We just bought a 3plex! How should we pull money out to buy another?, and when??!

Investor · Portland, ME · Member since 2017 · 2 posts · 1 vote

Hi BP friends,

My wife and I just bought a 3plex (woohoo!). We are happily bringing in about $700/door and are super happy with being first time landlords. We're mostly curious about what to do next... We want to get to 10+ doors in the next 3 years and we're kind lost on how we should be thinking about pulling money out of the property (HELOC, cash out refi, etc) and how to use it in the most beneficial way in buying more properties.

If anyone has experience in doing this and is open to teaching us different methods, we would love to meet you!

Cheers,

Jack and Ciara

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Brittany MinocchiBusiness Member

Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes

When you say you just bought it - how long ago? Did you use financing? Was it already turn-key or did it need or be rehabbed?

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
3y
Do you have sufficient equity to be able to pull anything out?

If you got a 75% LTV loan to buy the property, it would be near impossible for you pull any additional equity out. You need to either wait for market appreciation or do something to the property that increases its value. Then you can think about how to pull equity out.
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Brittany MinocchiBusiness Member
Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
3y
When you say you just bought it - how long ago? Did you use financing? Was it already turn-key or did it need or be rehabbed?
[email protected]330-354-6590
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Steffen Cushing
Lender · Franklin, TN · Member since 2022 · 33 posts · 8 votes
3y
do you own the home free and clear? or is there a loan on it currently? also how long have you owned it
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Jack LawsonPro Member
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Investor · Portland, ME · Member since 2017 · 2 posts · 1 vote
3y
We just bought it in June. We have a loan on it but it did assess for $50k over what we paid after we bought it. We haven't done any significant work as it was pretty much turn key. I know we are going to have to sit on it for a while but I am hoping we can start pulling in more units soon. I'd love to have a few 1:1 conversations with anyone that has gone through this.
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Dan Thomas
Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes
3y
@Jack Lawson
Are you living in one of the units? If it is a straight rental a HELOC will be tough right now. The only bank that I know of that will do them right now will only do 65 or 70% ltv. More options if you are living in one of the units....
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Dan N.
Member since 2019 · 119 posts · 60 votes
3y
Quote from@Jack Lawson:

We just bought it in June. We have a loan on it but it did assess for $50k over what we paid after we bought it. We haven't done any significant work as it was pretty much turn key. I know we are going to have to sit on it for a while but I am hoping we can start pulling in more units soon. I'd love to have a few 1:1 conversations with anyone that has gone through this.

Hi Jack,

Extremely interested in knowing were you were able to get a turnkey triplex with a loan that is cashflowing so nicely?! In addition to the city, are you able to share the neighborhood class it is in? Really appreciate it.
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Steffen Cushing
Lender · Franklin, TN · Member since 2022 · 33 posts · 8 votes
3y
Quote from @Jack Lawson:

We just bought it in June. We have a loan on it but it did assess for $50k over what we paid after we bought it. We haven't done any significant work as it was pretty much turn key. I know we are going to have to sit on it for a while but I am hoping we can start pulling in more units soon. I'd love to have a few 1:1 conversations with anyone that has gone through this.

in terms of cash out refinance, you'll have to wait a bit for traditional financing "conv loan". not sure if you are occupying one of the units, but if you have good equity position you could look at a HELOC.
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Zachary Ware
Member since 2022 · 405 posts · 455 votes
3y
Quote from @Dan N.:

Quote from@Jack Lawson:

We just bought it in June. We have a loan on it but it did assess for $50k over what we paid after we bought it. We haven't done any significant work as it was pretty much turn key. I know we are going to have to sit on it for a while but I am hoping we can start pulling in more units soon. I'd love to have a few 1:1 conversations with anyone that has gone through this.

Hi Jack,

Extremely interested in knowing were you were able to get a turnkey triplex with a loan that is cashflowing so nicely?! In addition to the city, are you able to share the neighborhood class it is in? Really appreciate it.

This was my first thought. Would also appreciate if you can share this information and possibly how you bought under-market if you did so.
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Devin PetersonBusiness Member
Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 665 votes
3y
Quote from @Jack Lawson:

Hi BP friends,
My wife and I just bought a 3plex (woohoo!). We are happily bringing in about $700/door and are super happy with being first time landlords. We're mostly curious about what to do next... We want to get to 10+ doors in the next 3 years and we're kind lost on how we should be thinking about pulling money out of the property (HELOC, cash out refi, etc) and how to use it in the most beneficial way in buying more properties.
If anyone has experience in doing this and is open to teaching us different methods, we would love to meet you!
Cheers,
Jack and Ciara

Congrats on the purchase! When exactly did you close? The easiest way to go about this is to do a DSCR cash out refinance. It will allow you to get up to 75ltv of cash out (sometimes 80% depending on dscr with certain lenders). DSCR ratios are typically 1.00-1.25 in order to get the green light.
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Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
3y
@Jack Lawson If you are bringing in $700 per door is this the cash flow after all the expenses including a percentage set aside each month for repairs and maintenance, vacancy, and CapEx? If not you will need to factor those things in, likely at least at a percentage of the total rent amount of 5%, more for the repairs and CapEx if the property is older and likely to need more repairs or more new systems sooner.
On several of my buildings I have also found that while I CAN take out 75% LTV my rents either won't support that much or the remaining cash flow after taking out that much is so small that I have just been hesitant to take that much out.
These are just a few things to think about since y’all are new to this, and if you’re already ahead of me and considering this stuff then great! I just try to help people think of everything that might help them that I missed when I started out.
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