How can I scale faster?

Question

I now have 4 rentals. They are cash flowing and things are great. But I am running into the issue where things are moving slowly.

I use the BRRRR method, so my cash gets stuck until the rehab and refinance is complete. This process is typically around 3-4 months per home. As a result, I can only buy 3-4 properties a year. My goal is to cash flow 10k a month. Assuming each rental nets me 250/mo I would need 40 rentals. That is a 13 year outlook based on my existing strategy.

I hear all these stories on BP about people getting hundreds of units in 1 year. So how did you do it? What am I doing wrong?

Joe Villeneuve · Answer

Amir, I'm in Michigan, and you are actually in a great place to invest for what you need.  You're doing it backwards though.  You need to flip regularly, using the seed money over and over, and spending the profits (only) on your cash flow properties.

As much as it might seem crazy, I would sell your CF properties for the profit and keep flipping until you can buy rentals with your profits.  You'll be taking a step backwards at first, but you'll find this will change quickly into running forward.

Those rentals you have now, and the CF that goes along with it, you'l replace and add more down the road...and you'll find that road should be short.

Arlen Chou · Answer

@Aamir Shah are you rentals here in CA? If you dig into the guys who are pulling down large numbers of doors in a year, they are doing it out of state and they have money partners.  Not to many guys go from zero to 100 without investing in a cheap market and having partners. If the number of doors is what float your boat, you need to find a money guy and get to a fly over state/area. Personally I am a lone wolf so I go with the slow and steady approach in CA.  The first few years are tough, but if you are lucky and and you handle your financing well, the ball starts to roll faster every year.

Arlen Chou · Answer

@Aamir Shah when I reference a partner, I mean real partners that have their own money.  They can be the money partner and you are the real estate side. You need somebody that has a pretty high net worth so you can get the bank loans you need to buy properties.  Once you have established the business you will not need to rely upon personal finances to guarantee the loans. People will say that commercial buildings need commercial loans and those loans are based upon the numbers on the deal.  That is true once you are established, but the reality is that a bank is not going to give a new face a big loan without having some assurances even if the deal looks good on paper.

Steven Eitreim · Answer

You need to go multifamily to scale.  Single family just won't get you there, unless you have money partners (equity partners or private money lenders... but be cautious of hard-money lenders with those rates).  But if you're going to get investors, why not do multi-family anyway.  Read "Multifamily Millions" by Dave Lindahl as a start... fantastic read, and really sheds light on why to scale to MF.

Jaysen Medhurst · Answer

@Aamir Shah, you really need to move into multi-family. Why BRRRR a SFR when the same amount of work can get you 4 units.

Since you have some experience, look to going 5+ properties. You may need to partner up with someone to get the capital, but makes it easier to scale.

Lastly, usually when you hear about someone acquiring hundreds of units over just a few years, they are syndicating deals (which is a great way to do it, BTW). That's a bit more advanced, but make no mistake, they don't "wholly own" 400 units.

Garrett Hawk · Answer

Hello Aamir,

I would broaden my strategy if you are wanting to scale faster. Most people who tackle hundreds of doors are syndicator and own a small portion of the actual deals. If you are wanting to go at it alone, I would look into doing deals with higher returns and raise private money to be your "lender" and not have them at an equity position.

Hope this helps!

Martin Neal · Answer

@Aamir Shah If the issue is money and not deal flow then I would suggest leveraging your capital more. I’ve been BRRRRing with 100% of my own funds but I plan to BRRRR with only 10% of my funds per property moving forward. I found a lender who lends 90% purchase and 100% rehab cost.

Aamir Shah · Answer

@Jaysen Medhurst At least in my head, I was planning on maximizing the amount of mortgage loans I can get before moving on to corporate loans. So that would probably happen when I have 10 rental properties. Plus my market is very single family focused (suburbs of detroit metro). I have thought of pivoting markets earlier though. Would require building out a new team in a new market.

Aamir Shah · Answer

@Arlen Chou I am investing out of state in Michigan. Regarding partners. Are we talking hard money lenders or actual partners who are splitting home purchases.

Joe Villeneuve · Answer

I see you PM'd me.  I'll reply.

How can I scale faster?

Most Popular Reply