How did you buy your second property?

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How did you buy your second property?

David Wagner
Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes

Hello Bigger Pockets Community ;) 

I see we have a podcast coming up on February 20, 2019 on regarding this topic but I am curious, how did you purchase your second property?

I have about $50K in equity but Ive been reading this is not a good strategy due to the risk.

What method did you use to get that second or third property?

Love to hear from the community.

Thank you!

David Wagner

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
7y

Bought a new primary every year for 5 years. Mostly for the better rates, I still put down 20% as I hate PMI.

I was also buying 1 investment property each year with 25% down and 15 year loans (to get better rates) at the same time. 

With a spare 2-3 I bought extra during that time I picked up 13 properties in 6 years. Stopped buying and started paying off. I’m down to 6 loans and pay one off with just the rental cash flow every couple years. Probably not the best use of cash to some people but in less that 10 years using about $100k total of my money I picked up $3million in properties flowing $8k/mo now and $15k/mo in 6 years when they’re paid off. 

Many people on here are much bigger, and some got that big in a year or 2. But I stopped when I had enough and retired 5 years after starting.  You have to decide for yourself when you have enough and enjoy your life and health while you got it. You’ll probably still be around next year but there’s a non-zero chance you won’t. 

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  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    7y
    Originally posted by @David Wagner:

    Hello Bigger Pockets Community ;) 

    I see we have a podcast coming up on February 20, 2019 on regarding this topic but I am curious, how did you purchase your second property?

    I have about $50K in equity but Ive been reading this is not a good strategy due to the risk.

    What method did you use to get that second or third property?

    Love to hear from the community.

    Thank you!

    David Wagner

     I bought my second the same way I bought my first. I took over the seller's loan (Subject To) and I've done that for twenty five years. I don't do anything fancy like beg banks for money.

    9Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    7y

    Bought a new primary every year for 5 years. Mostly for the better rates, I still put down 20% as I hate PMI.

    I was also buying 1 investment property each year with 25% down and 15 year loans (to get better rates) at the same time. 

    With a spare 2-3 I bought extra during that time I picked up 13 properties in 6 years. Stopped buying and started paying off. I’m down to 6 loans and pay one off with just the rental cash flow every couple years. Probably not the best use of cash to some people but in less that 10 years using about $100k total of my money I picked up $3million in properties flowing $8k/mo now and $15k/mo in 6 years when they’re paid off. 

    Many people on here are much bigger, and some got that big in a year or 2. But I stopped when I had enough and retired 5 years after starting.  You have to decide for yourself when you have enough and enjoy your life and health while you got it. You’ll probably still be around next year but there’s a non-zero chance you won’t. 

    32Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y

    Thank you for your response. Did you have the cash on hand for the 25% down?

    You are so right about knowing when to stop and be content. Tomorrow is a promise to no one 😉.

    3Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    7y

    @David Wagner

    Very true David. My father went from healthy, playing tennis several times per week. To back pains, to leukemia, to a walker, to passing in 3 months. 

    Most of these properties were $120-$130k so I needed about $30k each time. First was home buying money then half came from rental and half from earnings for #2,3,4.  After that the rental income started making up almost 100% of the downpayment money. 

    It would certainly be harder today when properties are $250k. But if took twice as long. Or you had to do all primary residences willing to pay PMI and put down 10% and it takes twice as long, that's only 12 years. That's going slow and steady and you can retire. I started at 35 and retired at 40. But what if you started at 25 or 30. That's a lot of freedom.

    Ps. All but 2 of these are with PMs as I’m an introvert when it comes to meeting new people. Manage yourself and make another $15-$20k per year, if you’re a people person. :-)

    Pps. I know parts of California are beautiful. (If San Diego wasn’t in California I’d be living there now.) but I’m pretty sure they consider all landlords evil rich people and all tenants innocent victims. If at all possible you might want to look oos for investments. 

