Five SFR's but struggling to scale up

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Five SFR's but struggling to scale up

Brad HuntonPro Member
Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes

I started my real estate investment journey in 2016 by buying my first SFR with a 401K loan. I currently own 5 SFR but I am wondering where to go from here.

Currently cash flowing around $1,200/month and want to scale up faster but I honestly don't know where to go from here. I work a W2 job making decent money and have just been saving up for each rental and making the 20% down payments with conventional financing.

It definitely gets easier with the additional rentals but still too slow for my goals.

I have set a goal for $10,000 per month in passive income but don't see that happening for many years much less than the 5 year time frame I set for myself.

How do I progress from my current position to where I want to be?

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Danielle Jackson
Phoenix, AZ · Member since 2021 · 504 posts · 282 votes
4y

Nice job building your portfolio. 

First thing I would consider is leveraging my equity (make your money work for you!) Have you considered taking cash out of your existing portfolio? What kind of equity positions are you in today? 

There are so many additional questions to be answered, especially with regard to cash flows by property (any worth getting rid of bc the cash flow doesn't make sense). $1200 with 5 doors seems like you might be able to find more profitable opportunities, including multi-family.

Do you self manage? Have you considered scaling by investing passively (syndications)? 

Those are just a few to start. 

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  • Danielle Jackson
    Phoenix, AZ · Member since 2021 · 504 posts · 282 votes
    4y

    Nice job building your portfolio. 

    First thing I would consider is leveraging my equity (make your money work for you!) Have you considered taking cash out of your existing portfolio? What kind of equity positions are you in today? 

    There are so many additional questions to be answered, especially with regard to cash flows by property (any worth getting rid of bc the cash flow doesn't make sense). $1200 with 5 doors seems like you might be able to find more profitable opportunities, including multi-family.

    Do you self manage? Have you considered scaling by investing passively (syndications)? 

    Those are just a few to start. 

    2Reply
  • Maurice D.
    Coppell, TX · Member since 2015 · 485 posts · 310 votes
    4y

    Great question, one I'm trying to answer too. I'm selling some of my less profitable SFR's (including a condo) so I can take that equity and buy some much better cashflowing properties. but even after optimizing cash flow, I don't see a path to significant doors any time soon, so what's the recipe?

    0Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    I did forget to mention that all of the properties are on 15 year mortgages so the cash flow is lower than it could be.

    I self manage 3 and have a local manager for the other 2  (Long distance investing). 

    Between all the properties I have $180,000-$200,000 in equity but I am reluctant to refinance again.

    I have thought of syndication investing but all of my focus has been in this specific niche which might not have been the best decision.

    0Reply
  • Danielle Jackson
    Phoenix, AZ · Member since 2021 · 504 posts · 282 votes
    4y

    There is no blanket recipe to achieving your investing goals. The key is that you acknowledge where you are, and where you want to be. The ability for self evaluation can be hard for investors. Good for you to be thinking through this. 

    If I were in your shoes, the very first thing I would consider is securing 30 year mortgages. Reason behind this, your goal isn't to have x amount in equity. It's to have 10k in monthly cash flow. The easiest way to achieve that is to leverage your money. With rates where they are today, in my opinion, it makes sense to secure 30 year mortgages. I have to believe that with 5 properties, and 15 year mtgs on each, that would significantly boost your cash flow. I would definitely be penciling that out as an option. 

    Multifamily is also a way that many investors scale. Not sure if you have the desire to purchase value-add properties, but anything you can do to force appreciation and not rely just on natural appreciation tends to be a popular move. Another way that many scale, especially for those that don't have the necessary capital or bandwidth to manage some of the larger scale multifamily, is to think about investing in a syndication. You can diversify amongst various sponsors and have exposure to multiple markets. 

    2Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    4y

    @Brad H.

    Congrats on 5 SFR. I'm at 12 and have bought 7 SFR with cash out refis. Most of mine are on 15 year loans too. But I've learned that pulling out equity in some of them is ok. I just pulled out 133k cash from one of my rentals to buy two more with 30 year loans. It didn't cost me a penny out of pocket and my cash flow just increased $1800/month. Once you have a few under your belt, you can start pulling out equity to grab more rentals. It feels like I'm buying houses for free! Refi til you die!

    2Reply
  • Jovany Espinoza
    New to Real Estate · Chicago, IL · Member since 2020 · 10 posts · 19 votes
    4y

    @Maurice D.

    I am in the same boat. I'm trying to figure out how to gain more revenue to make more frequent purchases.

    2Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    4y

    Your strategy will all depend on your goals and desired involvement level. The great thing about real estate is that you can make money a hundred different ways. The bad thing is that you can make money a hundred different ways and that often paralyses people. Pick one strategy and stick with it for a while, before you pivot or latch on a 2nd strategy. 

