How did you buy your second property?

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How did you buy your second property?

David Wagner
Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes

Hello Bigger Pockets Community ;) 

I see we have a podcast coming up on February 20, 2019 on regarding this topic but I am curious, how did you purchase your second property?

I have about $50K in equity but Ive been reading this is not a good strategy due to the risk.

What method did you use to get that second or third property?

Love to hear from the community.

Thank you!

David Wagner

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
7y

Bought a new primary every year for 5 years. Mostly for the better rates, I still put down 20% as I hate PMI.

I was also buying 1 investment property each year with 25% down and 15 year loans (to get better rates) at the same time. 

With a spare 2-3 I bought extra during that time I picked up 13 properties in 6 years. Stopped buying and started paying off. I’m down to 6 loans and pay one off with just the rental cash flow every couple years. Probably not the best use of cash to some people but in less that 10 years using about $100k total of my money I picked up $3million in properties flowing $8k/mo now and $15k/mo in 6 years when they’re paid off. 

Many people on here are much bigger, and some got that big in a year or 2. But I stopped when I had enough and retired 5 years after starting.  You have to decide for yourself when you have enough and enjoy your life and health while you got it. You’ll probably still be around next year but there’s a non-zero chance you won’t. 

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    7y

    Yeah down payment can be difficult but hopefully your current rental can be an example for a private lender of your skills.  I used my first property to to leverage private lending, collateral and proof I can renovate and manage a rental. Have you had an appraisal recently and did you do any updates/renovations to property?

    973-975-3895
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  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y

    Yes, if I can prove to a private lender a solid history of managing a property successfully it would help. I am going to have to spend some time looking through BP resources on how to find one. Any suggestions on where to find one? 

    I have not had the property appraised but recent sales have been between $350K - $355K and my loan balance is about $300K. I have not done any improvements since I purchased it brand new in 2017, Any improvements would probably help raise the property value but also my property taxes.

    I know my lender would be willing to get rid of it once I can show the LTV meets the requirement. Sales on slighter larger units have been $375K (an additional 100 sq feet were talking).

    0Reply
  • Scott Schultz
    Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
    7y
    @David Wagner I paid cash for my fIrst, second and 3rd rental, then financed them after repairs. Flips: Cash for the first one, 6mo interest only bank loan on the 2nd and 3rd
    0Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    @Dawn Burwell the regret was it took longer to scale and save up another down payment

    1Reply
  • Josue Vargas
    Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
    7y

    1st: Conventional 15% cash down 0.5% point, higher interest rates, MLS

    2nd: Conventional 25% cash down 1.0% point, best interest rates available, MLS.

    I will tap into HELOC once lenders don't provide Conventional for future investments.

    0Reply
  • Zayda ArzenBusiness Member
    Real Estate Agent · Portland, OR · Member since 2018 · 9 posts · 0 votes
    7y

    @Jason Fleming

    Jason, I'm also in Portland. I'm curious about your strategy. Did you rehab the first two properties? Did they cash flow for you? I imagine this was a while ago. This is such an expensive market that I am curious about how you bough homes for 200K that would qualify for FHA financing? Where did you go for your rehab loan?

    I'm a new investor looking for my second deal and am trying to carve out a strategy in this tough market. I like your method of moving into a new primary residence each time for better financing, as well as rotating whose name goes on the mortgage with your partner. 

    I appreciate your input. Thanks for sharing.

    [email protected]503-730-9459
    0Reply
  • Jason Fleming
    Lender · Portland, OR · Member since 2018 · 5 posts · 8 votes
    7y

    @Zayda Maguire

    Actually, I’ve done all of this since July of 2016.

    I did rehab both houses while living in them for the first year.

    The first house was $235k and had no problems qualifying for a FHA total payment $1350- rents for $1600 (fair market today is $309k)

    The second was $244k, desperately in need of cleaning and carpet removal, bathroom needed a gut- but qualified payment is $1417- rents for $1600 (current value is $295k)

    Third house was not able to qualify- so we went with a rehab

    Price was $165 +$90k for the rehab

    We had to put 5% down here so $12,750

    (I have an amazing lender and rehab contractor if you want to reach out privately)

    We did the rehab, waited until it was 6 mo old and refinanced it at the new appraised value of $372k. Payment is now $1900 with no PMI. We live in this one, but it would rent for $2200 I believe.

    The key to things for me was the amount of research I did finding an area of Portland I thought had upside, that I could afford (thereby aren’t many :/) My day job pays $50k a year, so I’ve been grinding to make it all work.

    I chose Lents, because I knew of a number projects that could come this way, and lucky for me they have.

    Reach out if I can help in any way.

    0Reply
  • Brenda Henry
    San Diego, CA · Member since 2018 · 10 posts · 4 votes
    7y
    Originally posted by @David Wagner:

    Yeah I have a feeling it may take me a while as well. 

