way, although it is an option people use. I could cash out refinance the BRRRR property I mentioned earlier, but I wouldn't get enough for a down payment (which I try to avoid down payments altogether by purchasing below 75% market value). Again, remember the bank won't loan the full value of the property, so the only equity you could pull out, is whatever the number is between the amount you owe and whatever percentage LTV the bank is willing to finance.

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

Another key is to market with older owners who own the property free and clear.  They will often times do whats called "Owner financing" and hold the mortgage like a bank would.  They get the benefits of a monthly residual income, without having the hassle of management.   Take a trip in the direct mail rabbit hole.  Its well worth the time and $.

Good luck!

 Do you recommend refinancing as soon as possible in order to continue to purchase as many as the end goal is?  
Originally posted by @Andrew Syrios :

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

Originally posted by @Andrew Syrios :

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

 Says the one who owns literally hundreds of houses.

I will say that I have seen a few more options available to expand rapidly now that I own a few properties. Lenders are more willing to work with you.

Originally posted by @Anthony Gayden :
Originally posted by @Andrew Syrios:

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

 Says the one who owns literally hundreds of houses.

I will say that I have seen a few more options available to expand rapidly now that I own a few properties. Lenders are more willing to work with you.

Hahaha! Things do start to accelerate exponentially, but it's important to not get ahead of yourself too. We have been tripped up at times when we bought too much too fast.

Originally posted by @Tasha Davis :
 Do you recommend refinancing as soon as possible in order to continue to purchase as many as the end goal is?  
Originally posted by @Andrew Syrios:

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

I would refinance as soon as you to get long term financing on the property. Just make sure the bank is willing to refinance you at the appraised value instead of the cost you have into the property (this is called seasoning). Some things you want to do fast (rehab it fast, rent it fast, refinance it fast), but it's also important to grow at a sustained rate and not try to get from A to Z all at once. 

So maybe I don't quite understand, but wouldn't refinancing just increase the amount of payments on the home?

Originally posted by @Andrew Syrios :
Originally posted by @Tasha Davis:
 Do you recommend refinancing as soon as possible in order to continue to purchase as many as the end goal is?  
Originally posted by @Andrew Syrios:

Don't worry about going super fast, especially at first. Just do one, then get it refinanced, then go onto the next one. As you grow bigger, things start accelerating and you're able to buy more faster. The biggest problem in real estate I see is people afraid to jump in. The second (other than maybe underestimated rehab costs) is people who get delusions of grandeur and want to grow too quickly.

I would refinance as soon as you to get long term financing on the property. Just make sure the bank is willing to refinance you at the appraised value instead of the cost you have into the property (this is called seasoning). Some things you want to do fast (rehab it fast, rent it fast, refinance it fast), but it's also important to grow at a sustained rate and not try to get from A to Z all at once. 

@Tasha Davis ,

Scenario A: If you bought a home for cash, you wouldn't have any payments at that time. Refinancing allows you to pull that cash out to use on other deals, but yes, at that point you have to start making payments on the mortgage you just put on the property.

Scenario B: For me personally, I haven't bought a home for cash. I use the interest only loan I mentioned earlier, because it allows me to finance repairs. The whole time I hold this loan, I'll be making payments on the amount I've borrowed. At that point, I may choose to pull cash out on the equity between the amount I owe, and the amount the bank is willing to refinance (usually 75% LTV on a refinance). The amount of payments isn't necessarily what is increasing, its the amount I'm making payments on that is.

@Tasha Davis

If you buy properties at a discount and apply BARRRR properly, you can definitely do it: https://www.biggerpockets.com/renewsblog/forget-br...

The point is that when you buy at a significant discount (motivated seller) and then put some work and refinance it out properly, you pull out all the cash you sunk in and can rinse and repeat.

Now to do it with such scale, you better have some solid, scalable processes and use good software.

You also need a solid deal pipeline from doing your own marketing via DM or some other means.

If you want a DM gameplan, just holler and I'd be glad to send you one. Best of luck!

Personally, I think you're doing it the right way as slow and steady seems smart for starting out! (Maybe I'm just a turtle.)

Some ways / thoughts :

  • Buy in more affordable locations (I do work in SF, homes are literally, median 1.2M / lone home! If I meet 1 owner, I'm already impressed :) ) When someone says to me that have 16 homes in a short amount of time? I think, "well, probably not super expensive ones!" Try asking them the cost of each property and work they put into it and return. 
  • Jobs / simply working their butts off - People like to say they don't like their job, but at the same time I think, "well, maybe we should be like them more / we all need more brainwashing Kool aid because we wouldn't be able to buy without hard work!" (For those who started with nothing.)
  • Saved the cash / moved funds from a savings / stocks into homes instead - Many I've listened to took many many years and just recently jumped in! Of course, no one ever talks about the sweat and blood it took to save all that!
  • Find partners (the "other people's money" mentioned by @Allan Rosso ) - I pass people all the time who say they own a ton of homes. Simply talk to them more, you may discover they have different people they invest with, not just their own things. 

