North Las Vegas, NV · Member since 2018 · 35 posts · 6 votes
Hello all, I recently purchased my first investment property and I’m happy with it! Although, it took quite a bit of my reserves and I’m curious to hear some of you guys stories on how you rebuilt your capital in order to invest in your next property!
Self sustained income source. I didn't start by buying hold properties. That's a one time use of funds, and as you are seeing, you then need to replace them to move forward. Very time consuming, and VERY expensive to you.
The alternative is to flip the cash you have at the start (Seed money), reinvest it in the next flip, and continue to do this over and over until you reach a point where your seed money has grown large enough to take the flipping profits from every subsequent flip (only the profits...the seed money continues to flip, over and over), and invest that into the holds. This becomes your own private source of funds...and, in the end, if you look closely, you should never spend a dime.
Self sustained income source. I didn't start by buying hold properties. That's a one time use of funds, and as you are seeing, you then need to replace them to move forward. Very time consuming, and VERY expensive to you.
The alternative is to flip the cash you have at the start (Seed money), reinvest it in the next flip, and continue to do this over and over until you reach a point where your seed money has grown large enough to take the flipping profits from every subsequent flip (only the profits...the seed money continues to flip, over and over), and invest that into the holds. This becomes your own private source of funds...and, in the end, if you look closely, you should never spend a dime.
Good advice, @Joe Villeneuve We are doing the buy and hold on STR vacation rentals, so no "flip-accumulation" for us though...we'll pay down the mortgages with the cash flow, make each one self-sustaining and keep the extra cash flow in the LLC account and let it accumulate (Maybe for unit 4 or 5 down payment?). With one under our belt and a plan to get Number 2 next fall, we (Both involved couples) are saving like little squirrels for the winter. All non-essentials cut out of the budget save the occasional dinner out to have fun, and all kids in both families grown and out so no cash-suckers to deal with! It's nice to see the War Chest accumulate, but like Joe said it is time-consuming. We're looking at 2019 for unit 2 and 2021 for unit 3, all of course based on current incomes and saving rates.
(Long slow day here at work so I am a bit long-winded, forgive me.) My story is stash the cash until we're ready to hunt again next year. No personal loans from credit unions or credit card companies to boost the amount, we have VERY low debt on both couples balance sheets and need it to stay that way for the next mortgages.
Paying them down doesn't qualify as self sustaining...just more expensive. I've made the most money on rentals buying properties over market value, and letting my tenants pay them off. Much less expensive, and much higher in profit (cash flow).
@Kendrick Smith I will give you a different answer altogether. I use the proceeds (disposable income) from my W2 income toward down payments. While my work colleagues drop a large amount of coin on nice trips or cars, or extravagant purchases otherwise, I simply use my disposable income on properties.
I prefer to NEVER spend my money...and never add any of my money to any of my spent money I originally had to spend to get the "ball rolling". I want my original "seed money" to work for me...not the other way around. Every penny I Spend, I have to recover before I can show a profit. If I keep adding my money into the Spending Pool, I'm actually falling behind with each deposit.
I'll "use" my money, the same money, over and over...but I won't add to it out of my pocket. I'll let the original Seed Money generate profits, that I add back into itself...over and over. This Profit, is actually OPM, and I thank all the OP's every day for their participation.
I also do this, except with money I make outside of my W2 income. All of my "side hustle" money gets funneled to my RE account. I give myself enough room for 20% downpayment and 1-year reserves.
@Joe Villeneuve I love that idea and I wish I applied this before I bought a hold property! I’ll get my funds back up and do some consistent flipping until I have enough to buy holds off mere flip profits! Thanks a bunch!
@Michael S. Yea that’s what I have to do now which is a very self disciplined situation lol and it’s kinda hard cause I just don’t make the money I’d like to make from the W2 job. But I’m on it! Thanks a bunch!
@Joe Villeneuve , I obviously stated that wrong. Our renters do pay down the mortgage, the cash flow is what we're saving up and using for additional purchases, along with our additional savings. We do add to the pile.
