10 properties,....now what?

Question

After 10 properties..how do I scale up and expand my portofolio?

I hear many say get a portofolio loan from small banks.. is that the route to take for anyone who has more than 10?

Thanks

John Morgan · Answer

@Fred Gonzalo

Once I hit 10 SFR I kept buying. My wife wasn’t happy, but it’s insane how much wealth rentals produce. I use the cash flow to put into my next down payment for the next deal. It’s so much easier to scale up now that I have all this cashflow. I’ve also done 5 cash out refis to pull out equity to buy more rentals. I bought 12 rentals for free basically since they didn’t cost me a penny. I just used the cash from my cash outs to buy them with 20% down payments. Keep going. Don’t stop!

Lane Kawaoka · Answer

@Fred Gonzalo When you're sitting on around 10 properties, it's likely your net worth has cruised past a million bucks. At that juncture, it might just be time to wave goodbye to the whole landlord gig due to the sky-high legal liability and the never-ending headaches. Still, the idea is to milk that leverage while you're still notching up to like three, four, or even five million in net worth because you are still in growth mode.

Trying to juggle individual properties or even those portfolio loans, which by the way, are like Christmas bonuses for lending brokers, it's not exactly the kind of scalable approach you want. Back in 2015, I had a bunch of rental properties - like around 11 most of which were turnkey deals people often chat here - which don't get me wrong are a great way to start investing.

As I became more of an accredited investor, I shifted gears towards more scalable options like syndications and private placements. No need to deal with a pile of 1031 exchanges, the smart play is to stack up those passive activity losses from the syndicated deals and use them to wipe out your gains from selling stuff off.

Back in 2016 and 2017, I let go of seven rentals. Made a cool $200,000 on the sales. Those suspended passive losses that I accumulated the years prior had me covered entirely on the taxes side.

Jake Andronico · Answer

@Fred Gonzalo

Congrats! What a great place to be.

I've been listening to Chad Carson a lot recently, who wrote "The Small and Mighty RE Investor".

Rather than selling, what if you kept your best 5 properties, completely paid them off, and hired PM's?

What would your cash flow look like?

Scaling is great, and that may make sense for you, but just wanted to throw out a different thought :)

Brian Valdivia · Answer

Hey Fred!

DSCR loans are the answer for these.  I personally use them for my own refinances.  They do not have the same restrictions and offer a few other benefits.  Here's a few:

-More than 10 (fannie  / freddie limit)-Close in an LLC or Corporation if desired-These loans won't show up on your personal credit score once they close-Underwriting evaluates the property's income instead of your personal debt to income.

Abbey Humphreys · Answer

Hey Fred- it sounds like you're in a position that every investor wants to build up to. Very nice work. I agree with those in this thread. Holding on to these properties is likely in your best interest and going forward, investing under an LLC and utilizing DSCR loans is the way to go.

Daniel Christopher · Answer

You have a couple options as I see it. Refinance some of these loans into a DSCR loan under an LLC to take them off your credit or proceed to scale with DSCR loans vested under an LLC.

Chad S. · Answer

@Jake Andronico

I have considered that, but I can't bear to pay the capital gains and recapture tax.

Alecia Loveless · Answer

@Fred Gonzalo Keep buying.  Don’t sell them off. You’ve worked this hard you’re just getting started! Either use a portfolio loan, a DSCR loan to keep going or work some now to pay one off and then buy the next one. I think you’re in a great place to be and I’m envious of your position!!!

Im about to close on my next one the 15th and I’ll have 2 paid off and 5 with mortgages. I’m very excited. I found another great opportunity about an hour ago to start researching.

Dylan Speer · Answer

Have you considered exchanging some into DSTs to use up debt while putting some cash into gas and oil mineral rights funds to move some of that cash flow to passive sources?

Erik Estrada · Answer

Hey Fred,

Sounds like a DSCR loan will work out for you. There is no limit as to how many you can take out and you can qualify based on the rents covering the mortgage payment. Taxes/Income Docs are not required to qualify.

You can also do a portfolio loan on these, that can allow for partial release.

10 properties,....now what?

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