3rd Investment Property

3 Replies

As the description says, I currently have two properties with 2 units each on them. One FHA and one conventional. Renovated both myself and rent them out. House hacking right now, so at the moment I have 3 doors. I am a Realtor and come across deals that easily work. I am also a property manager and not fair market rents in my area well. My challenge now is coming up with the funds for my third property. My strategy is buy and hold. I am looking to do a brrrr for my next one, or a mutlifamily duplex-quad to buy and hold. Not looking to flip. Obviously with bigger pockets being well know now, you hear left and right about hard money lending, and private lenders. How does one make a hard money loan work financially, without the funds for a down payment etc. The skin is in the game, but am far from where I want to be. Is it possible to cash flow while using a hard money lender without brrrr'ing? Since the interest is usually higher and there is a big balloon payment at some point. Just trying to come up with more ideas, because I am at a point where I see and spot deals, but don't have the capital yet to jump on it. Anyone have any advice or experience using other peoples money?

One thing you could do is an equity deal, where you start an LLC with a partner and you jointly own the company. Make sure you have a rock-solid operating agreement. But if you can find someone who has some cash to do that with you, they could fund it and you could find and manage it - and possibly do some rehab as well. They'd be happy to get money for no work, you'd be happy to do the same work you were going to do anyway and be able to close on the deal!

Hard money loans that I've seen often are limited to 6 months, or maybe 12 months. That wouldn't work for a buy and hold, and also it'd kill your cashflow completely.

BRRRR is a great strategy, and if you're lucky and personable and can meet enough different people, you might be able to find someone who'd fund a deal 100% for you on a short-term hard money or private money loan. Then you pay them back after you refi. If you can't find that perfect lender, then you might have to scrape together 10-20% of the purchase price (but not the rehab price). That's inconvenient but better than conventional financing.

If you have equity in either of your other places, you could get a HELOC or refi one of them.

Just a few ideas. I've had similar situations, and I've had good luck with meeting a lot of people at REIAs and anyone else that I might talk to, discussing what I do and sounding like I know what I'm talking about (which is true). Money appears from unexpected places with people who want to diversify their investments. Be likeable and knowledgeable and sociable and you never know who will fund a deal with you!

To avoid needing a downpayment consider finding a very motivated seller who will agree to finance the said downpayment amount as a second lien position loan. Then you need a HML (like us) who will allow a second position.

Of course you are still going to need other funds. But as you say you are OK to have some skin in the game. For instance for any closing costs that cannot be rolled into the loan (e.g. appraisal), for rehabbing until the first draw, for loan carry costs until the property is stabilized (HMLs are not cheap) and of course reserves for a thousand things that might go pear shaped.

Best of luck in your BRRRR empire.

@Gary Janice can you house hack the new purchase? 

if you have some equity in the there 2 properties you own you could possibly use it for HELOC or cross collateralize it with new purchase. 

Try to talk to more local banks, or seek advise from local mortgage broker.