Scaling with Line of Credit
Hey all!
Long story short, I've been using a line of credit ($300k @ 5%) and have completed several flips so far this year. However, taxes & commissions are quickly making me realize that I want to get into BRRRR/buy & hold sooner rather than later (as I had originally intended).
Wondering what opinions would be on how to stack doors as quickly as possible in a sustainable way? I know this will involve getting into multifamily/commercial, but not sure what that looks like when using financed money. I've debated BRRRRing but I'm afraid that stacking 2-4 unit properties won't get me where I want to go quickly enough.
@Brandon Turner & @David Greene inspired me to set a stretch goal of $50 million in holdings by January 2030, so I obviously need to start moving ASAP.
Thanks in advance and looking forward to discussing!
Most Popular Reply
@Sam Burchyett the same way as to fix and flip/scenario. Just on a greater scale perhaps.
Multifamily and Commercial lenders will look at DCR.
To calculate the DSCR, divide the net operating income (NOI) by the commercial mortgage loan payment. The cash flow generated by the property will cover the new commercial loan payment by 1.44 x. Because most lenders will require a minimum DSCR of 1.20x this loan is eligible for competitive financing.
For example, NOI of $500,000 with debt service of $400,000 would equate to a DCR of 1.25-to-1