Sequence of Rental property Purchase

3 Replies

Hi guys,

Looking for advice on the topic of sequencing house purchases.  I have Purchased two rentals so far. Should close on two more by end of July.  I've so far limited my purchases of $100K+ SFH, that can rent for $1000+ that I hope can appreciate over time due to them (mostly) t being in good/path of progress areas.   Now I'm at a point where I am thinking whether I should aim for more expensive or more affordable housing stock.

With conventional loans as of this week, I am able to do 15% down and 5% interest rates with no points. It seems like a waste to have terms that good for a property that is 60K-90K,m even if COC% are better. I'd rather get a 120-200K property that cash flows and I would save and focus properties on that level until all 10 (or 20 if my wife goes back to work).

I can look to the 60-90k houses once I get pass my Fannie/Freddie slots and have to resort to portfolio loans. Since Portfolio loans typically needs a higher downpayment as well as higher interest rates a cheaper house strategy then will be much more efficient then doing now. 

Does that line of thinking make sense if i am mostly aiming for cashflow (with a bit of appreciation down the line)? Is there any flaw in this strategy (other than speed of scale?) 

@Wei Jie Yang , don't get hung up on the 10 mortgage thing. In fact, if you're talking with local banks/credit unions that don't sell their loans off, it shouldn't even come up. I found their terms to be very competitive.

If the more expensive properties are delivering the same ROI and running out of capital isn't a concern, then, yes, pursue them. Specifically, I'd recommend looking at MFR so you can start realizing some economies of scale and mitigate risk.

Originally posted by @Jaysen Medhurst :

@Wei Jie Yang, don't get hung up on the 10 mortgage thing. In fact, if you're talking with local banks/credit unions that don't sell their loans off, it shouldn't even come up. I found their terms to be very competitive.

If the more expensive properties are delivering the same ROI and running out of capital isn't a concern, then, yes, pursue them. Specifically, I'd recommend looking at MFR so you can start realizing some economies of scale and mitigate risk.

Currently not really looking at MFR simply because I need 25% rather than 15%. Figured I might as well take advantage of the leverage while I can.

Do local banks/credit unions have similar terms in terms of down payments as Fannie/Freddie? I was under the impression they were closer to 30% and 6% minimum with points