What are SCALABLE STRATEGIES for repeat real estate investing?

Question

Hi everyone! What are your SCALABLE STRATEGIES for repeat real estate investing without renovations? ex. only buying condos or ready to rent homes.

Do any of you have recommendations on SCALABLE STRATEGIES for repeat real estate investing without renovations? ex. only buying condos or ready to rent homes.

I’m primarily trying to understand how to do this in the Toronto or nearby areas market. From my research I know you can do:

1. Buy, rent, save up for next down payment (20%), repeat. Seems slow as it depends on you having income for the down payments.

2. Buy, reno, rent, refi, repeat. I myself or my nearby circle do not have contracting experience so this particular route is difficult.

3. Buy, rent, refi. I’ve read about re-financing once equity builds and then using those funds to purchase. Is there a hard figure at which you should refi? Ex. x% equity built, then re-fi?

Any others?

Gautam Venkatesan · Answer

@Jan Walczak you will need to look into creative ways to purchase rent-ready properties where you don't use your own funds to acquire like subject-to, seller financing, using private funds, sandwich lease options, etc. I do not know anything about the laws in Toronto regarding these techniques so please research them thoroughly before proceeding. Good luck!

Account Closed · Answer

Beside the strategies already mentioned, another strategy to consider is buying your real estate on Wall Street rather than main street.  Some real estate companies are publicly traded (such as REITs).  Other real estate offerings are in the form of crowdfunds that are not publicly traded.  The advantage of these approaches is you have minimal involvement in managing the actual real estate.  You decide what securities to buy (and sell if they are tradeable) while the middlemen for a fee take care of the details of running the business.

Every strategy has its tradeoffs to consider.  For example, publicly-traded securities often have a lower rate of return.  Investors buy them (and bid up their prices) because of the market liquidity they provide.  When the market is open, you can buy or sell a publicly-traded security usually in a matter of seconds (rather than weeks or months it might take to buy or sell a directly-owned property).  The leverage with publicly-traded securities is often less.  In margin accounts, the Federal Reserve generally limits the amount of money you can borrow from the brokerage firm to a 50% LTV at the time of  initial purchase and has maintenance margin requirements if the price of the stock falls too much (not all securities are marginable either).  In retirement accounts, margin is not allowed and everything has to be cash secured.

I own shares of a real estate index ETF in a retirement account that is set up to reinvest my dividends automatically.  The advantage to me is my DRIPs have no commission cost once I buy the initial shares and the DRIPs allow me to buy additional fractional shares.  In a global real estate mutual fund I own, I reinvest the dividends and capital gains.  The initial minimum investments are low.  My approach is "check in once a year" to make sure everything is still on track.

Frank Wong · Answer

Hi Jan,

It doesn't have to be complicated but those will be the three you can apply right away.  You technically don't need contracting experience to buy and rehab. You need to have time and be willing to put in the work to find people to do the work for you.  Buy and refi out only works if you can buy and rehab the property. Unless you bought the property and there was a tremendous run up in price.

Buy and rehab doesn't have to be the only way. I know a lot of investors that just don't have the time to do it nor do they want to.  They rather use their time more efficiently in their current jobs and just invest the money into turnkey properties.  I have clients who only buy condos in SF that are newer built and just rent those out.  It's a solid strategy and works for them.

Even though option 1 is slower than the other it still works.  What you can do is look for underprice turnkey properties and invest into those.

What are SCALABLE STRATEGIES for repeat real estate investing?

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