Ten properties in 1 year...how is this possible!?

28 Replies

I keep seeing these life changing one year turn arounds in peoples lives.

My main question is how do people buy 10 properties in one year considering the DTI Ratio?

I am personally making 65k-70k/yr at my W2 job and can only afford 1-2 rentals per year due to DTI Ratio, not liquid funds.

My rentals are currently not inside of any LLC, but I have a large umbrella policy.

What am I missing?

Originally posted by @Lawrence Paul :

I am personally making 65k-70k/yr at my W2 job and can only afford 1-2 rentals per year due to DTI Ratio, not liquid funds.

What am I missing?

You're missing that your lender has "overlays," meaning they are more restrictive than Fannie Mae's basic requirements. Someone probably told you that your rental income can't be "counted" until it is on two years of tax returns. Might be time to find a new lender. Go to your local REIA meetup, buy some beers, and ask people who they use. I have people with $3m in mortgage debt (Bay Area house prices) who have day-jobs nowhere close to being able to support that.

And don't take my word for it, here it is from the source, note the word "or":

1. your DTI should be improving with each deal. Networking with lenders and local investors is a 100% critical must do 

2. the VAST overwhelming majority of people don't buy 10 houses per year. So it's not like some common thing EVEN among people who are halfway decent at this. Especially in the beginning, and especially as markets get tighter

3. how cheap are you buying deals? Shouldn't be coming out of pocket too much if you're buying at a big discount. 

4. you have no idea what these peoples' situations are. Maybe they don't have the same capital restrictions, maybe they know superstar wholesalers, maybe a million other things. 

5. You should expect most people to lie about as much as they breath. Don't chase everyone's story when you haven't vetted to find out the details of what really happened. 

If you go to a big bank they may not be cool with you having 10 mortgages, period. If you work with a regional bank or a credit union you should be fine.  Also if someone had Enough equity from one house...... let’s say $300,000.  If they got 75 percent cash out on a refinance that’s $225,000.....you can go to certain areas of the Midwest and put $20k down on 10 different properties.

Or maybe they cashed out or borrowed on their 401k.

Or maybe they did 10 deals in one year but there were wholesaling or doing notes..... or flipping .... or any combination thereof.  Don’t get discouraged when you see s podcast titled A 100 Deals in a Year..... it most likely is not 100 buy and holds. 

Also look at the profitability.... someone may brag about having 50 doors in 3 years but of their “profit” is only $25 per month per door that does nothing...I heard a BP podcast guest one time say he doesn’t even get out of bed if he’s not getting at least $250 per door per month and n st least a C+ neighborhood.,,.. I’d much rather be in his shoes than the person with 50 doors and barely any profit.

@Joe Villeneuve , ok got you. If I was still living in the USA this is probably the only strategy I'd be using now. It's just so easy to make money and infinitely scalable.  And you can deal exclusively with A grade homes!!

Originally posted by @Dean Letfus :

@Joe Villeneuve, ok got you. If I was still living in the USA this is probably the only strategy I'd be using now. It's just so easy to make money and infinitely scalable.  And you can deal exclusively with A grade homes!!

 Why would this be exclusive to living in the USA, and not in another country?

@Joe Villeneuve , well in theory nothing. However as a New Zealander who has lived in a few countries I find American laws and financial systems to be uniquely flexible and easy to take advantage of. New Zealand and Australia for example have no private note industry, no REO system, foreclosures at all are rare. And it would take a miracle to find anybody wanting to do seller financing like we can in the USA.

It is theoretically possible but I can't imagine why anybody would ever agree. We just aren't like the states. You can often get a seller to leave in say 100 or 200K on a 1 million dollar buy to make up a shortfall in your lending but that would be about it. And it would normally be for no more than 24 months.  Our industry is highly, highly regulated and our houses are eye wateringly expensive.  

Originally posted by @Dean Letfus :

@Joe Villeneuve, well in theory nothing. However as a New Zealander who has lived in a few countries I find American laws and financial systems to be uniquely flexible and easy to take advantage of. New Zealand and Australia for example have no private note industry, no REO system, foreclosures at all are rare. And it would take a miracle to find anybody wanting to do seller financing like we can in the USA.

It is theoretically possible but I can't imagine why anybody would ever agree. We just aren't like the states. You can often get a seller to leave in say 100 or 200K on a 1 million dollar buy to make up a shortfall in your lending but that would be about it. And it would normally be for no more than 24 months.  Our industry is highly, highly regulated and our houses are eye wateringly expensive.  

