Boston, MA · Member since 2014 · 48 posts · 6 votes
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?
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
12y
I'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.
"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.
Because when the economy stutters, your tenants will disappear in a heartbeat, your vacancies will go through the roof, and all of a sudden your income doesn't quite meet your financial obligations.
This is exactly what happened a few years ago.
But as I've made very clear, far be it from me to talk to sense to you people who finance everything, I made a ton of money buying distressed property sales last time round - I'll make a ton of money next you all go broke.
It's almost unsettling that so many people today are not learning what broke investors only 5-6-7 years ago. How short memories are.
"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.
Because when the economy stutters, your tenants will disappear in a heartbeat, your vacancies will go through the roof, and all of a sudden your income doesn't quite meet your financial obligations.
This is exactly what happened a few years ago.
But as I've made very clear, far be it from me to talk to sense to you people who finance everything, I made a ton of money buying distressed property sales last time round - I'll make a ton of money next you all go broke.
It's almost unsettling that so many people today are not learning what broke investors only 5-6-7 years ago. How short memories are.
I thought the issue from the housing implosion was people buying things they clearly couldn't afford, not tenants leaving rentals. If you get your number correct in terms of rents, purchase price, etc, you can easily ride out any vacancies.
But then again, it sounds like you're more of a buy and flip kind of person, while I'm a buy and hold, yes? If that's the case, then it's just a matter of different strategies. But, let's not forget, flippers lost a ton of cash as well. But we shall see. :)
Investor · Century, FL · Member since 2015 · 950 posts · 603 votes
11y
Originally posted by @Account Closed:
I thought the issue from the housing implosion was people buying things they clearly couldn't afford, not tenants leaving rentals. If you get your number correct in terms of rents, purchase price, etc, you can easily ride out any vacancies.
But then again, it sounds like you're more of a buy and flip kind of person, while I'm a buy and hold, yes? If that's the case, then it's just a matter of different strategies. But, let's not forget, flippers lost a ton of cash as well. But we shall see. :)
Travis
And why do you think they couldn't afford the houses? When your income stream (eg tenants) dries up, you are left servicing the debt on your own, and this is where it goes horribly wrong. And this is where it went horribly wrong for a lot of people only a few years ago.
As for me flipping? Haven't flipped a single house. I sold a duplex once as it was cursed.
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
11y
I currently have 25 units on land contract and will be refinancing them all into 2 or 3 commercial loans in around 2.5 years. Once that round of financing is complete I'll be sitting pretty good cash flow wise. That along with the fact that this 12 unit will be fully rehabbed and rented at the new higher rates. I already have 17 units financed with my bank.
If something happens prior to then, Im fairly certain I could get my sellers and probably even my bank to do some interest-only while I recovered. That's the benefit of not borrowing from national lenders and having loans chopped up and sold in pools.
Bottom line, in my opinion, is that I was taking more of a risk for my future when I was just droning my life away in a factory. At least now I have a shot at making $15k or more a month one day.
It's not for everyone....but it's working so far and I have no issues with having to work harder so that I can cover my living expenses from other sources rather than rape my portfolio for a few more years.
I thought the issue from the housing implosion was people buying things they clearly couldn't afford, not tenants leaving rentals. If you get your number correct in terms of rents, purchase price, etc, you can easily ride out any vacancies.
But then again, it sounds like you're more of a buy and flip kind of person, while I'm a buy and hold, yes? If that's the case, then it's just a matter of different strategies. But, let's not forget, flippers lost a ton of cash as well. But we shall see. :)
Travis
And why do you think they couldn't afford the houses? When your income stream (eg tenants) dries up, you are left servicing the debt on your own, and this is where it goes horribly wrong. And this is where it went horribly wrong for a lot of people only a few years ago.
As for me flipping? Haven't flipped a single house. I sold a duplex once as it was cursed.
I bet if it was cursed, you could call some hippie kids with a van and a dog. They could solve your mystery! :)
I thought the issue from the housing implosion was people buying things they clearly couldn't afford, not tenants leaving rentals. If you get your number correct in terms of rents, purchase price, etc, you can easily ride out any vacancies.
But then again, it sounds like you're more of a buy and flip kind of person, while I'm a buy and hold, yes? If that's the case, then it's just a matter of different strategies. But, let's not forget, flippers lost a ton of cash as well. But we shall see. :)
Travis
And why do you think they couldn't afford the houses? When your income stream (eg tenants) dries up, you are left servicing the debt on your own, and this is where it goes horribly wrong. And this is where it went horribly wrong for a lot of people only a few years ago.
As for me flipping? Haven't flipped a single house. I sold a duplex once as it was cursed.
I bet if it was cursed, you could call some hippie kids with a van and a dog. They could solve your mystery! :)
Almost sure it was built on Indian burial ground! Thing wouldn't even close right when I was trying to get shot of it.
This has been a great thread in general, but thank you Brandon for the effort put into describing and exemplifying your methods. Very thought provoking, and I love your mindset. Keep on rollin'
Lol, seriously, thanks to the OP for your questions. There's a wealth of information here for newbies like myself. And again I'm reminded why I HAVE to log in to BP daily.
Baltimore, MD · Member since 2016 · 75 posts · 11 votes
10y
Question: When doing a land contract, do you get an agent to represent you or oyu do all of th epaperwork yourself? Do you also employ the services of an Atorney? I am doing some reseach on land contracts and it sounds like a good idea. I have few other questions too, but I will start with these two.
