I am interested in the stacking method, where do I start?

16 Replies

I have been listening to podcast, reading books, researching tax liens, deeds, notes and everything about real estate. I feel that a MFH will be the best start. I want to eliminate my rent expense, by living in one of the units. My goal is the stack method using BRRRR. What is the best way to get started? I own a LLC, which allowed me to write off a lot of my expenses can I still get a mortgage loan, I was told no.

@Erica Hatfield If you are BRRRRing then you would most likely use hard or private money to get started then refinance and reinvest in the next property. First property you would need some money for down payment unless the hard or private lender will do a 100% loan. After that you would not have to use hard money anymore. I am guessing that is what you mean by stacking. There are plenty of finance companies that lend to LLC'S on rental properties.

@Chuck Klinger I guess what I am trying to say is my LLC is not showing enough profit. My W2 income is low due to the LLC expenses I wrote off. While I wait to file taxes and show a better income; I am seeking other ways of financing. I am attending a scavenger tax sale to speak to private investors and I am trying to figure what other options are available.

@Erica Hatfield Conventional loans are based on the borrower's income levels (for the purpose of a primary residence).   Commercial loans are based on the cash flow (and more importantly debt to income ratio) of the property.  I understand you wish to live in it, but I would consider approaching the deal as a rental first.  Once you close on the commercial mortgage, you could "live" in one of the units while you are trying to rent it out (which might be indefinite).

This could be a creative workout around your low W2 income. 

If you are in Chicago there should be a bunch of different real estate "meet-ups" that you could attend or even set up yourself to begin networking with private money lenders. Chicago is a good financial hub and I am sure you should be able to meet the right people soon enough. With traditional stacking, you can either start with a single-family and rent the other rooms out or begin with a duplex and rent the other side - you could keep both options open so you can get started sooner rather than later. 

Originally posted by @Bryan Devitt :

@Bruce Arellano if you want to BRRR it then you do private money so you can mortgage it the second it is rented. Otherwise you need to let the loan season (usually 6 months) before you can remortgage it

I am also new to real estate investing and am hoping to get my first deal within the next year. I would like to use the BRRR method so that I can continue to buy more properties, but I am a bit confused by all of it. So you would recommend doing private money for the first deal and once it is rented, to refinance the property, repay the private money lender and use the remaining amount to put a down payment on the 2nd property? Am I understanding that right?

Originally posted by @Bruce Arellano :

So when BRRRRing, it doesn’t  necessarily   “have” to be private/hard/personal money? 

No, it isn't a requirement, it is just one of the quickest ways. It is going to be difficult to get a conventional loan for something so cheap that you can fix and BRRR it because you'll be competing against cash buyers and sellers are more inclined to take less money for a guaranteed sale over someone who might not close the loan in the end

Originally posted by @Jane Wish :
Originally posted by @Bryan Devitt:

@Bruce Arellano if you want to BRRR it then you do private money so you can mortgage it the second it is rented. Otherwise you need to let the loan season (usually 6 months) before you can remortgage it

I am also new to real estate investing and am hoping to get my first deal within the next year. I would like to use the BRRR method so that I can continue to buy more properties, but I am a bit confused by all of it. So you would recommend doing private money for the first deal and once it is rented, to refinance the property, repay the private money lender and use the remaining amount to put a down payment on the 2nd property? Am I understanding that right?

Read my post above this one and then search these forums for BRRR or better yet, buy the book off this site that is all about BRRR. If you're serious about this path it is a cheap investment into your future earnings

@Bruce Arellano because most likely a conventional lender will not lend on a property that needs a lot of renovation. You can also get your initial funding from your 401K or equity loan from your own home if it has equity. Once it is rehabed and rented then you can out refinance. You would then have cash to purchase your next property.