Direction for scalability?
Rental Property Investor · Providence, RI · Member since 2018 · 12 posts · 3 votes
As someone who is starting out, I am trying to figure out the best direction to scale my real estate portfolio. I currently own a 3 family home with cash on hand and access to hard money.
My main goal is buying and holding for cash flow but with the multi family market so high it is hard to find deals that are giving a decent return.
So what should I do?
- I like the Brrrr strategy but have trouble finding homes to execute this on...maybe this is a work ethic problem but I am interested to hear where people are finding these homes?
- I don’t mind buying a beat up multi and improving as people move out
What are some other options and opinions I am open to just about anything as long as it will get me to my goal
Thank you in advance for time and help
@Bobby Pagliarini this is a great question and I do run a training every Monday at 5pm EST that is focused on getting real estate investors in the Massachusetts and Rhode Island market together and on the phones calling motivated sellers.
I have found that either cold calling yourself OR ha ing wholesalers and real estate agents cold-call your lists for you can be an amazing way to generate deals.
I see you are from Providence area. Are you considering buying in Pawtucket? I've seen some opportunities in the following cities: Central Falls, Pawtucket, providence, Woonsocket, but you have to be in front of the sellers before an agent gets there.
I currently invest heavily in Fall River and am considering expanding to New Bedford and am available for any questions about investing anytime my friend.
I love helping my fellow investor find off-market deals!
Ps, I don't charge anything for my deal finding trainings, I really just want you to find the deals, lol
Cheers to your success!
@Bobby Pagliarini not sure what the STR market is like in Providence but you could buy a multi and rent a unit or two out as STR's if it made sense, to increase your returns.
@Bobby Pagliarini How much are you working on your multifamily off market list? Use local GIS mapping to find multifamily deals from 10-30 units that maybe larger investors have passed over. It's the same for single family, get hungry for those off market deals and build yourself a list or buy a list.
@Bobby Pagliarini you might want to look at out of state properties. It's not hard to find places in Indiana, Mississippi, and Alabama that rent for 2% of the home price. The difficulty is then not finding a place so much as finding a good property manager. But that might fit your strategy better. That's what I've been doing recently, so I speak from experience.
@Bobby Pagliarini you might want to look at out of state properties. It's not hard to find places in Indiana, Mississippi, and Alabama that rent for 2% of the home price. The difficulty is then not finding a place so much as finding a good property manager. But that might fit your strategy better. That's what I've been doing recently, so I speak from experience.
Be very careful with multis in Mississippi, but if you are interested in Mississippi properties I can recommend a good property manager. She is a broker as well so she can help you find properties.
Hey @Bobby Pagliarini I'm in the same position. I live in Boston and bought a 3 family in Providence on Fed Hill last year at a great price. I grew up in Providence so I know the areas pretty well. I've been looking for another one since then but haven't found much with the numbers that I want. Now I have to say I've mostly been looking on market as I'm also an agent and making money back on the buy offsets some of the down payment (as I'm using 3.5% down loans). I need to start putting more time towards off market deals.
@Joe Rodriguez you mind sharing more about these 3.5% loans. Or is it just FHA?
@Luan Oliveira Yes, FHA. I've been able to use FHA twice by buying, renovating, and refinancing once I hit 20% equity in the property.
@Joe Rodriguez Hi Joe,
Have you looked in the Fall River, New Bedford, Taunton markets? These areas seem to be some of the best cash flow cities in the state. Please PM me if you want to discuss further. Anything I can do to help please don’t hesitate. Good luck :)
@Bobby Pagliarini
I have been anti-scale for most of my investing career. I have always taken the position that I don’t need 200 assets that perform mediocrely. I would like 50 by the time I am done. 50 really quality high performing places. I have 35 years until I stop buying.
I always hear people bragging saying “Just Bought my 10th house this year!” If you bought 10 bad deals you could potentially be worse off. All it means is that someone was willing to lend you money on 10 places.
@Bobby Pagliarini this is a great question and I do run a training every Monday at 5pm EST that is focused on getting real estate investors in the Massachusetts and Rhode Island market together and on the phones calling motivated sellers.
I have found that either cold calling yourself OR ha ing wholesalers and real estate agents cold-call your lists for you can be an amazing way to generate deals.
I see you are from Providence area. Are you considering buying in Pawtucket? I've seen some opportunities in the following cities: Central Falls, Pawtucket, providence, Woonsocket, but you have to be in front of the sellers before an agent gets there.
I currently invest heavily in Fall River and am considering expanding to New Bedford and am available for any questions about investing anytime my friend.
I love helping my fellow investor find off-market deals!
Ps, I don't charge anything for my deal finding trainings, I really just want you to find the deals, lol
Cheers to your success!
@Bobby Pagliarini awesome question I love it. Glad you're beyond "I think I want to buy an investment property" and thinking "how do I buy 10 more."
1. I'm a big supporter of creative financing and OPM. SO KEEP YOUR CASH ON HAND and use it to secure wholesale deals or off market properties then just refi out asap. (There are thrifts and savings & loans that don't have much of a seasoning period here in Indy area.)
