How do you scale your business so quick?
Boston, MA · Member since 2014 · 48 posts · 6 votes
How do you scale your business so quick?
Most Popular Reply
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
12yI've purchased 3 new rentals in the last month as well as several retail flips and a few wholesale properties. For me, it was a matter of discovering what is the one thing that makes me the most money in my business. I focus on that and outsource or put off everything else. Just do that one thing that brings the paydays and forget the rest. Being busy and working hard doesn't mean you're making any progress toward your goals.
106 Replies
- Investor · Atlanta, GA · Member since 2014 · 40 posts · 18 votes11y
I've read this thread several times to determine if your strategy is viable in my regional market, but I keep getting stuck on the cash flow. I understand if you are able to find a seller who owns a property free & clear, the strategy works for both parties. The seller gets regular income now via interest payments and you via standard cash flow (Gross rents - (PITI + expenses)). But, if the seller already has a mortgage, he'll have to negotiate a purchase price and/interest that allows for the finance payments to not only cover the current mortgage payments, but also leave some profit in his/her pocket. How can you still cash flow enough to justify the work required to manage the property? Do you have a $ per door criteria?
Also, when you find your properties from your direct mail, I assume you handle all the paperwork as a realtor isn't involved.
Hmm, I wonder if it would make sense to find a investor-savvy realtor to help locate potential properties, even if it increases the cash out of pocket to acquire the property?
Anyway, I'm really fascinated by this strategy and think if done correctly, you scale pretty quickly in a larger metro area.
Thanks for all the great detail you've provided.
- Gabriola, BC · Member since 2015 · 29 posts · 7 votes11y
Business and investment both needs money both needs time ,both will give you success.But for this you have to think smartly.Take your time before investing,take suggestion check out the market value.Plan the whole strategies like a game.Don't open your card search everything about the thing where you want to invest .Then come with big card and take the game off from everyone like a champion.
- Qualicum Beach, BC · Member since 2015 · 18 posts · 4 votes11y
If you go so quick and take shortcut will give you money but for short time period.Take baby steps leads you to climbs the mountain of success.The key is to choose whatever you choose confidently have faith upon you and take quick decision.
- Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes11yBrandon Hicks You seem to be focused more on MF units. I would guess this tactic would put you in contact with the burnt out investor willing to consider the land contract with owner financing option. Short of this, and possibly networking at a REIA, how do you zero in on investor owners? As you mentioned, trying to do this with a residential owner would be a super long shot, and REO's and foreclosures a non starter. Thanks.
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
"how do you zero in on investor owners?"
They're one in the same. People who own multi's are investors.....in most cases anyway. But, yeah, focusing on MF's is going to have you dealing with owners who are already used to getting a check every month and therefore be more open in general to seller financing.
You can get a mailing list of MF properties in your area or make your own by searching property records sites.
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
Most of the properties I have purchased I purchased when I had a full-time job. I didn't pay myself anything from my cash flow so the cash flow only served the purpose to continue the snow ball of growth. Most of my deals were rented under-market when I picked them up so I was able to raise rents on turnovers and so on. But overall, my early strategy was to just grow. To pick up some decent quality properties with an eye to future when I'd have more equity and be able to increase cash flow by refinancing the lower debt into permanent bank financing at better terms. What you say is inline with the way it plays out. When the seller has underlying debt you have to wrap it in a way that makes sense for the seller. When they own it free and clear you can get better terms. I basically looked at a deal and if the numbers worked to where it would cover itself and be a good long-term property I went for it. I even did a couple of duplexes on 12 year amortizations with a 5 year balloon at 5% interest knowing that they wouldn't cash flow but I'd force the pay down to be able to refi them sooner. Which I did at 16 months into the deal.
It's not a strategy for everyone...but it's worked so far for this broke guy ;)
25 of my 42 units are in a town with a pop of around 10k. In a large metro area I really believe I could hit 100 units inside of 12-18 months using my structure.
Feel free to message me some example deals in your area. Good Luck
- Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes11yBrandon Hicks I like this method as it keeps your money in your pocket, and with virtually no money in it your ROI is virtually infinite, but I worry about having reserves for all the units you are adding so quickly. Obviously you can keep your cash on hand for reserves. What kind of cash flow per door with owner financing are you targeting. It seems like it would be low financing almost 100% LTV and at terms favorable enough to get sellers to go with financing the sale. I know you said you tend to buy solid units, but HVAC, roofs etc. can go out. Have you been put in a squeeze yet using your method, Thanks. Tony
- Investor · Century, FL · Member since 2015 · 950 posts · 603 votes11y
Originally posted by @Stephen Collins:
How do the pros acquire so many properties in such a short amount of time? I listen to the BP podcasts and the guests are always talking about growing 5-10+ units a year. I bought my first house in 2013, and am looking for an investment property in the ATL area. I am worried though that after I finance this second property I will have such a high debt/income ratio that I’ll be stuck paying cash for any additional units, and that I may no longer have cash on hand due to any rehabs. How do you guys grow so quickly?