    You can get lines of credit or refi your current rentals to buy more, you can find partners (passive or active partners) and leverage their money and/or time, you could passively invest in syndications or you could combine these strategies. This just scratches the surface for you. 

    1Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @Danielle Jackson

    I will definitely look into doing a cash out refinance. Thank you for the advice and for opening my eyes to other possibilities. I tend to get tunnel vision and forget to look at the big picture.

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    4y

    I think your cash flow is low for 5 SFR, but the 15-year mortgage is a smart play. The one question I would ask you is, why do you want to scale and what does scaling mean to you? Are you self-managing or paying for it? With 5 SFR, I do think you could safely take on a 4-plex as a next deal and be able to be way ahead of the curve compared to someone doing that as a first investment. I think you will find the cash flow better and the management similar.

    [email protected]Podcast Guest on Show BiggerPockets Daily 667: 5 Amazing Benefits Multifamily Investments Offer (That Single Family Homes Don’t) by Gino Barbaro
    Zen and the Art of Real Estate Investing59 Reviews
    WebsiteView Page
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  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @Jonathan Greene

    I have been looking to branch out into multi-family units to increase my returns. I have a line on a duplex but due to DTI ratio will need to wait until taxes are filed next year to open up some options. I showed a big loss thanks to a total remodel of a unit due to bad tenants and basically vandalism.

    1Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @John Morgan

    Thank you. Will definitely look into tapping equity to increase doors and cash flow.

    0Reply
  • Luciano A.
    Developer · Houston TX · Member since 2018 · 423 posts · 400 votes
    4y

    @Brad Hunton

    I am also in Texas. Don't you have a rich relative that can just write you a Million Dollar check??? Yeah, me neither. lol

    Having your properties on 15 years means you will have properties paid off in 15 years thus at that point will see huge cashflow coming in. If you don't want to play that long term of a play then I would second those that mentioned going into a 30 year or getting a HELOC or line of credit on the current properties.

    It sounds like you are being a good investor that is not falling for the get-rich-quick schemes. Look at your game as a long-term play. If you want to grow quickly you might want to sell some of the properties and use them to flip other deals. Grow your cash base and then put that into long-term holds. 

    It's awesome you have gotten 5 thus far so don't give up. Take your time and play the long game especially since you have a full time job and can make this into a 5-10 year play and not a 6 month play :)

    Best of Luck 

    0Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @Luciano A.

    I can, and have been playing the long game but as I get older I am starting to believe that I am far behind where I want to be. I'm trying to make up for lost time so to speak and just trying to meet my goal of passive income in 5 years instead of the 15 years it is currently taking. Thank you for the advice and encouragement.

    0Reply
  • Sam YinPro Member
    Los Angeles, CA · Member since 2021 · 583 posts · 738 votes
    4y

    @Brad H. You may have to consider alternate strategies.

    I was in almost the exact same position in early 2020. I made the decision to grow faster and watch lots of YouTube podcasts. I did one refi to purchase additional properties in spring of 2020... well... that only took me from about 1500/m to 2500/m. Needless to say, way too slow.

    After a lot more YouTube, I decided to 1031 a few SFRs in summer 2021. That took me from 2500/m to about 15000/m cash flow. I may rinse and repeat one more time next year and shoot for 30000-50000/m. If I get there, i settle down for a while.

    To be clear, my current gross rents is about 33000/m, so a little over 50% is operating costs and debt service. But you can see the power of 1031. I went for mismanaged, undervalued multifamilies. I work full time and I self manage. Over the course of the year, I created processes that allow me to spend about 4-8hrs per month on REI. so not totally passive, per se.

    I'm sure there are other avenues. I think you can definitely achieve it if you focus on you goals and just research.

    Congrats thus far!!

    1Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    I don't know if anyone will see this since it was back in Nov '21 but I just wanted to give an update on my progress.

    After everyone's advice and A LOT of research, reading, and podcasts, I made some moves to get me closer to my goals.

    I sold a piece of raw land I owned and bought a duplex off market which cash flows great.

    Next I refinanced two of the properties with the most equity and took out a big lump sum.

    I found five off market deals that I was able to purchase with money I had saved and the refinance cash.

    I also came across one great deal off of the MLS and was able to get it as well.

    My next move is to tap into the equity of my primary and I should be able to purchase three or four more rentals in the near future. Still not where I want to be but I will have 15-16 rentals with a nice cash flow of around $5,000 per month which is my lean F.I. number.

    I will probably continue to buy when I come across deals and have down payments from my rental income and my W2. I am in no rush to quit as I love my W2 but the additional income is such a huge blessing.

    So in conclusion, THANK YOU SO MUCH!!! The advice and guidance I have received on these forums and from private messages has been invaluable.

