How to buy more investment properties?

Question

Hello BP family,

I would like to know the best way to move forward. We presently own 6 rental properties (townhomes) and have done fairly well keeping them rented for the past 4 years. Now we would like to buy more units but not really sure how to proceed. we spent all of our capital purchasing the 6 units.

1) we need to purchase a primary home which will cost around  300k

2) we are mortgage free on the 6 units (worth 45k each)

3) we would like to purchase 12+ units (cost per unit 50k)

So my question is what is the best way to accomplish our goal? Should we take mortgages the properties we have now?

I was wondering if we could possibly apply for a $600k and mortgage the rental for the 20% down payment?

Then some how we could take the 600k and purchase additional units. The primary house purchase would be separate from the investment deal. So should we try to work the investment deal prior to purchasing the primary home? or purchase the primary first?

Open to any suggestion

Thanks in advance.

Charlie Miller · Answer

Can you get HELOCs on the town houses that are paid off?  Use this money to cash purchase or for down payment.

Pete T. · Answer

@Ron Climber- are you really going to get better terms from seller financing than what is available at the Bank?  I doubt it, even w/ the fees you mentioned.  Also, when you accept seller financing, arent you defeating the purpose of why you originally bought the property?

Cedrick Gervin · Answer

Thanks for all the wonderful advise, I'm loving this site. Mr. Ron Climer I would like to know why would someone hold the mortgage when they can rent the unit for more? The example you gave was $60k property at 5 % interest with  payment equals $500. In the Atlanta market I'm getting $800 monthly on a 40k investment renting.

I appreciate you sharing you knowledge.

Account Closed · Answer

The best financing is seller financing.  Find a seller that will hold a mortgage.  How do you do that?  When you go look at a property to buy, make your first question be,"What is the price?" .  Let your second question be,"Will you hold a mortgage?"   If the answer to that is NO, unless this is the bargain of the century, keep looking.  Thirty five per cent of the houses in America are owned free and clear.  Why wouldn't the seller want to hold a mortgage?   Read my article right here on BP about why they should.

http://www.biggerpockets.com/blogs/3840/blog_posts/27179-seven-reasons-a-seller-should-hold-a-mortgage   Make it your policy that if the seller won't hold a mortgage and it is not the deal of the century, keep looking.  Once you have this mindset, finding owners that will hold financing is easy.

We all know that the financing is the best part of any real estate deal.  If you are getting your financing at the B A N K , this is like buying retail.  I have another article that you might want to read about owner finance.

http://ronclimer.blogspot.com/2013/04/seven-reasons-why-i-love-owner-financing.html    Did you go read that article?  The first sentence is "Owner finance is easy."  I like easy.  The first sentence of the second paragraph says," you can change the terms later".  Can you do that with institutional financing?  NO

Find an owner that will finance your next house with little or no money down.  That is the best financing there is.

David Krulac · Answer

@Cedrick Gervin

Another alternative after the personal mortgage would be one blanket mortgage on the 18 rental properties.

David Krulac · Answer

@Cedrick Gervin

The first thing that I would do would be to buy the personal residence and finance it to the hilt, like maybe 5% down and 95% financed fixed for 30 years.

The second thing that I would do is to try and line up financing for the 12 unit purchase. (fixed rate 30 years also if possible)

And lastly and only if you re-fi the 6 T-Hs.  It has been my experience that the appraisals for re-fis are how shall we say it less generous than arms lenght purchase transactions.  Perhaps that is not the same experience as others.

Matt Devincenzo · Answer

Remember this is only for Fannie/Freddie loans, and they allow up to 10 the first 4 are just easier and can be cash out refinances. So you can still get as many loans as you would need, you just would have to use commercial/portfolio loans at some point.

One possible way of doing this would be to talk to a local bank/CU about a "blanket loan". That would be a loan against several properties. So you could set it up initially with your 6 rentals and use the cash to purchase and get several more rented. Then either just keep just the 6 mortgaged and the other cash purchases, or roll them into the blanket loan to continue buying more until you reach your goal/comfort level.

How to buy more investment properties?

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