    25% is a lot of money for me as well ;)

    I definitely enjoy reading the responses, strategies, and requirements.

    I hate PMI like most people but I gotta start somewhere.

    I dream of getting rid of it and eventually I will.

    Thank you.

    David

    David- PM me if interested in the broker's info, I am in escrow with a broker on a multifamily (owner occupied) property, 5% down with no PMI. Nobody else could do it for me, I was given his info by my agent/friend who recently closed with him.

    1Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    I bought two using 20% down (in Canada rules are different), then I sold another one I had and used some of that money to buy another with 20% down and another with cash.  For those with mortgages, I got the longest mortgage I could and then I make extra payments which reduce the length of the mortgage and save me $ in interest.

    0Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y
    Originally posted by @Brenda Henry:
    Originally posted by @David Wagner:

    Yeah I have a feeling it may take me a while as well. 

    25% is a lot of money for me as well ;)

    I definitely enjoy reading the responses, strategies, and requirements.

    I hate PMI like most people but I gotta start somewhere.

    I dream of getting rid of it and eventually I will.

    Thank you.

    David

    David- PM me if interested in the broker's info, I am in escrow with a broker on a multifamily (owner occupied) property, 5% down with no PMI. Nobody else could do it for me, I was given his info by my agent/friend who recently closed with him.

     Hi Brenda,

    Thanks for your reply and congratulations on your purchase being in escrow:)

    5% down with no PMI sounds amazing.

     I sent you a PM:)

    David

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @David Wagner. Since I see some people listing multiple properties, I’ll do the same.

    Property 1: 20 percent down turnkey SFR

    Property 2: 20 percent down half-duplex

    Property 3: 20 percent down turnkey SFR

    Property 4: 20 percent down SFR

    Property 5: Cash purchase of duplex

    Sold propeties 1 and 2.

    0Reply
  • Sergio Aguinaga
    Detroit, MI · Member since 2018 · 148 posts · 38 votes
    7y

    @Mike M. Are subject to’s safe and would you recommend doing them?

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    7y

    @David Wagner

    You should be able to get up to 10 SFRs with only 20% down. There are some conventional loan products that allow you to only put 15% down, but then you have to pay PMI. I also think investing the markets where the cash flow makes the most sense will allow you to more easily, and safely build your passive income portfolio. Definitely scaling up faster will be more realistic in markets where the home prices are more feasible. Just my thoughts on a couple points in your forum post. Lots of good pointers here.

    Zach

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
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  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Sergio Aguinaga:

    @Mike M. Are subject to’s safe and would you recommend doing them?

     They are safer than the other kinds of investing. I've been doing them for 25 years. Here is how you do them:

    Average Cash Flow Per Door In Phoenix Metro Area

    https://www.biggerpockets.com/forums/600/topics/58...

    0Reply
  • Sergio Aguinaga
    Detroit, MI · Member since 2018 · 148 posts · 38 votes
    7y

    @Mike M. Thank you, I’ll use that post as a reference for when I’m ready to begin doing it. I know there are books specific to that type of investment and I would like to do a couple of those in the near future. Once I get there is it ok if I message you if I have any specific questions?

    0Reply
  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @Sergio Aguinaga:

    @Mike M. Thank you, I’ll use that post as a reference for when I’m ready to begin doing it. I know there are books specific to that type of investment and I would like to do a couple of those in the near future. Once I get there is it ok if I message you if I have any specific questions?

     Sure, I answer these questions constantly. No problem.

    1Reply
  • Ryan Myers
    Member since 2018 · 6 posts · 1 vote
    7y

    Hi, I bought my primary residence last year with a 4% down FHA loan. I would like to buy my second property after one year in my primary and keep my current as a rental. My current payment is close to $1700 a month and I know I could get around $1900-$2000 a month for rent. I don't believe I have too much equity due to buying high in the market. Does it make sense to try to refinance to lower my payment or just take the $200-$300 in cash flow per month? Any advice/wisdom would be greatly appreciated. Thank you.

    Ryan

    0Reply
  • Aaron Hunt
    All Over, USA · Member since 2017 · 689 posts · 756 votes
    7y

    @Dan Heuschele

    $180k/$3 million (equity appreciation) is a bad way to look at it. The leverage was a big part of it. And naturally with lower interest rates you feel safer as you do it. Equity appreciation probably helped tremendously. That’s a lot more consistent and will keep rising. The stock market will likely have way more fluctuations, and chances are he wouldn’t be hitting $3 million off of $100k by having $100k locked up in stocks over that same time period.

    Me personally, in 3 yrs I put a certain amount in down payments spread over my properties and now receive 72% of the total down payments back as rent on mine per year. The overall equity is up 200% on my total down payments. My index fund heavy 401k is nowhere near those gains.

