Hello everyone, new to BP and am looking for some guidance. I've owned a duplex in West Allis since 2009 and just moved out and placed a tenant in both units. Property currently cashflows pretty well but now I am wondering how to acquire the next multi-family? Should I leverage the equity in my house (might have $20-30k) or pull from my 401k? I recently learned of the BRRRR strategy and was looking to try that. I was originally planning to do a cash, 401k and private loan combo, but I am curious about the options to leverage the house equity. Any suggestions?
@Derek Mizysak - a couple thoughts come to find. First is to by another multifamily and live in one unit, rent out the others. This option could require minimal down payment compared to buying it as a full rental property.
The other option is, some banks do blanket loans across multiple properties, this would let you tap into that equity. But be cautious here if you have really strong financing on that original duplex. I am growing more conservative with financing & leverage, I wouldn't give up a low 30 year fix rate for financing that is on a balloon or adjustable rate.
Thanks @Andrew Kerr , My wife and I are renting a larger place as we have outgrown the duplex (4 kids) so living in another multi-family is probably not ideal. The idea of renting was so that we could save our down payment money for another investment. We are still getting moved into the new place but once we are settled in, I am planning to start making some offers on properties. The beauty of real estate is there are so many way to go about doing things. Most likely facing a 20% down payment, I would almost have to do the BRRRR method to recoup my funds because the $50,000 that I can scrape up, I would want to repay back in a relatively timely fashion.
With the BRRRR strategy, at least the way we do it, we get a private loan for the property we are acquiring and then once it's done and rented, we refinance it to pay off the private loan. If done right, we have none of our own money in it. But it goes over sometimes so it's important to have some cash. I would say that looking for private lenders and maybe refinancing your duplex to have some working capital is the best way to move forward. But it's hard to know from afar.
Makes sense. The first couple deals are always the hardest as it takes time to save up more money for down payments. But you are right, the BRRRR method works great for recouping some or all of your down payment. You could also look at doing a flip. Take the capital you have to do a flip, take the profit for a down payment on a new buy and hold, then use the original capital for a third property or another flip.
Once you get a few properties going, and let that cash flow pile up it gets easier. Good luck with your next deal!
Is that the most common way to do the BRRRR strategy? To purchase the property cash? Probably increases your chances of getting a loan since the equity is there. My problem is I don't have the network of people/private investors that I can work with to loan me that kind of cash. Until now, I have been doing my real estate stuff solo. I am actually pretty excited about this page because maybe I can end up finding a local partner here as well. The good news is I have a cash flowing property under my belt right now...baby steps hey? Thanks guys!
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