I'm an ex-realtor so I know how to order title work. I buy off a letter of intent basically. I write that up myself and then once accepted it goes to the title company and my attorney. The attorney drafts the land contract, memorandum of contract and sales disclosure. The TC handles the closing. Costs me $770
Investor · Janesville, WI · Member since 2013 · 180 posts · 155 votes
10y
I was just pointed to this post though it does look to be a few years old. I think the Land Contract is a great strategy for people looking to grow quickly with little money or credit. For others who have a full time job and good credit I think the BRRR method works wonders. I've went from 0-50 units in just under 3 years using this approach. I market for motivated sellers using direct mail, negotiate contracts 70%-80% of the market value minus expenses (which aren't even crazy killer deals), then borrow money for lines of credit to pay all cash for the properties, fix them up, rent them out and then go to a bank to refinance the property and pull 100% of my initial capital back out (Banks will lend on 80% of appraised values). I'm able to turn a house in about 2 months and can sustain buying several houses a month this way. I've never flipped a house, nor done a land contract and have successfully done this BRRRR strategy on 32 properties. I really think it is an amazing way to go if you have the credit and income to support a refinance on a property. I'm able to get sub 4.5% loans and 5/1 ARM's amortized for 20 years. The key is finding a bank that is willing to refinance based on the appraisal and not the purchase price. Note this works best in areas where you can buy rentals at the 2%+ rule as banks will need to see a minimum debt to coverage ratio of 1.2. I could post actual purchase/rent price examples but the area I do this in is really an exception to most parts in the US.
Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
10y
Chris Heeren
Do you have a lender who will refinance for you based on appraisal as soon as rehab is complete? In other words, no seasoning is required.
Investor · Janesville, WI · Member since 2013 · 180 posts · 155 votes
10y
I've found many local banks that will do a refinance immediately after I purchase the property for 80% of the appraisal. The bank I'm currently working with will actually do 80% of the appraisal upfront on the initial purchase of the property. Meaning if I buy a house for $32,000 and it appraises at $40K, the bank will full fund the purchase price at closing. We just started doing these deals about a month ago and hopefully will allow us to really pick up the pace in growing to 100 units!
Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
10y
@Chris Heeren are you doing these deals local to you in WI? Are you in C-B neighborhoods? When you say lines of credit does that include no interest credit cards? I'm gong to be implementing brrrr and I'll be using a combo of HELOC and I was thinking hard money loan but if I can use a no interest credit card or maybe a personal line of credit I was thinking it would be a lot cheaper than going the hard money route. Thoughts?
Investor · Janesville, WI · Member since 2013 · 180 posts · 155 votes
10y
I only have bought properties in WI and they are all in C class neighborhoods. I have a couple $10K unsecured lines of credit at 5% and a HELOC through a bank, I also have a free cash advance $15K credit card that is at 8% which I have bought houses with before. If you have a no interest credit card, you most likely may not have a cash advance option - if so, I would be using that all day long. I also have a couple private loans through family and also a 401K loan from myself. I basically try finding any means necessary that allows me to borrow money cheaply and then flip the houses to myself.
Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
10y
That's awesome, thanks for sharing! I'm going to have to research the cash advance option on a cc more. I like the idea of using a combo of no or low interest lines of credit vs using a HML. I worry about refinancing though with a bunch of lines with high balances.
I've found many local banks that will do a refinance immediately after I purchase the property for 80% of the appraisal. The bank I'm currently working with will actually do 80% of the appraisal upfront on the initial purchase of the property. Meaning if I buy a house for $32,000 and it appraises at $40K, the bank will full fund the purchase price at closing. We just started doing these deals about a month ago and hopefully will allow us to really pick up the pace in growing to 100 units!
Would you say that using the above approach, you can almost not do the second "R" in the BRRRR strategy? e.g., if you purchase a property for 20% below anticipated appraised value (32K instead of 40K) you have already locked in equity of 8K (20%), and forcing additional equity gains through a rehab may be necessary for a cash-out refinance. Is this correct? Thanks
Investor · Janesville, WI · Member since 2013 · 180 posts · 155 votes
10y
The rehab is definitely necessary as most the properties I pick up aren't rentable in their current condition. My strategy is if it's very minor repairs I'll close with a bank up front and essentially skip the 'rehab' portion. If the property is going to require more than $7k-$10K of work then I'll pay all cash and get the appraisal done after the repairs are made and refinance the cash back out.
Investor · Winter Garden , FL · Member since 2014 · 72 posts · 27 votes
9y
Great thread! Question: who cares how many units you have? Its all about cash flow! I'd much rather have 20 units cash flowing $500/unit than 100 units at $100/unit.
Its great people focus on units but business are valued on revenue (cash flow) and that is what pays the bills, not the number of units. Just my .02
Depends on the market I guess. Having a 100 SFR's in a good market for a 30 year period will make you far wealthier than 20. And long term wealth is a big reason why we hold assets.
Depends on the market I guess. Having a 100 SFR's in a good market for a 30 year period will make you far wealthier than 20. And long term wealth is a big reason why we hold assets.
Would love to hear current status and how far you’ve progressed? And how as well.
I hit 63 units in mid-2016, bought one house in January 2017 to make it 64. Sold that house to a friend to help get him started in January 2018. I’ve not bought anything since then. I’m currently focusing on paying debt down while the market is high.
I was able to do a big refi where I combined 8 land contracts (26 total units) into one new bank loan last summer. So I’m down to just a few remaining land contracts.
Im to the point where I really don’t want anything else that I have to manage myself so I believe my next move will be syndication. To help with that transition, im attending @Ben Leybovich’s Arizona syndication workshop in January.