    0Reply
  • Jimmy Deringer
    Real Estate Agent · Spokane, WA · Member since 2013 · 123 posts · 66 votes
    7y

    @David Wagner we found undervalued off market deals and used hard money. If you have equity and can put it to use on a good deal then that’s less money you’ll spend off fees, points and high interest payments.

    1Reply
  • Jeremy England
    Contractor · Pensacola, FL · Member since 2017 · 322 posts · 157 votes
    7y

    I havent actually done it yet as i am just starting to look for my second property.  Refinancing today on my brrrr.

    It will depend on the property as to which strategy I use to purchase it.  If its via auction, I'll likely use the same strategy as before.  Personal loan for purchase and rehab, then refinance after 6 months.  

    If I buy from a wholesaler, I may get a hml.  Refinance after 6 months

    I doubt i'll connect with any motivated sellers, i don't have the marketing budget or time to scavenge. But if i did, I would probably use one of the two above.  

    I could get a heloc based on my current rental.  It appraised at 118k, and I'm refinancing for 78k today.  But i don't think it would be worth the fees to get such a small amount.  even if someone would give me a heloc at 80%.  Which i doubt they would

    0Reply
  • Tony WooldridgePro Member
    Rental Property Investor · Walla Walla, WA · Member since 2016 · 480 posts · 346 votes
    7y

    @David Wagner, I found my 2nd REI property on craigslist. I actually found it while I was Flipping my 1st investment property. When I originally contacted the owner about it the previous year she wanted $85,000 (for 2 houses, ADU). I entertained buying it at the time but didn't want to spread myself to financially thin as I was still rehabbing my FLIP. Glad I didn't because it was already a very big undertaking working on my 1st investment, learned a ton though! Explained to the owner my concerns about not wanting to take on to much risk and told her if it was still available when I completed my Flip I would still be very interested (RE is always about establishing your self as a true professional which in turn will go along way to establishing your ability to create lasting relationships!).

    Sold the FLIP, did GR8 on my first investment and contacted the owner again about purchasing her 2 homes. Luckily, I didn't purchase it the the year before as the priced dropped to $17K! Paid $42K cash and had the owner carry $26K to allow myself some wiggle room on the rehab as I am in the process of BRRRRing these. Got the little ADU rehabbed and is currently rented. Working on the bigger home and will cash-out-refi and do it all over again! In negotiations currently for my 3rd property as we speak! Thanks for allowing me to share and here is to wishing you nothing but GR8 success in your 2019 REI ventures!

    0Reply
  • Jian G.
    Rental Property Investor · San Diego, CA · Member since 2019 · 102 posts · 43 votes
    7y

    @Dan Heuschele

    Yes it different from one to another, their spending habit, current bills, being able to keep up with the same lifestyle. I personally wouldn’t want to downgrade from current lifestyle. A lot of us can move to a cheaper place to live, cut down expensive and be able to retire or to survive without worrying about paying basic needs

    0Reply
  • Kelly N.
    Investor · SE, MI · Member since 2013 · 1k+ posts · 461 votes
    7y

    #1- multi unit, 25% down conventional financing.

    #2-4, same

    #5- multi unit, 30% down and conventional financing.

    All were occupied when we took possession, except one 4 unit only had 2 tenants.

    #6 we are working on now, we will pay cash.  The property is in rough shape, so we will do a cash out refi on property #2 (has the most equity) to fund the rehab and most of the purchase price, then we'll pull cash out of #6 for the next deal...

    0Reply
  • Account Closed
    Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
    7y

    @David Wagner don't hurry up to use your equity position to purchase a deal that yields you a 10% return. In this high market, only discounted deals & very high yield deals (18% cash on cash is my minimum) are a good call. 

    Do you have 50k in equity total or 50k that a lender is willing to leverage for you? Of course, a lender won't give you a HELOC or refi out every dollar of your total equity.

    Go wholesale some deals :) Stack your chedda and make a move when you've got enough liquidity not to worry about leveraging your home against your rental property unnecessarily.

    0Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y
    Originally posted by @Account Closed:

    @David Wagner don't hurry up to use your equity position to purchase a deal that yields you a 10% return. In this high market, only discounted deals & very high yield deals (18% cash on cash is my minimum) are a good call. 

    Do you have 50k in equity total or 50k that a lender is willing to leverage for you? Of course, a lender won't give you a HELOC or refi out every dollar of your total equity.

    Go wholesale some deals :) Stack your chedda and make a move when you've got enough liquidity not to worry about leveraging your home against your rental property unnecessarily.

     I have a total of 50k in equity in equity and you're right about leveraging my only rental property to make another deal, there's no since in putting myself in harms way (financially). I have been reading about wholesale deals and I know most of what I've seen involves hard money loans or finding private investors (not too sure if that's 100% correct statement). 

    Do you have a recommendation on how to approach a wholesale deal?

    I appreciate your input and feedback;).

    David

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