Buying another one after the initial rental.

7 Replies

My wife and I saved enough money to put a down payment on our first rental. We are currently remodeling it as of this writing. My question is this, So we saved money, bought our first rental but have no money to buy another rental until we save up enough money again(12 months roughly). So how do folks scale so quickly? At this rate it will take us years to build a sizable portfolio and I will be 47 this year. I have read much about finding others with capital but when you do that but have no money to invest with the other person investing, what would you really be adding to the investment?

@Todd Ayers

If you follow the BRRRR method you can use other people's money to scale. Just don't try to scale to quickly. I see your rehabbing the property you just bought. So you understand the rehab component. Meet people on BP, attend meetups, attend REIA (real estate investor association) meetings to network and find OPM. You have one rental under your belt so your not a total novice. Actually buying one a year is a good plan. Eventually as the cash flow increases from your properties you will be able to buy two in one year. By 55 you could have 10-15 properties. It's a slow process. OPM can speed up the process. I have been able to work with investors who will fund the entire project. The money is not cheap 10-12%, but it allows you to scale.

@Todd Ayers you would be the one finding the deal and putting it all together. The money person is just that. All they have to do is pull the trigger on getting you the money (although rarely will that be the case).

In my experience so far, anyone who is putting their money at risk is going to be doing some due diligence of their own. This is especially true when you are first beginning to work with someone and they don't know you.

It sounds like you have a full time job outside of trying to invest in real estate. Let me be the first to congratulate you on breaking into REI though. Who cares if you are 47! If you just bought one solid cash flowing property over the next 15 years you would be positioned for a pretty decent retirement and not have to worry too much about money coming in.

As for the specific property that you are doing right now, if you are doing a rehab on it, you must be improving it's value no?

If you are improving it's value, then that means that you are going to have equity in it. What you could do, if the numbers make sense, is pull out some equity from it and use it towards another property. This is how a lot of investors are able to speed up their investment opportunities. We like to call this velocity of your money.

I would love to hear what you are thinking about all of this.

@Nathaniel Hovsepian we are improving the value. We purchased the house for $70,000 and it appraised for $76,000. We put the standard 20% down and after the rehab it should be worth roughly $90,000. I live in a small town of only about 13,000 in the city and roughly 33,000 in the entire county, but the market is rougly 42% rentals here. Which is nice. they dont sit empty for long. We just purchased in January so I will give it a couple of months and see about the cash out refinancing option.

In the process of finishing my first town home end unit myself, my plan is to do section 8 and refinance and see what equity i can pull out of it to get my next.Will be all in at 95k on the high side ARV with comps 150k. Realistically I'm thinking it probably wont sell higher than 130k, so that don't leave a whole lot equity to get out of it so i may not end up picking up another unit this year but I'm still working on it. The year is still young lol

@Todd Ayers Oh I see. Those numbers don't leave you much room for being able to take anything out with a refi, but that's totally ok. 

Like I said originally, you might just go about this process slowly and acquire a bunch of properties over time.