Dead-end. How can I continue to do deals?

Question

Andrew Johnson · Answer

@Alexis Soto For whatever it's worth, you seemed to be worried about 6 months, don't be.  If you're in this for the long haul you'll have to get used to seasoning periods (for the most part) as well as amount of time it takes to reload your capital for the next down payment.  It's going to take you much longer to go from 4 units -> 10 units than it will to go from 20 units -> 30 units.  At least that's my perspective.  Not to mention, if you're that confident in your $45K purchase -> $130K valuation, sell.  Sell it and take the $80K to invest in a commercial multifamily.  It sounds like that's what you want to do anyway.  Rather than trap yourself in the wrong property just take your $80K profit and buy something that you *want* to buy-and-hold, force appreciation with, etc.

Rick Pozos · Answer

Keep marketing and looking for properties. If you find a great deal in the next 6 months, ask a friend who is an investor to buy the deal. I am sure that they will give you  a few thousand dollars for a great deal. That is called wholesaling. You could also ask friends and family to lend you money for other deals. When you have a network of friends and investors it becomes just making some phone calls.

Rodney Miller · Answer

If your property truly is worth 125k and you only need to borrow 45k that's a low 36% loan to value.  I can't imagine that you can't find a bank or private lender to take that very low-risk loan.  Are you confident in your valuation?

Alexis Soto · Answer

@Jeff Kehl Thank you for your advice. I have answers to about half of your questions. Hah! Managment is in place, as is the accounting aspect. It will take about 2 months to get all the tenants to signup for recurring payments. Most of the updates that are needed for the home are cosmetic and I feel that I can capitalize on the fact that I have tenants in place now, and make improvements to the unit as they start to move out. Rents are below market value at the moment, I am a firm believer in not leaving money on the table. Unfortunately, when I asked them to produce a lease, they were all very quick to show me.

I think your advice has gotten through my thick skull, and I thank you for that. I suppose I can wait another 6 months and collect some cashflow (sigh). So much for moving with momentum.

I still am activley searching for deals everyday. I will continue to do so until I refi out and have the means to purchase more!

Jeff Kehl · Answer

@Alexis Soto I personally agree with the bankers, if this is your first rental property. Focus on it for awhile. Is everything good with it? Are the rents at market level? Is there any deferred maintenance? Do you know the age and condition of all of the major systems? Have you developed a plan for upgrades?

How are you handling it operationally? Managing yourself? If so, are all of your policies and procedures written down and fine-tuned? Is your legal structure set up? Accounting systems? Insurance?

Also spend some time getting to know your market. Do you know the other multi-family owners in the area? Do you know what they charge for rent? How is their occupancy?

I'm personally terrible at the above... When I buy a property I'm immediately looking for the next one and it has hurt me more times than I like to admit.

Also, nothing says that you can't keep looking for a good deal while you are in this period. If you find a good enough one someone will partner with you on it or you can always call 12 more banks. One of them will fund it.

Alexis Soto · Answer

Thanks for all your prompt replies and excellent advice first and foremost.

@Rodney Miller refinancing is not the problem, but actually my main exit strategy. If comps continue to go up, the deal could appraise for more in the next 6 months. I also looked into 'delayed financing'. But in order to free up more capital, I am thinking that the smart play here is to wait. Let me know what you think.

@Andrew Johnson selling the property for a profit of 80k or so is an excellent exit stragedy that I will always keep in my back pocket. However, the cashflow from this property is extremely attractive and I feel I need to 'reload my capital' like you stated.

Dallas Trufyn · Answer

You said 'my capital is tied up'. That's the trap. Whenever possible, always use other peoples money for RE, that way you can keep moving onto other deals. Money is never hard to find if a RE deal is profitable. Hard or private money is what you need to use till you refi. Check out some of the resources on here for BRRRR strategies and there are lots of lenders on here as well. Your numbers seem very good, and that will allow you room for even hard money interest.

Dead-end. How can I continue to do deals?

Most Popular Reply