@Joe Villeneuve , I obviously stated that wrong. Our renters do pay down the mortgage, the cash flow is what we're saving up and using for additional purchases, along with our additional savings. We do add to the pile.
This is another way to "self fund". The difference is the source of the funds. In your case you are using your cash flow. In my case, I'm flipping my seed money repeatedly, and spending the profits on cash flow properties instead of my cash flow.
I prefer to keep my cash flow, and spend the flip profits. One of the bigger reasons is it's faster. The other big reason is I consider cash flow my money, and flip profits OPM.
Now, when my cash flow is large enough to not have to accumulate it to move forward with CF properties, I use the CF instead of my flip profits. This way, I get my original seed money (plus the grown seed money) back intact (as in never spent).
My seed money was free money then...a "cash like substance".
@Kelly I. That’s the game plan to get out of the rat race and make enough to give my time to myself as much as I’d like! Good Luck!
Exactly! Retiring at 55 is no problem, I’ve got everything set up and on auto pilot to do that. But how about in 10 years at 46? Now that is what I’m talking about!
@Kendrick Smith I think there are a lot of solid investment concepts here to review. The sum of all this is you have to find whatever method works best for raising capital in your own individual situation.
Joe's method is great - but it won't work for me for three reasons: 1. I am trying to scale our REI with money rather than time. 2. I have a business partner with whom we have to match our investments to keep everything 50/50. 3. I do not have a better investment option to put my W2 proceeds in right now otherwise (stock market, savings account, etc are not as desirable investments for me right now).
@Kelly Iannone I thinking aspiring to retire at 46 is fabulous. For me, the reality of it is zero since I have kids. However, I have already told my W2 employment that I will be giving them a one year notice the moment my youngest child finishes with college - which will occur in only about 13 years (!). Long way to go, but plenty of time to continue investing!
@Joe Villeneuve , I obviously stated that wrong. Our renters do pay down the mortgage, the cash flow is what we're saving up and using for additional purchases, along with our additional savings. We do add to the pile.
This is another way to "self fund". The difference is the source of the funds. In your case you are using your cash flow. In my case, I'm flipping my seed money repeatedly, and spending the profits on cash flow properties instead of my cash flow.
I prefer to keep my cash flow, and spend the flip profits. One of the bigger reasons is it's faster. The other big reason is I consider cash flow my money, and flip profits OPM.
Now, when my cash flow is large enough to not have to accumulate it to move forward with CF properties, I use the CF instead of my flip profits. This way, I get my original seed money (plus the grown seed money) back intact (as in never spent).
My seed money was free money then...a "cash like substance".
Understood better now Joe, thank you. We are strictly buy and hold until retirement, so there are no flip profits for us to keep recycling.
@Kendrick Smith I think there are a lot of solid investment concepts here to review. The sum of all this is you have to find whatever method works best for raising capital in your own individual situation.
Joe's method is great - but it won't work for me for three reasons: 1. I am trying to scale our REI with money rather than time. 2. I have a business partner with whom we have to match our investments to keep everything 50/50. 3. I do not have a better investment option to put my W2 proceeds in right now otherwise (stock market, savings account, etc are not as desirable investments for me right now).
Not sure why you say any of the 3 reasons for not doing it my way apply here?
@Joe Villeneuve Sorry, I should have qualified that better - it's because we don't do any flips - we are buy and hold only model right now. The cash flow from the buy and hold properties would take forever to accumulate for the next purchase obviously.
Great post! I'm in the same position as @Kendrick Smith. Except my W-2 doesn't make that much extra money, basically enough to pay our bills. Any suggestions for people who can't take money (at least currently) from their W-2?
@Kendrick Smith I'm in a similar situation. My wife and I purchased our first rental a few months ago which depleted the majority of our savings. I'm currently in the process of obtaining a HELOC to tap into the equity of my primary residence as well as looking into private lending and/or partners to help fund the next property.