2. Use the hard money for riskier business or bigger value add projects that'll tie up your cash for 4 to 6 months.
3. Buy things on terms if possible. Use small down payments and work deals backwards to cashflow your $100/mo after all expenses and negotiate a good payment.
4. Go after package deals. We broker a lot of package deals and get investors to their numbers quickly. If you're going to own one might as well own 100. There is less risk with what is perceived as more risk. One vacant rental out of only a one home portfolio means 0% occupancy...out of a 10 unit portfolio now we're at 90%... And so on.
Good luck!
@Kai Van Leuven definitely see both sides of the fence but if you plan on owning and retaining and being in the business for next 35 years you should buy everything you land on asking the way. Regardless if it truly meets your criteria but wholly agree with as long as it is simply a quality town/area/property.
1. Time value of money coupled with low interest rates, 2. all the fed is trying to do is create inflation (meaning rents are up but your mortgage stays the same) and 3. almost 100% chance of massive equity creation in and over 30 years... triple threat!
@Bud Gaffney I have not looked into Fall River, New Bedford, Taunton markets. I'm hesitant as I'm not too familiar with those areas but I've been interested in doing more research. It just happens that it's in the middle of where I live (Melrose- North of Boston) and where I grew up (providence). Also, my dad who is a carpenter pretty much takes care of my properties and it's easy for him to get to Providence from Warwick (where he lives). But if I get to a point where I can't find anything in Providence, I'll definitely consider those areas.
@Joe Rodriguez Sounds good, Joe! I wish you much success.
@Bobby Pagliarini I've struggled a bit with how to reply to this.
I guess this is because I'm interpreting the question as, "I don't see numbers out there that look good, but how do I keep buying and expanding anyway?"
I think there are two basic answers, only one of which is usually discussed.
The first one, the one which is the standard reply, is that you just need to look harder to find deals where the numbers do look OK/good. Contacting owners directly through some method (direct mail, post cards, SEO/web ads, etc.) to find "off market deals" is the usual recommendation for this.
And I think there's some truth to that, and opportunity in it - but at this late stage of the market, you should know if you go this road there's a lot of competition so you will likely have to spend months of consistent effort to eventually find something acceptable. I do think you can succeed with this method, but you should know how much work you're going to need to put into it.
A related recommendation is to contact wholesalers and try to get on their buyers' lists. If you do have cash on hand and access to hard money, you can certainly do that, but again this will require a fair amount of work as the deals I'm getting sent from most wholesalers these days are usually close to retail price or are just way too thin. I've also noticed a lot of wholesalers trying to start bidding wars among multiple cash buyers, which further drives up the price of course.
Again, I think you can succeed with this method, but it is a grind and you're going to have to kiss a lot of frogs to find an acceptable prince(ss).
The second answer, which almost no one wants to hear or talk about, is that if you just can't find properties where the #s look good... don't buy anything.
It's almost heresy here on BP, but to me, when #s are high and people seem to be paying prices that don't make sense, and doing other crazy things like buying properties without inspections... it may just not be the best time to buy.
No one wants to hear that because it seems like everyone they know is making major money in real estate, and they want to join the party, but I can say that I saw the same thing in 2006 so when I start to feel a sense of "irrational exuberance" in the market, it makes me want to reassess things, start to add more cautious assumptions into my property analyses, etc.
So I think your three choices are: 1) buy something at full retail even though the numbers are awful (and pray rents keep going up as they have for the last decade, so you can service that mortgage); 2) spend a lot of time and effort finding an off market deal (maybe the best option, but I guarantee it will be a grind); or 3) accept that the market is crazy right now and wait until the market changes and #s do start to look better in general.
I'm not saying that any one is the right choice, just that sometimes the right action can be no action at all (right now). Obviously that may not work for you and your personal situation, goals, etc. but I think it's at least worth considering that option as well.
@Anthony Thompson very good answer my friend! I love your assessment and courage to discuss secret option #3 here on bigger pockets!
I agree that option 1, really is a dangerous option and only makes sense if you currently own NOTHING and are buying a multifamily to house hack and live rent free.
Option #2 I would absolutely AGREE is a ton of work and also IF YOU ARE DEDICATED to being an investor, is the best option. I like that you mentioned building a network of wholesalers. That really is a great form of leverage that I have relied on for the last 2 years.
Option #3 I really think is a function of how hard an investor is willing to work at option #2.
If its not a good deal and the current rents can't sustain the mortgage and expenses DO NOT BUY IT. Cash is also an acceptable position at some points in the market.
On the other side of it. If you are crushing it in option #2 and you find a GREAT DEAL or 2 or 3 that #cashflow. Then of course go all in on it.
We expect a market pullback when things get this crazy, but we may or may not see it soon. That doesn't mean it is okay to buy into investments that don't make money.
If you find yourself considering how to make money passively there are business assets you can build as well that still have the ability to provide massive passive income similar to rental property.
Remember... CASH or GOLD/silver look like a boring asset when inflation is high, but when the music stops... CASH IS KING
Cheers to your success!