Lots and lots of outside income.
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
@Tony Gunter
Have I been in a squeeze? Absolutely.
My 1st day after quitting my $14/hr job last June I had a main supply water line break. Total cost to repair was just over $4k. The last few months I've spent all the money I should've been setting back for property taxes on rehabbing my new 12 unit. I'll pay the ones I currently have on land contracts but Ill be playing catch-up on the property taxes for the ones I have with bank financing the rest of the year. I can get a better return "borrowing" the county's money to improve the value and boost rents on my 12 unit than what the penalties cost. I'll have to push my painting business to cover my pay the next few months.
You know what though? Lots of people DONT take risks and still live pay check to paycheck. My current portfolio will provide me with a $15k a month or more income in 20 years. You know wasn't going to do that for me? Every job Ive ever had :)
(Don't misread this as me come across as rude....)
- Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes11y
Fantastic post. At the end of the day it's all about finding the yes. Making it work and doing the deal. How did you put together your boilerplate LC? Would love to read it!
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
Have I been put in a squeeze?
Absolutely! My very 1st Monday after quitting my $14/hr job last spring I had a main water supply line burst at a duplex. All-in it was a $4k bad day. Currently I've spent the last 2 months blowing through most of the cash set aside for spring taxes rehabbing a few units in my new 12 plex. I can get a better return "borrowing" money from the county though added value and increased rents than the penalties cost. I'll pay all the land contract deal taxes but the ill be playing catch up on the ones already financed through the bank. No biggie. I'll just have to push my painting business the next 3-5 months so I don't have to pay myself cash from the rentals.
Here's the thing.....lots of people don't take risk and live paycheck to paycheck. My current portfolio will give me a $15k a month or more income in 20 years. You know what didn't offer me that? Every job ive ever had ;)
- Investor · Jacksonville, FL · Member since 2014 · 186 posts · 34 votes11y
@Brandon Hicks
Thanks for the post - I am in the process of learning how to start to really scale up so that I can hit my 10yr goals. I really appreciate the insight and the detail.
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
I have my attorney draft EVERY land contract I close. Sure I could take one from a previous deal and modify it myself, but how excited will my attorney be if I come to him for help on a deal that is going bad that I closed with HIS document?
It's worth paying him to keep him happily in my corner :)
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
"Lots and lots of outside income"
You must have missed where I stated I went from 4-28 units in 3 years while making $14/hr and me and my wife spending everything we could make and borrow on recovery a sick child.
Real estate is FREE. Get creative.
- Investor · Encino, CA · Member since 2011 · 30 posts · 6 votes11y
Hi All,
Great thread and the creativity is terrific. I believe in creating cash thru flipping and larger deals so that when I need cash for a deal, I have the reserves to fund it. If it is a larger deal than I can take down myself, I bring in partners or flip the deal. Cash is always a important part of the story. Assets are great on your balance sheet, however, they won't take you to the next level. Watch your leverage, too.
- Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes11yBrandon Hicks I respect you dude. You've got b@lls and an inspirational attitude about how to get ahead in this game. These tools will definitely be in my tool belt.
- Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes11y
It took me almost 3 years to buy 3 properties, and it was a slow process as I had to save up for each down payment. Two things really contributed to my growth, one was a fix and hold with a 6 figure equity gain, and the other was getting into commercial financing. My DTI is no longer a consideration but my track record and the performance of the property are what is looked at
Second City Real Estate4.821 Reviews - Investor · Century, FL · Member since 2015 · 950 posts · 603 votes11y
Originally posted by @Brandon Hicks:
"Lots and lots of outside income"
You must have missed where I stated I went from 4-28 units in 3 years while making $14/hr and me and my wife spending everything we could make and borrow on recovery a sick child.
Real estate is FREE. Get creative.
And how much debt are you holding at the moment?
- Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes11y
"And how much debt are you holding at the moment?"
That question shows me that you understand that you do not need lots of outside income.
I finance my deals 100% because I have no cash.
- Investor · Century, FL · Member since 2015 · 950 posts · 603 votes11y
Originally posted by @Brandon Hicks:
"And how much debt are you holding at the moment?"
That question shows me that you understand that you do not need lots of outside income.
I finance my deals 100% because I have no cash.
I wish you well.
When this economy stutters, you are in for a lot of sleepless nights.
- Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes11y
Originally posted by @Stephen Collins:
How do the pros acquire so many properties in such a short amount of time? I listen to the BP podcasts and the guests are always talking about growing 5-10+ units a year. I bought my first house in 2013, and am looking for an investment property in the ATL area. I am worried though that after I finance this second property I will have such a high debt/income ratio that I’ll be stuck paying cash for any additional units, and that I may no longer have cash on hand due to any rehabs. How do you guys grow so quickly?
