Blanket loan for 9 rentals? Or Private money?

Question

I was looking for a first investment and as I was looking around I came across 9 houses that are cash flowing Gross 1.7-2% of their value

They seem to have strong rental histories but I'll be doing due diligence later on. They all look like great deals conservatively looking at 10% vacancy 15% for property management and 10% aside for maintenance I'm looking at a 43% annual return on my money.

Assuming an Ammoritized 30-year loan at 4% which is probably impossible but if I'm looking at a Private money 30-year note at 8%

it becomes a 30%~ annualized return on my initial investment

Honestly, I have no idea what I'm doing other than the numbers and worst-case scenarios, is this a good first investment.
Does anyone have advice on what other creative financing methods I could use to fund my purchase? I feel like I find a new loan product every day.

I'm hoping to leverage the Bigger Pockets community for some advice. :)

Thanks and have a wonderful 2020!

Timothy Brennan · Answer

Hi Peter,

You are absolutely right there are a ton of funding options for you out there. A lot of investors in your position have been using hard money to finance these sort of properties, more specifically a 30 year fix rate DSCR loan. As long as you have a good credit score and these properties have good cash flow you can a descent rate.

Erik W. · Answer

I hate paying interest, especially when there are ways to avoid it.

Bring in a money partner at 0% interest who is interested in a medium term deal and split the profits 50/50. You find and manage the properties. He brings the cash. Add an option into your deal where you buy out your partner in 3-5 years, or whatever you both agree makes the most sense.

Or have the deal "sunset" in 3-5 years and you each get half the properties after you pay off your partner. Half may mean he gets 5 and you get 4, but you get to pick the one you want first. Meanwhile, bank all that interest and save up a huge war chest ready to make your payoff obligation. Worst case, you should be able to get conventional financing because you'll have a large down payment!

Timothy Brennan · Answer

Hi Peter,

By HML I mean hard money lender and yes you could use 1 DSCR blanket loan for multiple properties.

Peter Petwr · Answer

This is more along the lines of what I want, but my time frame is short the owner wants out soon. Where should I advertise for a money partner?

Also don't investors like putting down the least amount of money possible so they get the biggest ROI and continue leveraging their money?

I love the idea and it will lead to less risk by owning them outright , but maybe I don't quite understand it?

Great stuff though thank you so much!!

Peter Petwr · Answer

Wow , those are commercial loans right could I use 1 dscr loan on multiple properties?

I'll look into it thank you!

Blanket loan for 9 rentals? Or Private money?

Blanket loan for 9 rentals? Or Private money?

Most Popular Reply

5 Replies