 Got it.  I misunderstood.  I thought you meant you wouldn't do this in the USA "from" another country.

@Lawrence Paul great question. Over the years I've helped so many build their portfolio. You may have trouble with conventional banks due to credit, DTI, Fannie/Freddie rules, etc.

You have to go a different direction depending on resources. Either taking on a Partner to fill in the Bala or some of the best ways is seller financing, Sub 2, master lease options, etc. My specific has been to both acquire deals with and offer deals on seller financing to investors. Hope this helps. Wish you the best

@Joe Villeneuve , oh well that is another question. I do think it would be very hard to do when out of the country. Most of mine have been A grade homes with elderly sellers who had nothing to do with the money. So the deal is built on my personally meeting with them, explaining how it works, getting my attorney to confirm my financial position etc. I think it would be really hard to do remotely in the market I like to play in which is typically 300 to 400K homes in Memphis.

Originally posted by @Dean Letfus :

@Joe Villeneuve, oh well that is another question. I do think it would be very hard to do when out of the country. Most of mine have been A grade homes with elderly sellers who had nothing to do with the money. So the deal is built on my personally meeting with them, explaining how it works, getting my attorney to confirm my financial position etc. I think it would be really hard to do remotely in the market I like to play in which is typically 300 to 400K homes in Memphis.

 Probably right.  You'd have to establish a complete team there first, then find the properties to fit this scenario, then...all remotely.  

My prefered source are retiring REI looking to cash out of their 100% equity. They're already used to cash flow, don't really want an all at once tax hit, and understand the concept already. They usually like to work their way through their properties, one or two at a time. Another nice thing is once you've established your relationship with them, they usually come to you first when the next one comes up...and never list. Also, they are more than willing to recommend their "team" to you...that's already familiar with these properties.

Right that's a good idea. If I'm ever back there I'll look at it. I have a great team in all regards except a face to front people.  That was always my job!

You would either have to have a very rich uncle, or have some great networking skills.

It's not super easier to go from zero to 10. BUT to go from 50 to 60 is a lot simpler because you already have funds, systems. So question is more what stage are you reading these stories.

IF You have no properties, I wouldn't advise going from zero to ten. You need to walk before you can run. Take your time and learn to manage people, learn the ropes. then start swing and going for the bigger plays

@Lawrence Paul buying property under market value, raising rents and refinancing with local banks (commercial loans or portfolio loans) is likely the most common.

The other is partnerships but then you likely don’t own all the property yourself. You see that a lot with syndicates. They say they own 1000 doors but the truth is they CONTROL that many doors. Their ownership percentage could be much much less.

@Lawrence Paul more realistic to do 1-5 the fist year. Just focus on that one really. There is usually a hidden story behind most instant success stories. As in a lot of big talkers lie, leave out that the number of houses was with a partner or ten,  and the terms “We” & “ Us” could mean that they are taking way to much credit what their dad or rich uncle or group did. 

Guess I just need to find a better bank or lender because I have more money than banks will let me spend on conventional loans right now because all the banks that I have run into make me wait a year before calculation net gain (or loss) on my rental property.

Based on the numbers I am running, I will only be able to purchase one property per year...perhaps two if I can pull some DTI magic. Feels like I am not able to invest my money to its full potential. Once the ball gets rolling two a year seems more simple (perhaps year 3-4), but this starting out feeling is being to get to me.

I am going to cash out refinance on my first property in three weeks (purchased 30,000 undervalue and put 6,000 dollars into the property). Purchased for 110,000 worth 140,000.

Originally posted by @Dean Letfus :

@Joe Villeneuve , well in theory nothing. However as a New Zealander who has lived in a few countries I find American laws and financial systems to be uniquely flexible and easy to take advantage of. New Zealand and Australia for example have no private note industry, no REO system, foreclosures at all are rare.  And it would take a miracle to find anybody wanting to do seller financing like we can in the USA. 

 What happens when someone stops paying their mortgage in NZ?

Do yourself a favor and take all "success stories" on here with a grain of salt. Most of them aggravate me and have no detail, are completely exaggerated and worse yet, the investor is swimming totally naked and doesn't have proper reserves. My favorite ones are the ones written by a younger Millenial or Gen Z who declares himself retired at 24 because they make 40k a year in passive income. 

I am debating writing one in a few months, but it would be filled with detail if I did it.