Don't Listen to Josh, How I bought 50 Units in One Year
Well it's not really 50... My Brother and I bought 8 units around 2006 and didn't make any money because we bought too high. And it's really not one year, it's probably closer to 13 months. So really the headline should be 8 to 58 units in 13 months. I wrote, "Don't Listen to Josh" because I buy in South St. Louis City, I leverage Virtual Assistants and Professional Inspectors so I don't have to do much of the work, and I definitely bought way to fast.
I found a neighborhood in South St. Louis where properties are available at the "2% rule". I call this rule the "50 times Rent" rule, same rule, I'm sure there are many rules of thumb that work, I just chose the 50x rule. For instance I buy Duplexes for 30k, put another 25k into them, and I am all in with the cost of money and closing at 60k. A 2/1 - 2/1 duplex rents at the low end for $650 a month, so my Gross Rent is $1,300 a month. $1,300 times 50 equals 65,000. So I know am good because 60k is less than 65k, so I am under my rule. In this example I am buying at 46 times rent (46 x 1300 = 59,800). Which is good because twice I have paid more in renovations than I expected due to underground plumbing issues. It took a long time to find a good contractor I could work with, we lost a lot of money working with expensive or bad contractors. A good property Manager is essential, my PM helped me find a good contractor, more properties, and is focused on what matters most: Occupancy.
I dabbled in wholesaling for a few months and did not make any real money, but I gained and education. I found my neighborhood where the numbers work and I found my first HML. Immediately after I bought my first SFR, because I had the HML connection, I was able to buy 2 more duplexes and another SFR. Following the BRRRR strategy (I didn't know I was BRRRRing until after I did it) I Renovated, Rented, and Refinanced my first duplex. Unfortunately I was not able to Refinance the SFRs with my Lender, due to minimum loan amounts, so I still hold those with my own money. Then I started repeating and bought a few more duplexes and used Groundfloor.us as my HML. In the meantime I bought another 6-plex under 40 times rent with my Brother near Branson Missouri, then we came across an amazing opportunity in NorthWest Arkansas. Last month we closed on an 18 unit Apartment complex for $375,000. Today, I closed on a 6 property package in St. Louis for a total of 14 units, with the HML my Brother found on Bigger Pockets.
My strategy is not without faults. Because the properties in St. Louis don't appraise high enough, I usually have to put in money to meet the refinance LTV and closing costs, instead of taking out money like most people do when the refi.... But I CASHFLOW, and I am surrounded by nice neighborhoods (the icing on top).
My next goal is to pay off all my St. Louis properties in five years when I retire from my full time W2 job and then cashflow without or with low LTV debit service. I'll maintain my 26 St. Louis properties as my base cashflow so I can retire, and then focus on partnering with investors to buy more properties in my small neighborhood. I also want to buy more apartment complexes in the Ozarks and NW Arkansas with partners/banks.
To summarize: Buy - less than 50 times rent. Rehab - include the rehab numbers in the Buy number, and good Contractors are important. Rent - Use a self-employed Property Manager that focuses on high occupancy and collecting rents, not a firm with fancy extras. Refinance - I refinance with a lender that offers 30 year fixed non-recourse, but higher interest rates than Fannie/Freddie. Repeat - Scale up as quickly as possible so you can focus on the second stage, Hold (stabilize and pay off), keep the goal of the third stage Own (high cashflow) in your sights. But none of this possible without the first stage, Buy.