Investor 路 Las Vegas, NV 路 Member since 2013 路 8k+ posts 路 10k+ votes
5y
I bought a new primary and a renal every year for 5 years. Usually at the same time so I didn鈥檛 need to provide all the paperwork twice per year. If you can鈥檛 afford 2 x 20-25% down loans you can get one 20-25% and one 4-5% owner occupied loan.
Can鈥檛 swing that? Get one 5% owner occupied every year. In 5 years you鈥檒l be ahead of 80% of Americans (99% of earthlings). Do it for 10 years and you鈥檒l be ahead of 90% and 99.5%.
Real Estate Agent 路 Oklahoma City, OK 路 Member since 2020 路 471 posts 路 462 votes
5y
@Krystal Marquez
I find saving money to be such an arduous journey sometimes, but that may be my impatience kicking in. So I try to save what I can and find ways to make more money as well. That is one of the reasons I got my real estate license, all the money earned from that goes to buying or supporting rentals.
Not answering your question, but I am on a similar path as you, pulling in $2k or so a month extra and saving for the next rental. I know many people find creative ways to acquire rentals, but I do not want to be over leveraged so here I am left to saving. Two a year consistently is fantastic over a span of 5-10 years. You鈥檒l be ahead of the game :)
@Patti Robertson yes I save the 6% of the rent for vacancy. Thank you for your advices appreciate it.
IMO 6% reserve is not nearly enough. It seems easier to manage cashflow once you get over 10 units. Before then, one bad month where you have two AC units go out, or have a couple of tenants lose their job, and you need quite a bit of cash to push through. You will need this PLUS your 15-20% down payments. That's quite a bit of cash. At $2K/month, that will be enough downpayment to purchase one $120K property per year, but it can't need any work if you don't have additional reserves to fix it up. Perhaps you can find a partner with more disposable income or liquid cash. Or perhaps you get really lucky and land some owner financed deals which allow more flexible terms, although I find these generally need significant work. Focusing also on increasing your disposable income, either by raising your income or lowering your expenses would be an important part of your strategy. That's all I was pointing out.
Rental Property Investor 路 Clarksville, TN 路 Member since 2020 路 30 posts 路 10 votes
5y
@Krystal Marquez
Not sure how you feel about this- but I would definitely look into creative strategies! It can/ will save you a ton of money, requires no credit, and can literally be no money down and 0% interest if the deal is structured that way! I see you mentioned wholesaling. This will provide you with those leads for creative financing if you鈥檙e marketing/prospecting. Just educate yourself about the abundance of ways to get creative! Then you can decide if this avenue would be suitable for you馃槉. I鈥檇 be happy to share my resources/ knowledge with you if you have any questions!
Rental Property Investor 路 Gilbert, AZ 路 Member since 2016 路 3k+ posts 路 4k+ votes
5y
@Krystal Marquez It is easy to buy 2 properties a year if you know how to do it. I don't mean to be snarky or sarcastic, what I am saying is true and very simple. Last year I purchased 110 units including 20 single family homes. I don't say that to brag. I say that to help you have perspective. At the beginning of 2014 I only owned my primary home and 1 rental. Today I own 200 units. I didn't start out with a lot of extra money. I had to get creative and learn how to use credit and hard money and private money lenders. All you need to do is learn from people who buy more than 2 properties a year with limited resources. Attend your local meetup groups. Network with others. Find people who are doing it in the areas that you want to invest in and find out how they are doing it and duplicate it. It will likely take more effort and work if you are going to do things creatively than if you were to just put down large down payments. But once you learn how to do it, then it is definitely possible to buy 2 properties a year; or 10 or 100.
Rental Property Investor 路 Waterbury, CT 路 Member since 2020 路 28 posts 路 52 votes
5y
@Forrest Faulconer I'm thinking to do the same, get my real estate license from CT and work part time to increase my income, then learn how to flip houses. I know is a long way, but we all can do whatever we want, it's just about been creative, make a plan and follow the plan step by step.
I need some strategies, how can I buy 2 property every year for 10 years.
Do you have a high income job, some level of experience that gives you an advantage, or a good bit of free time to leverage your own work/availability?
Professional 路 Baltimore, MD 路 Member since 2011 路 37 posts 路 52 votes
5y
It took my partner and I 20 years to build up our rental portfolio to the 750 properties that we own now. We did it through the BRRR method, one house at a time. The trickiest part is cash flow management. Rentals make money in the long term, but not the short term. My back of the envelope number is that it takes $15K in soft costs to add one rental property to your portfolio. So you need to be able to earn that $15K somewhere else. We did it through flipping and wholesaling. Raise some private money to help with your operating capital (I know, easier said than done, but there's tons of posts on BP about raising private money), and keep doing current cash producing deals, so that you can afford to keep adding.
Last thing I'll add, the DSCR loans are the best product possible for landlords growing their rental portfolios. If we'd had access to that kind of lending (and didn't have to deal with stuffy local banks), we'd have gotten to 750 way, way faster. My lending company offers these kinds of loans. Rates are in the 4s. And remember to keep having fun!
Some great insights on this thread - thank you all. I do have a question though when scaling your portfolio and using bank financing. Is the rent from these rentals (all or 75%) being used as part of the debt ratio calculations by the banks? Do you have to own a rental for a certain period of time before the bank considers the rent?
Rental Property Investor 路 Waterbury, CT 路 Member since 2020 路 28 posts 路 52 votes
5y
@Shlomo Koheler Thank you for your great ideas. I'm a little scared to jump in to huge deals like 5 plexs, but I will start getting more knowledge and analyzing deals. You have been doing an amazing work getting all these properties without doing flipping. Koheler Where can I find good 5 plex? Where have you bought your?
I bought a new primary and a renal every year for 5 years. Usually at the same time so I didn鈥檛 need to provide all the paperwork twice per year. If you can鈥檛 afford 2 x 20-25% down loans you can get one 20-25% and one 4-5% owner occupied loan.
Can鈥檛 swing that? Get one 5% owner occupied every year. In 5 years you鈥檒l be ahead of 80% of Americans (99% of earthlings). Do it for 10 years and you鈥檒l be ahead of 90% and 99.5%.
Is an "owner-occupied" loan different from a "primary residence FHA" loan?
If they are the same... My mortgage holder (Guaranteed Rate) told me that with an FHA primary residence (which, we put 3.5% down on), we would need to have 20% equity in that original unit in order to use the FHA primary residence (3.5% down) again on another home because FHA doesn't allow the dwelling to be used for anything other than that, your primary dwelling. Perhaps that rule is void if you wait 12 months after the original FHA purchase?
I don't know the fha rules but I believe you'd be better off collecting the extra 1.5% to do a convention 5% down mortgage. Then you're definitely free and clear after 12 months to do it again. The PMI rules may be better with the convention as well, at least they used to be.
I bought a new primary and a renal every year for 5 years. Usually at the same time so I didn鈥檛 need to provide all the paperwork twice per year. If you can鈥檛 afford 2 x 20-25% down loans you can get one 20-25% and one 4-5% owner occupied loan.
Can鈥檛 swing that? Get one 5% owner occupied every year. In 5 years you鈥檒l be ahead of 80% of Americans (99% of earthlings). Do it for 10 years and you鈥檒l be ahead of 90% and 99.5%.
I have a few rentals I BRRRRed, but I鈥檓 about to move out of my primary residence and rent it out I live in a small enough town I鈥檓 sure my loan officer at my small bank will know the house is rented out
Do banks care if the original financing was for owner occupancy and then converts to a rental property?