Creating a lot out of a little

16 Replies

If you are starting out in rentals but would like to double the amount of properties every year, how would you do that?  Me and an investment partner are about to have our first rental. We want to double the amount of rentals we have the following year and have a total of 3 rentals. Our first rental, in the best case scenario will only allow us to buy another property in 3 years. What is your advice? I would love to hear your stories.

Easy.  The "secret sauce" is to memorize this sequence of numbers, 1073741824, and follow the 2 Golden Rules of Real Estate Investing:

Golden Rule #1:  Never, under any circumstances, or rationalization, ever...spend your cash.  You should be using your cash over and over again (the same cash), but never spend it.  Huge difference between the two.

This means you would need to get your cash out of every deal you put it into, ASAP,..with friends (profit and/or cash flow).  As you add to your "friends", you find the next house isn't big enough to hold them all (= you have more available cash than the next house needs).

So, move your cash into one house, and your friends into the other house.  Repeat this over and over, as fast as you can.

This is an example of how "money" (your cash specifically) isn't a noun...it's a verb.  When it becomes a noun...you lose.

@bryan
Cash our refi. It’ll take some leg work, but you’ll be able to find a lender that will write a commercial loan on your first deal and allow you 80% of the ARV (after Reno value).
I’ve used this tactic BRRRR strategy, to turn my first deal into 3 additional in 6 months. Best of luck!

@Joe Villeneuve , I like what you started to say, but it was a bit technical for me. I own one 3 unit property that I refuse to live in, and I'm still renting my current residence. Next year I'd like to purchase a 2 or 3 unit in a much better neighborhood for my primary residence. I can probably scrounge together another 3% down, but there has to be a better, faster way to do this. I'm currently paying $1,800 a month in rent and want that money to go toward my own property.

Can you explain how to "use" cash as opposed to spending it?

He’s essentially talking about the BRRR strategy. For example, buy a distressed property for 50k. Use hard money and say put down 15 percent of that. Then borrow from a private money lender the rehab cost. Let’s say rehab cost 30k. So you’re all in (of your own money) at roughly 7500 plus holding and closing costs so let’s say 15k. You owe 30k and 42500 or 72k and the ARV is 110k. You then refinance at 80 percent of 110k and that gives you 88k, which pays off the loans and give you your money back.

Rinse and repeat. Obviously it’s hard to find deals like this.

First, I'm not talking about the Brrrr strategy.  I don't use it anymore, because it carries too much limiting "baggage".

There are many ways to get your cash back out of a deal...fast. Each strategy that can be used is based on a combination of criterias that are dictated to the REI by their connection, and knowledge, of the 3 Pillars of REI Knowledge (that's what I call them at least). Every REI is different in their financing options (entrance strategies) and Cash Flipping knowledge (exit strategies). Notice I said "cash Flipping". If you're doing it right, and thinking right, you're not focused on you physically getting out of deals. Your focus is on getting your cash out of the deals, hence the terms "cash flipping". I can flip my cash...and still physically be in the deals. That means I can have no more cash in the deal, but I cash still be getting cash out of the deal.

It depends on what your bottleneck is. For most, it's financing, so I would say the BRRRR method along with a stable of private lenders is the best way to achieve such growth.

The biggest problem with the BRRRR method isn't the maximum loan limit you run up against, although that is a problem. It's the timeline, and the limited cash flow increases during that timeline.

Originally posted by @Aaron Cullen :

@Joe Villeneuve you never stated the 2nd Golden Rule...

 Sorry.  What's Golden Rule #2?  Never under any circumstances, for an reason or rationalization, ever...forget Golden Rule #1

@Joe Villeneuve  Hahaha I should have known. Sage advice always ends with the repeating of Rule 1 !!!

Newbie here but my plan is to start out flipping to make my down payments for rentals. I dont know what my ratio is going to be but I am going to want a ratio of rentals to houses. lets say I want 3 rentals:1 flip. In that case I am assuming the profit from the flip will pay for down payments on 3 rentals. Again, these are hypothetical numbers, perhaps that ratio is too conservative or loose.

Originally posted by @Aaron Cullen :

@Joe Villeneuve Hahaha I should have known. Sage advice always ends with the repeating of Rule 1 !!!

 Misunderstanding this rule (or rules) can be a common thing though.  This simply means that you shouldn't leave your cash in deals.  That's where your money goes to die.  Your money needs to stay active, and to move as fast as it can...with friends.  When it stays in a deal, its growth is based on a long time table and a 1 to 1 relationship of use.  That's spending you cash.

When you get it out, while maintaining an interest (and returns) in the property it came out of, and is reinvested in the next deal (put back to work), you are getting exponential use out of the same funds.  When these funds are used more than once, but you only have to pay for them once, that cost per use is reduced per use...and in the end, you never spend any money.  The impact if this compounding effect is staggering.  Einstein referred to it as, "...the greatest invention of the 20th century".  What he said after that was more important.

                                                        "Those that understand it, will live off of those that don't"

Lines of credit, cash-out refis, private money, hard money, sub2, wraps, owner financing, lease options, land contracts, parterships -- there are lots of ways to get into your next deal. Some are better than others.
Originally posted by @Daniel F. Harb :

Hello @Joe Villeneuve...

Of those three books you have written, are they RE related?

Thanks in advance !

 One is

Originally posted by @David Morgan :
Lines of credit, cash-out refis, private money, hard money, sub2, wraps, owner financing, lease options, land contracts, parterships -- there are lots of ways to get into your next deal. Some are better than others.

 Good start to the list.

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