    7Reply
  • Sam YinPro Member
    Los Angeles, CA · Member since 2021 · 583 posts · 738 votes
    4y

    @Brad H. Outstanding! Congratulations on the quick success. You took advantage of all the knowledge and resources around you and made the most of it. Biggest hurdle was getting over the fear and now the future moves are easily imagined. Good job!

    I have been employing similar tactics with similar results. There is no secret. The formula is there. The biggest hurdle is our understanding of finances.

    Keep it up.

    2Reply
  • Wendy Stclair
    Investor · Long Beach, CA · Member since 2019 · 42 posts · 63 votes
    4y

    @Brad Hunton thanks for the awesome update here. it was great to read the journey and see the advise. i'm in a similar situation as you, had 5 rentals and this year sold my priciest one 1031'd it into 4 SFHs. My immediate cash flow will jump $380/mo on one home to $2000 on 4 (1 of them was a cash purchase to meet 1031 needs while the rest are about $300 ea). This plus the others will get me close to $5k /mo cash flow which is exciting! The last two i'm buying this year i'm afraid i'll have to put at 6.5% interest which will dampen cash flow a bit.  Hoping i can refi those in a few years.  I have one other high value property i can take cash out of if i want in 2023. Trying to work while doing this is a bit exhausting I find - just chasing lenders, insurance companies, finding properties, and the 1031 was super stressful for me! the 45 day window killed me and scared me back into turnkey as i just ran out of time to find good deals. Anyway thanks for sharing!

    1Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y
    @Sam Yin:

    Thank you and congratulations on your successes as well. The formula is not easy but it is simple and has proven true many times over.


    0Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y
    @Wendy Stclair:

    The interest rates definitely put a damper on returns but in 5-10 years I bet the rates will be only a small part of it. The last two I closed were at 6.4% but it better than not having a property. Congratulations on your success. 


    0Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    4y

    For me I would only buy value add properties 

    fix them up, increase  the rent pull out some cash 

    Or flip houses to get cash for the next rental faster 
    i also prefer the longest loans possible.  They gives me higher cash flow and increases my cash faster so I can do the next deal 

    1Reply
  • Nick Shri
    Rental Property Investor · VA · Member since 2020 · 218 posts · 133 votes
    4y
    Quote from @Brad Hunton:

    I don't know if anyone will see this since it was back in Nov '21 but I just wanted to give an update on my progress.

    After everyone's advice and A LOT of research, reading, and podcasts, I made some moves to get me closer to my goals.

    My next move is to tap into the equity of my primary and I should be able to purchase three or four more rentals in the near future. Still not where I want to be but I will have 15-16 rentals with a nice cash flow of around $5,000 per month which is my lean F.I. number.

    THANK YOU for sharing your journey!! I love the fact that you know your lean F.I. number and worked towards it. And now continuing to work beyond that. Kudos to you and wish further successes!! Quick question - how did you go about finding off-market gems? Sending you a connect request, shall we hop on a phone call? 

    1Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    4y

    @Brad Hunton

    Congratulations on your progress - that is awesome.  I think I am in a similar position to where you were last year... I have 5 doors, and trying to figure out how to scale faster than one every 1-2 years.  Similar to you my wife and I are trying to replace all of our W2 income with rental income and aren't there yet.

    All your moves make sense to me - kudos.

    Question - how'd you find the off market deals?

    0Reply
  • Nick Barlow
    Warsaw, IN · Member since 2017 · 229 posts · 270 votes
    4y

    @Brad H. You already heard what will be my recommendation: cash out refi.

    It’s easier said than done in today’s environment, and something I haven’t done yet-my first cash out refi went to financing a foundation repair in the same house, and with rates at 7ish %, I don’t get enough return after fees and closing costs to do it now-just timing, but is the longer term plan.

    Look up Michael Zuber-One Rental at a time. His message is to get 4 properties-once you get there, cash out refi to get 3-5 more properties, then a few years later, 1031 into large apartments-the kind that have onsite management and do the types of deals that changes lives.

    Congrats on having 5 properties after 6 yrs of REI-that alone is an achievement that should not be underrated.

    0Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @Nicholas L.

    So my third rental 2 years ago was off market from a realtor that we had used. She was scaling down her portfolio as they were focusing more on other projects. I bought 4 of her properties total and she found me the duplex from a partner of hers who was doing the same thing. The other two deals were from a friend of mine who owned them. He was looking to consolidate his portfolio into one area and gave me first dibs.

    0Reply
  • Brad HuntonPro Member
    OP
    Rental Property Investor · Granbury, TX · Member since 2020 · 84 posts · 70 votes
    4y

    @Nick Barlow

    Thank you. I was able to cash refi two units and get a decent 5.1% 30 year fixed rate. These other properties are on 5/25 year commercial loans with decent rates and I plan on holding these for the 5 years and cashing out then.

    0Reply
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