All my capital is alllocated - what next and how to keep growing?

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

All my capital is alllocated - what next and how to keep growing?

Roy Gottesdiener

Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes

I started investing 4 years ago doing BRRRR, right now I have a portfolio of 6 SFH worth around $1.1M with $600k in debt and around $1.5k monthly cash flow. I'm a foreign national so my cash outs are capped at 60-65% LTV so even though I got great deals I still reached a point where my capital is now locked into these rentals. On the one hand, I realize I just need to let time do it's magic and enjoy appreciation and debt paydown, but I'm looking for ways to continually grow my portfolio by either acquiring more properties or finding ways to generate more income which will be used to purchase more properties.

I tried using OPM but that doesn't work for me for several reasons - if I go down a loan route I can't pay it back because of my LTV cap and partnering for equity requires a lot of work in bulding trust and even then it's for a very small share of equity which is insignificant. Then, products such as HELOC or 1031 exchange are not open to me as a foreigner so even though i have on paper $500k in equity I don't have a real way of tapping into it.

Any ideas or suggestions what I can do now to keep growing would be much appreciated!

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Jasmine Williams

Real Estate Consultant · FL · Member since 2024 · 32 posts · 18 votes

@Roy Gottesdiener honestly, $1.5k/mo cashflow seems pretty low for a 6 sfh rental portfolio of $1.1m...especially for it to be locking up $500k of your equity.

Me personally, I would sell the 6 sfh, take the proceeds, and purchase 2 small multifamily properties. With a $500k investment you could probably easily grow to a $1.65M, 6 units portfolio, with cash flow in excess of $2,500/mo, all while reducing your structure count from 6 to 2. This achieves your goals of, both, accessing the equity and growth, and reduces your stress & workload. lol

Feel free to connect with me. I'll tell you exactly how to do it. Also, if you do end of selling please definitely connect with me! We work with investors globally. Might have someone interested.

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Rick Pozos
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
2y
Sounds like you need to work on that building of trust with other people. If you are doing a deal 50/50, that is not a small insignificant part of the deal.
Whatever you are doing, it has to be valuable to someone. Find that person that it might be valuable to and partner with them.They will be the ones who offer more equity because they NEED you.
1 Reply
Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
2y
@Roy Gottesdiener What you don't cover is the growth potential for the six single family homes you currently own. Are these 6 homes in locations where there are reasonable expectations you will benefit form significant appreciation in the immediate future? If not, and if these are homes that are in a market where dispositions are not too daunting you are likely best served selling these homes and re-investing in properties that can lead to additional equity. Equity is what allows you to scale, not cash flow and it's much quicker generated by appreciation, not principal paydown.
For some, simply holding the portfolio you own and paying down the debt satisfies their investment objectives but someone like yourself who is looking to scale can't achieve that at the pace you may necessarily want if your real estate is stagnant on appreciation unless you have additional sources of cash you can throw at new acquisitions.
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2 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Rick Pozos when you say 50/50 are you referring to flips? I did do several flips where one side brings the money, I take care of everything else and we split the profit. But flips are hard to come by and if you're talking about buy and hold how does the 50/50 split actually look like?
0 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Stuart Udis totally agree, I just have a major drawback where I can't 1031 and will have to pay taxes so as of now I'm not in a position where selling makes sense, definitely in a couple of years.
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
2y
@Roy Gottesdiener I want to re-emphasize are the 6 homes you currently in an area where you are expecting to achieve significant appreciation in the next few years? Based on your cash flow you aren't in a position to pay down the principal aggressively. If its a stagnant growth market what benefits do you achieve waiting a few years rather than ripping off the band-aid and paying your LTCG taxes now? Some even speculate LTCG tax rates may go up depending on who our elected officials are. Unless there's reason to believe appreciation is imminent or you expect to be in a position where you can take advantage of 1031 exchanges in the near future I don't see how waiting a few years advances your agenda of scaling.
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Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Stuart Udis yes the houses are in areas I expect values to go up significantly, with positive population and job growth
0 Reply
Jasmine Williams
Real Estate Consultant · FL · Member since 2024 · 32 posts · 18 votes
2y
@Roy Gottesdiener honestly, $1.5k/mo cashflow seems pretty low for a 6 sfh rental portfolio of $1.1m...especially for it to be locking up $500k of your equity.
Me personally, I would sell the 6 sfh, take the proceeds, and purchase 2 small multifamily properties. With a $500k investment you could probably easily grow to a $1.65M, 6 units portfolio, with cash flow in excess of $2,500/mo, all while reducing your structure count from 6 to 2. This achieves your goals of, both, accessing the equity and growth, and reduces your stress & workload. lol
Feel free to connect with me. I'll tell you exactly how to do it. Also, if you do end of selling please definitely connect with me! We work with investors globally. Might have someone interested.
4 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Jasmine Williams in theory this sounds great but in reality 500k equity after paying closing costs and taxes would be around 250k cash in hand, so the 6% CoC you are getting would translate to 1.25k monthly cash flow. Tough spot
0 Reply
Jasmine Williams
Real Estate Consultant · FL · Member since 2024 · 32 posts · 18 votes
2y
Quote from @Roy Gottesdiener:

