Growing the Business
Well, we are at a good/fun point in the business as it is decision time on what to do next and how to do it. We currently have used the BRRRR strategy and I would like to stick with that strategy in some shape, form or fashion. Below are the options we are looking at to move forward and I'd like to ask everyone's opinion on what our next steps should be. First, I would like to tell you a little bit about our goals, our situations, and how we blend them to make the team that we currently have.
Let me start by giving you the make-up of our team so far. There are four of us that have got together and formed an LLC. We have known each other for almost 20 years and we all have unique qualities that we bring to the team. We have one guy that handles the remodels/flips and everything that goes with the rehab of the properties. From dealing with contractors to doing some/all of the work himself on some projects, he is the go to guy. We have one guy that manages the properties, from fielding calls about clogged toilets, to ensuring tenants are taking care of the property, to scheduling the lawn to be mowed, he is the go to guy. We have one guy that is the legal guy (he is actually a lawyer). He ensures our contracts are rock solid for us and for our tenants. He also has a hand in finances and dealing with banks, etc. Finally, there is me, I'm a Realtor and the deal finder. I also have a hand in the finances, working with investors and how we finance our deals. We all owned Real Estate investments before we formed our LLC, but have taken our combined experience to try and grow as fast and as big as we can, but do it at a rate we can all handle. We also have an accountant that we work with frequently and have formed a few good connections with investors and some local banks. We all four are still in the Military (I'm retiring in November this year...YAY) and have full time government careers. However, we don't want to all stay in the rat race forever and even though I am retiring from the Military, I will still be keeping my full time job as the Airfield Manager. We are a very busy group, but I have no doubts that we can grow the business to the level that we will all be happy with.
GOALS:
First off, we want to build a business big enough that in the next 5 years, it can replace the income of all of our day jobs. This roughly looks like 500k a year or about $42,000 per month between the four of us. That will allow 100K a piece per year, plus 100K back into the business every year. That is very doable, especially once you start breaking it down into doors needed to do so. At $200 dollars a door, that is 210 units needed in the next 5 years. That sounds daunting at first until you break it down into units needed per month to be on track for this which is roughly 3.5 units per month or 42 units a year. Yes, I know, that is a BIG HAIRY AUDACIOUS GOAL, but I fully believe we are capable of doing it with this team. Also, if it takes us 10 years to get to this point, that isn't a problem at all for any of the four of us, we just WANT to get to this point in 5 years.
PLAN:
As I mentioned earlier we have been utilizing a form of the BRRRR strategy to start our journey. We want to build a foundation on Single Family Residential that will be a base to fund the daily operations as we grow. We plan to flip some properties to build our capital while also doing buy and holds to ensure we have a passive income stream being built. Once we get to a certain point (not sure what this point is yet), we will switch over to growing the portfolio through acquiring small to medium sized multi-family housing, storage units and mobile home parks. These are all part of the expanding process in our minds, however we may niche down on one or two of them until they are built to a point we are comfortable with. So now that the goals and mid-long term plans have been discussed, I want to ask your opinions on what we should do moving forward to finance these plans.
FINANCING: Right now, we are days away from finishing up the refinance part of a BRRRR strategy house. After this refinance, we will have about 65k in the operating/reserve accounts. We have commitments from investors of about 35k and we are currently working with a bank that could possibly offer us a commercial line of credit. We are also open to hard money lending as I know that line of financing gives us many options to choose from. Right now, the plan is to look for 3 bd, 2 bth, single family houses that we can purchase for 100k or less, rehab for 50k or less and have an after repair value of 200K or more. They are plentiful around here! We are focusing on auction, foreclosure and pre-foreclosure deals. Here is where my question comes in, if you were in this situation, what would be your next move? I'd like to get to the point where we are working on 1-2 buy and hold properties while simultaneously working on 1-2 flips so we can raise the amount of capital we have on hand to eventually be able to phase out hard money/banks (at least in reference to the SFH purchases).
Our options look kind of like this: 1. Use existing funds, paired with investor funds to do next flip/buy and hold. 2. Use hard money and investor funds for next flip/buy and hold. 3. Use Investor funds and bank line of credit for next flip/buy and hold. 4. Use funds on hand and hard money for next flip/buy and hold.
What are your thoughts on moving forward? What would you do? Are there options that I am missing? If I have left out some details, please feel free to ask, thanks!