How to buy and hold more than 5 properties or units?

Question

Hello everyone I’ll try to keep this as short as possible so it doesn’t turn into a ramble but to give you some background I’m 21 in Pittsburgh my only child is my fur baby 😂 but I’m working and saving money and I want to buy and house hack a tri or quad I was thinking 203k so I’m able to do some rehabbing as well and I want to buy and hold my question is how to get financing once I start getting up into and passed 5+ properties I know it would turn into commercial at that point so would it be a lot more cash at that point?

Short term goal: save up 10-15k get into house hack property by August

Long term goal: 10k a month net

Even longer term goal: 25-50 unit apartment building

I know I have a lot of work to look forward too I have a decent mentor always looking for good advice

Are these goals realistic?

Am I missing anything?

Any additional thoughts, comments, concerns?

Thank you

Nathan Gesner · Answer

Go figure out how to buy your first property and be a Landlord. Then buy your second. By the time you have your third, you'll have figured out how to buy your fifth.

Jeremy Taggart · Answer

@Dante Campbell the 5+ is for units in one building not properties. If you are 2-4 units then you can still get residential financing with 30 year fixed loans and a low interest rate. 5+ units is when it gets into commercial lending that's where you'll typically see 20-25 year amortizations and usually balloon payments and/or adjustable rates at 5-10 years where you would either need to pay off the loan or refinance to get out of it. You'll also need closer to 25% down for commercial lending whereas if you are house hacking 2-4 units you can use FHA to start at 3.5% down then 5% down thereafter.

I personally have been doing a house hack a year since I graduated college and after I used up my FHA at 3.5% down found a local bank that will lend at 5% down for 2-4 units as a "portfolio" loan and they'll let you utilize that as many times as you want. Another option is refinancing out of the FHA loan into conventional once you have enough equity then using the FHA again.

Once you start getting more and more properties it gets tougher to get conventional financing from standard lenders and that's where smaller local banks that have "portfolio" loans will come in handy. They keep those loans in house and don't have a limit on how many you can get and are a little more lenient usually than your standard lender.

You have goals similar to mine. I am starting out building my portfolio house hacking small multi units while I can to take advantage of the low down payments then I eventually plan on 1031 exchanging the smaller stuff into 1 or 2 big apartment complexes to have all the units in one place. Getting started in your early 20's definitely puts you ahead of the curve to be able to implement that strategy over time and take advantage of house hacking to get started with little risk/money.

The 203k loan is a great product however there is a lot of red tape that goes along with it. I'd say the most important thing that goes along with that is having a contractor you can fully trust. I've heard horror stories of 203k loans gone bad because the contractor decided to jump ship. You typically have a higher interest rate and more fees that go along with that compared to your regular FHA loan. I'm more of a fan of buying something that needs cosmetics and updating it over the course of living there that way you can do a lot of the work yourself at the beginning when you are low on cash and learn what goes into rehabbing so you are more knowledgeable about what goes into it when you eventually do start to hire contractors for everything.

Cameron Tope · Answer

@Dante Campbell there are creative ways to get past 10 loans such as commercial debt, in-house loans and putting multiple properties under one loan.

I had the same question when I started, but truth is you don't need to worry about it. When the time comes and your pushing your loan limit there will be a strategy you can use to get you past it.

And as far as house hacking goes, it's a wise choice to start investing that way.

Best of luck!

Sean Sabina · Answer

What areas do you want to look in? What are you expecting from roi?

the house hacking is a great idea for you, but know your areas of interest. That will help you grow your knowledge faster. If you have any questions feel free to contact me.

Dennis M. · Answer

If you learn creative financing you won’t ever need to kiss the banks butt ! Besides your looking at step 7 .. do what Nathan suggested and just start with the first and worry about such matters later after you get experience

How to buy and hold more than 5 properties or units?

How to buy and hold more than 5 properties or units?

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