Thank you, all advice is appreciated!
-Stephen C.
Hi Stephen,
I was in the same boat as you. I was worried about debt/income ratio, when someone mentioned commercial financing to me. There are lenders out there that will do a commercial loan, but for residential properties. It may take some leg work to find them though. For example, my lender that I most recently dealt with would do a 20 year fixed, 4.6% loan with 25% down, plus 6 months worth of reserves. That meant when I bought a $40k house, I'd need roughly $12,000 cash to buy it (10k for down payment, plus 194 per month x 6)
Hope that helps you out!
Travis
- Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes11y
Originally posted by @Brandon Hicks:
@Tony Gunter
Have I been in a squeeze? Absolutely.
My 1st day after quitting my $14/hr job last June I had a main supply water line break. Total cost to repair was just over $4k. The last few months I've spent all the money I should've been setting back for property taxes on rehabbing my new 12 unit. I'll pay the ones I currently have on land contracts but Ill be playing catch-up on the property taxes for the ones I have with bank financing the rest of the year. I can get a better return "borrowing" the county's money to improve the value and boost rents on my 12 unit than what the penalties cost. I'll have to push my painting business to cover my pay the next few months.
You know what though? Lots of people DONT take risks and still live pay check to paycheck. My current portfolio will provide me with a $15k a month or more income in 20 years. You know wasn't going to do that for me? Every job Ive ever had :)
(Don't misread this as me come across as rude....)
Love the mentality you have!
Reminds me of a sign I saw somewhere about being an entrepreneur: Entrepreneurship is living a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t.”
Sounds EXACTLY how I think. I've gotten a lot of people telling me I'll fail, I don't know what I'm doing, or how because someone else in our circle of families tried it and failed, that means I'll fail too.
Those will be the first people I visit when I retire at the age of 50, and they've got 20 years to go.
- Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes11y
Originally posted by @James DeRoest:
Originally posted by @Brandon Hicks:
"And how much debt are you holding at the moment?"
That question shows me that you understand that you do not need lots of outside income.
I finance my deals 100% because I have no cash.
I wish you well.
When this economy stutters, you are in for a lot of sleepless nights.
Question, if the economy stutters, how will he be in for sleepless nights? The only one I can think of is if he can't make the balloon payment because he was unable to obtain financing at the time. Renegotiate and get financing a year down the road.
- Boston, MA · Member since 2014 · 48 posts · 6 votes11y
Thanks for the info! I close on my second SFR on the 27th of this month. I ended up doing 5% down conventional, and also had to show the 6 months reserves. I am planning to get as many units as I can with conventional loans, let them build equity, and then sell for seed money for newer/larger projects. Is there a general rule of thumb for debt to income when the banks will stop lending?
This new house should cash flow about $100 a month based on my analysis. It was valued at 115k, and I got it for 95k as foreclosure. Its move in ready after a good cleaning, and maybe some new paint over all the vibrant colors (unless you love "Auburn Orange").
- Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes11y
Originally posted by @Stephen Collins:
Thanks for the info! I close on my second SFR on the 27th of this month. I ended up doing 5% down conventional, and also had to show the 6 months reserves. I am planning to get as many units as I can with conventional loans, let them build equity, and then sell for seed money for newer/larger projects. Is there a general rule of thumb for debt to income when the banks will stop lending?
This new house should cash flow about $100 a month based on my analysis. It was valued at 115k, and I got it for 95k as foreclosure. Its move in ready after a good cleaning, and maybe some new paint over all the vibrant colors (unless you love "Auburn Orange").
You bet! It varies from lender to lender, but generally speaking, I believe it's 40% debt to income ratio. Someone correct me if I'm wrong.
How much did you put into the house out of curiosity? Down payment, closing, etc. I'm just curious about your rate of return.
Also, I would suggest commercial if you can. A bank is going to want to see your debt to income be low once you make your first commercial loan, and you don't want to be in a position where you're totally tapped out. I'd suggest also setting up an LLC for your commercial loans to protect you from lawsuits, etc. and put those rentals under that LLC.
The advantages of a commercial loan is that they don't count that against your debt to income ratio, as they only care about the cash flow of the "business", meaning the house that you buy. Thus, you can buy as many as you'd like as long as you have the requisite down payment and reserves. At least, that's the way it is with my lender.
Good for you on pulling the trigger on the deal though! It's a very scary thing to do, and I wish I had started YEARS ago. Had I done that, I would be retired now. (I'm 40). If you have any other questions, feel free to ask!
Travis
Join the conversationCreate a free account to reply, vote on answers and follow this thread.