@Jasmine Williams in theory this sounds great but in reality 500k equity after paying closing costs and taxes would be around 250k cash in hand, so the 6% CoC you are getting would translate to 1.25k monthly cash flow. Tough spot

You might be right about that one. My previous offer still stands if you decide to sell. Also, I have a few proformas you can run through if you want to crunch some numbers & compare opportunities. Just let me know!
0 Reply
John Clark
Member since 2018 · 1k+ posts · 1k+ votes
2y
Quote from @Roy Gottesdiener:

@Stuart Udis totally agree, I just have a major drawback where I can't 1031 and will have to pay taxes so as of now I'm not in a position where selling makes sense, definitely in a couple of years.
Why "can't" you 1031?
1 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@John Clark I live in Israel and I'll be required to pay taxes here anyways
0 Reply
Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
2y
@Jasmine Williams Not really low as that’s about $250/unit. By many standards that is a decent return on that number of rentals if they were bought a couple of years ago.
In my portfolio of 25 units I receive about $250/unit. While it may not be the best CoC that's considered a solid long term investment cash flow by many.
0 Reply
Eugenio G.
Boulder Creek, CA · Member since 2023 · 8 posts · 0 votes
2y
@Roy - talk to tax advisor about incorporating. The entity may need to pay corp taxes but you may be protected until dividends are withdrawn.
0 Reply
Jasmine Williams
Real Estate Consultant · FL · Member since 2024 · 32 posts · 18 votes
2y
Quote from @Alecia Loveless:

@Jasmine Williams Not really low as that’s about $250/unit. By many standards that is a decent return on that number of rentals if they were bought a couple of years ago.
In my portfolio of 25 units I receive about $250/unit. While it may not be the best CoC that's considered a solid long term investment cash flow by many.

I get it, @Alecia Loveless! Decent, for sure. Me personally though, I always try to look for scenarios where cash flow & CoC, as well as other indicators (DCR, GEI, etc.) perform a bit more aggressively/positively in both the short term and long term. It takes a little more work & creativity on our part lol, but the result is much more promising for long term performance. At 25 units, I'd much rather be at $350+/door. But, again, that's just me & how I'm looking at our numbers. Our system is a bit unique.

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Roy Gottesdiener
If I had six homes and $500k In equity but only cash flowed $1500 I would sell them and buy a $500k home that rents for $3k a month. Just doubled your earnings and have no debt.
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2 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Chris Seveney agree with the logic, but 500k in equity after closing costs and tax would be somewhere closer to 300k, and generating 6-7% from it is only a bit more what I'm making today
0 Reply
John LitzPro Member
Reno NV · Member since 2022 · 74 posts · 56 votes
2y
It could be possible to change debt structure from 6 individual loans into a single portfolio loan allowing you to pull a larger part of the equity in one chunk and still stay under 65% LTV.
Second suggestion is increasing the income generated by doing mid or short term rental strategies. It’s more work for sure but helps build faster.
Third suggestion is find a local partner that handles the lending side of things (to avoid the foreign limitations) while you handle all management and repairs part or the deal.
Best of luck

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Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@John Litz thanks, option 3 sounds great but it means bringing in a partner to my LLC. can I ask for ideas how you would structure it?
0 Reply
Randy Rodenhouse
Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
2y
Yes what you are getting now is low $1500x12/500,000 = 3.6% approx. However, that ship has sailed. Yes you could sell and get your 500k less taxes and then reinvest but maybe looking forward you need to look at investments with higher returns of 10% range. I have posted before in Linked In that BRRR is not a great strategy since you have to master so many things.

You have to buy the property right and at a low enough price and find the funding to do so. Then you have to renovate the property and there are sooo many things that can (and do) go wrong with the rehab process. Then, if you get the renovation done successfully, you now have to find a good tenant. Then you have to manage the tenant and deal with maintenance and repairs. Now after all that, you have to go to a lending institution a second time and try to get a loan and there are many requirements to getting loans in todays environment which make it difficult.