One important thing I think about: SURE, you can own 100 homes, but, imagine what your life would look like if you didn't scale that right... (eg: you self-managed and just suddenly woke up with 100 tenants. wew...)

Another spin to the question: What's the ROI work for all the work they're doing? One can have "50 doors" but have to work their tales off...

Not much of that financial freedom people likes to brag about. 

Hope there is something in there that helps!

@Tasha Davis ,

Do what works best for you guys!  Having 2 duplexes sounds like a phenomenal start, because in a year or so you can move to a new house, and then you'll have 4 units that can be rented!      

There are some people doing like the 30 or 70  units in 3 years,  but remember it's not a race or a competition.      Those people leverage and use other people's money and tons of debt, maybe found some owner financing,  and are creative in their growth but to compare yourself to them is crazy because it's not apples to apples in funding and strategy.    One thing  you have to remember, when you grow at that pace of 70 units in 3 yrs, you have investors  to answer to about the money, whereas when you grow more slowly like what you're doing, you are the boss.. the bank will still want the money, but they won't ask for anything more than the mortgage.      Just something to think about!

How are people getting around maxing out your DTI (without the obvious exceptions like getting a partner/someone else name)?

@Matt K. , some banks will count rental income towards your DTI when acquiring new properties. Different banks may have different rules, so it's up to you to ask the question, and get an answer for your particular situation and the bank you're working with.

Originally posted by @Allan Rosso :

@Matt K., some banks will count rental income towards your DTI when acquiring new properties. Different banks may have different rules, so it's up to you to ask the question, and get an answer for your particular situation and the bank you're working with.

Are you talking about a portfolio loan? Or using existing lease/property as additional income? Because I've basically maxed out my DTI but I would still have cash to meet reserves/down payment but I'm confused as to what type of product I'd need.


Basically I guess is there a loan type (that is suitable for long term) that'd allow me to purchase as many properties as I want with just meeting the cash requirement for reserves/down? Or am I looking at a HML type thing where the fees/rate would likely destroy anything in the 1-2% rule?

To really grow quickly, I found tired landlords with more than one property to sell.  I financed one conventionally, considering that the 'down payment' on the portfolio, which he carried with seller-financing.

Another 10 unit shot was a small community bank CEO that found himself with an REO. He seller-financed that through his bank, which is what he is in business to do- lend. Got it to the other side of his balance sheet.

Another guy with 18 just called. He owns a quad and duplex in an LLC, the other 12 personally, all side-by-side in a 'village' of plexes.

I could buy the LLC (it only exists for these 2 properties and he recently put a 70% Brrr on them) with low money, buy the best quad and househack it for the absolute highest price it will appraise for (with 5% down), then have him carry the other 6 at below market prices and below market rates, with nothing much else down.

We'll see.  Funny how when you aren't looking for more to do or don't need more cash to invest, it becomes the most available.  

Get creative. He never considered selling the LLC vs the plexes themselves. Doing it that way would allow me to buy 18 units ($1.2M) for about $35k down and save almost $40k in closing and appraisal costs.

@Tasha Davis  glad you are here in BP! Great place to learn! An excellent way to learn about real estate is buying and selling undeveloped land. Incredible returns, no rehab needed, and you can buy/sell all over the country. Great way to learn how to create and close deals - and any budget can work. Hope this helps you!

There is so much for me to learn still!

@Tasha Davis

As people responded to your question, the simple answer to how they are buying so many properties so fast is.............they are advanced investors. Investors who have at one time started where you are at now, and progress upwards to 5+ to 50 to 100 multi-units. These properties they buy will never come on the market or MLS. I would say these are pocket listings or wholesaled. When they are bought, they are bought all cash as it is faster, better negotiating position, and depending on condition, not able to get financing. Once bought, they are fixed up, and then refinanced to get their money out. And the cycle starts all over again.

Terry

@Matt K. I'm in the middle of closing a small portfolio deal that will have one single loan. The banker stated that existing rental income will count towards my DTI (from a rental I already own), and he also said that the rental income the portfolio is currently receiving helps getting it past underwriting. I don't think that means that the portfolio income counts towards my DTI (since I don't own them yet), but at least I know it helps to be acquiring properties that already have tenants in them. Again, each bank might have its own rules and exceptions, so you would have to get clarification from whoever you are going through on how it works with them. Keep in mind, I'm using a small/local bank in my area.

As far as the second part of your question, I'm not sure exactly how to answer that. Personally, I would go to every small/local bank in your area, explain your situation as far as your DTI, tell them what you plan on doing as you move forward with your investing, and see what they can do for you.

"Are are you able to save for federal tax on rental income, money for if things go wrong and money for a down payment for another house?"

I have a day job - don't know where you're coming from - but I have found that my my federal tax refund has gone up after my first few rental homes.  I'll pay the piper in a couple decades but for now that isn't a concern.  But I do make sure I keep a certain amount in reserves for repairs and the like before finding the next deal.  But I'm not very good yet at using other people's money...

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