How did you get to 50 units

Question

Is there must be something that I am missing, but from what I read you can only hold 4 or so refi building at a time so how do I use the BRRRR method to get to 50 units?

Mark Fries · Answer

@Julian Hendrix

The weekend millionaire. It changed my life.

I'm gonna go completely against the grain here because bigger pockets loves to push the BRRRR method...but you do not need that to be successful or buy properties.

Just take a minute and try to visualize yourself managing 50 different mortgages.. And then looking at your cash flow of 175 or 200 a month.. And then having to deal with repairs... That's like working for free... That's not financial freedom.. it's an absolute nightmare.

Jill F. · Answer

When my latest deal closes, I will have 49 doors (with 6 mortgages). For bigger properties or groups of properties you can use commercial financing-- you have to put more down (usually 25%), the interest rates are higher (by about 1-2%), and terms are shorter (20 years is common). Once you have 12 or so units purchased with residential financing it will only take a few years in a stable (slowly appreciating market) (probably 2-5) to pay down the mortgages sufficiently to cross collaterazlize of cash out refi those units for another group of units. It is my understanding that a married couple can buy up to 20 four units with residential financing-- but I'm no expert, that path is not open to us because we don't have w-2 income.

Oh wait if I count my own house I will have 50 doors. yay.

Michael Maurice · Answer

Personally, I started with a little cash and got into my first batch of properties out of pocket. I took that bundle of homes to a bunch of local banks and found the best deal. Pulled the cash out of those as a line of credit and then pulled off that line to buy the next round of homes. Wash, rinse, repeat.

Michael Maurice · Answer

If you are in the single-family arena, you will eventually graduate to larger portfolio loans where one piece of paper is collateralized by multiple properties.

Mark Fries · Answer

@Julian Hendrix

Why on earth would you want to hold 50 mortgages? That's just 50 liabilities...read some books on building your portfolio without mortgages...

Corey Hawkinson · Answer

@Julian Hendrix Nothing wrong with that strategy as long as it isn’t causing too much stress. I just meant my comment on a cautionary tale.

Nigel Guisinger · Answer

What you are thinking about is standard financing. Use commercial lending. You can hold as many loans as you can qualify for. The rates aren’t as low but the upside is huge. I’ve used Commercial lending for both large and small deals.

Corey Hawkinson · Answer

@Julian Hendrix I’ll let you know after I purchase 43 more units. Ha! I’m with Mark on this. What’s your motivation for 50 doors? Is that from some seminar? 50 doors at $200 per month equals $10,000 per month cash flow at which point you have “financial freedom”. Be careful that you aren’t trading in your W2 to become a full time property manager. That’s what I’m actively trying to avoid right now. I want to grow further, but I have a strong preference for that growth to truly be passive.

Marcus Auerbach · Answer

Rinse and repeat will get you there. And usually a combination of multiple strategies. The first property is in many ways the hardest, because it's your first. The second one is much easier, but then you start hitting against your DTI limits. Once you have 5 and have some cash flow, it get's easier again, because you are gaining financial momentum and don't have to rely exclusivley on your W2 for your next down payment.

You can try to do that without leverage, but it is not really practical. For some people it is a philospohical issue, not a practical or financial one. There is no 4 unit limitation for BRRR, but after 4 it get's more difficult to qualiy for 30 year fixed products. After 10 you will use commercial loans.

Julian Hendrix · Answer

@Corey Hawkinson I don't know about crushing it That's just the bills which are far more than what I make. And I don't like being responsible for employees I much rather be working with contractors

How did you get to 50 units

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