Wow! So many moving parts.

Even just doing one of those is hard enough, but now you have to be an expert in finding discounted properties, rehabbing properties, rental and property management, maintenance, and raising capital and getting loans.
1 Reply
Roy Gottesdiener
OP
Rental Property Investor · Singapore · Member since 2018 · 128 posts · 48 votes
2y
@Randy Rodenhouse actually all my deals generate double digits CoC, but because they had significant built in equity it looks like the money is not working well enough. Just out of curiosity, what deals are you doing that get you a 10% return?
0 Reply
Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
2y
OP
1. Stop. Will your current REI model get you to your end game? If not transition to a different REI model.
2. For example. Instead of or only doing BRRRR. Add value add to the mix. On your current properties can you do an ADU? Do you have extra land you can divide and pay down debt? In the future change your buy box to a value add box. Pick a great community and buy the worst house and BRRRR. You get two value adds for the same effort. Look for properties that you can sell land off. If you bought 3/2s before, now buy 2/1s and BRRRR and ADU if the numbers work.
Basically reevaluate your REI strategy and Buy box. Also determine point A and where you want to get to Point B.

Congratulations your 90% there just having jumped into REI. Just need to refine both goals and strategy.
0 Reply
Randy Rodenhouse
Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes
2y
@Roy Gottesdiener That makes sense. I too have properties where the CoC is low due to appreciation and trying to decide if should leave in or take out equity. I invest primarily in mortgage notes and do private lending. I started buying notes in 2012 and it has been good. However, today the note prices have gone up and the margins squeezed but I think it will present another opportunity in the next couple of years. Maybe not like the great financial crisis but definitely seeing some cracks.
0 Reply
Carlo D.
New to Real Estate · NY · Member since 2023 · 127 posts · 58 votes
2y
Quote from @Randy Rodenhouse:

@Roy Gottesdiener That makes sense. I too have properties where the CoC is low due to appreciation and trying to decide if should leave in or take out equity. I invest primarily in mortgage notes and do private lending. I started buying notes in 2012 and it has been good. However, today the note prices have gone up and the margins squeezed but I think it will present another opportunity in the next couple of years. Maybe not like the great financial crisis but definitely seeing some cracks.

@Randy Rodenhouse may I ask how/where you invest in the notes? Is it through Paperstac?
0 Reply
Chris Barrett
Investor · Madison WI · Member since 2021 · 176 posts · 103 votes
2y
@Roy Gottesdiener The way I see it if you don't want to sell, you have two options: wait for equity to grow and for your saved income to accumulate or use other people's money. Build relationships, meet other investors. Maybe find private lenders who would be willing to use one of your properties as collateral, since you have perhaps a 60% LTV with the bank, someone could lend on say 25% of that equity. I'm a private lender locally and I'll take on 2nd positions behind banks, as well as use other mortgage notes as collateral for my lending.

0 Reply
Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
2y
Quote from @Roy Gottesdiener:

I started investing 4 years ago doing BRRRR, right now I have a portfolio of 6 SFH worth around $1.1M with $600k in debt and around $1.5k monthly cash flow. I'm a foreign national so my cash outs are capped at 60-65% LTV so even though I got great deals I still reached a point where my capital is now locked into these rentals. On the one hand, I realize I just need to let time do it's magic and enjoy appreciation and debt paydown, but I'm looking for ways to continually grow my portfolio by either acquiring more properties or finding ways to generate more income which will be used to purchase more properties.
I tried using OPM but that doesn't work for me for several reasons - if I go down a loan route I can't pay it back because of my LTV cap and partnering for equity requires a lot of work in bulding trust and even then it's for a very small share of equity which is insignificant. Then, products such as HELOC or 1031 exchange are not open to me as a foreigner so even though i have on paper $500k in equity I don't have a real way of tapping into it.
Any ideas or suggestions what I can do now to keep growing would be much appreciated!

My first idea is you have to figure out how to partner and grow. There's always going to be a limit on what you can do on your own if you want to grow your portfolio.
2nd idea-If your goal is to grow the portfolio in the short term and your unable to use a 1031 to defer capital gains I recommend you discuss with @Aaron Hickey. His company organizes structured settlement sales as an alternative to 1031. I have no idea if you can use this approach as a Foreign National but there's nothing to lose in having the discussion. https://www.biggerpockets.com/users/aaronh585
312-681-7487
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