    3Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    7y
    Originally posted by @Bill B.:

    Bought a new primary every year for 5 years. Mostly for the better rates, I still put down 20% as I hate PMI.

    I was also buying 1 investment property each year with 25% down and 15 year loans (to get better rates) at the same time. 

    With a spare 2-3 I bought extra during that time I picked up 13 properties in 6 years. Stopped buying and started paying off. I’m down to 6 loans and pay one off with just the rental cash flow every couple years. Probably not the best use of cash to some people but in less that 10 years using about $100k total of my money I picked up $3million in properties flowing $8k/mo now and $15k/mo in 6 years when they’re paid off. 

    Many people on here are much bigger, and some got that big in a year or 2. But I stopped when I had enough and retired 5 years after starting.  You have to decide for yourself when you have enough and enjoy your life and health while you got it. You’ll probably still be around next year but there’s a non-zero chance you won’t. 

     I suspect you know this, but your paid off return is a 6% return on equity.  The S&P historically has outperformed 6% (not that I am recommending the S&P but just using a passive investment that everyone knows). 

    If you can live the life you desire off that return then I think it is great.  Unfortunately, I spend way too much and would need $3M in equity to return far better than 6% to support my spending habits (for better of worse).

    I am not attempting to be critical as much as enlighten readers who are not doing the math to what the numbers indicate.  It seems to work great for you.

    2Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y

    I can appreciate the perspective regarding rates of return, however, the stock market doesn't have bedrooms and bathrooms?

    I am not a good stock investor but houses do appreciate overtime. 

    Thanks for the input 😊.

    3Reply
  • Frank Boenzi
    Real Estate Agent · Grand Rapids, MI · Member since 2016 · 34 posts · 27 votes
    7y

    David I am currently in the same boat. I bought a duplex FHA three years ago and have about 60k equity built into it (bought in Grand Rapids MI at a great time). From what I understand I can refinance my property to a conventional and then go buy another one FHA and live in it. Outside of that you need 20% down for single families and 25% down for multi family properties. My next step I believe is exploring the hard money option to flip properties. Building up a 20%-25% amount off my profits and buying the next one that way. I know here in Michigan there are some lenders who have a loan for investors where there is no income verification. Still have to have 25% down and the interest rate is 10%. Not the best option but it is there. Another option is finding distressed properties that are behind on taxes. I just came across a gentleman who got is "$1" cash offer accepted on a property and it has $1200 in back taxes. I will be following this thread to see the other input. Best of luck!

    1Reply
  • Matt Leber
    Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    7y

    @David Wagner 1st property: 20% down conventional MLS

    2nd: 20% down conventional MLS

    3rd: 20% down conventional MLS

    4th: 25% down conventional off market

    5th: 25% down conventional off market

    Don't like PMI and my wife and I save half of our income to invest so we have been able to do 5 properties in 3 years. We also opened a fixed rate HELOC on our 1st property in case we need to tap equity to invest or use for CapEx. Haven't tapped it yet though. The last two deals were multifamilies so they required an extra 5% down.

    3Reply
  • Frank Geiger
    Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
    7y

    David,

    I saved for a year put 25% down then instantly regretted it. Took another year to save up another 25% and then recycled cash after that. Not bashing other strategies. It just took me a long time because I was single and not making much.

    2Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y

    Yeah I have a feeling it may take me a while as well. 

    25% is a lot of money for me as well ;)

    I definitely enjoy reading the responses, strategies, and requirements.

    I hate PMI like most people but I gotta start somewhere.

    I dream of getting rid of it and eventually I will.

    Thank you.

    David

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @David Wagner. I put 20 percent down on a 2 bed 1 bath same as I did on the first one. Paid 35k sold it for 46k 15 months later

    1Reply
  • Anthony Wick
    Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
    7y

    @David Wagner

    Property 1: FHA in my name.

    Property 2: FHA in girlfriends name.

    Properties since: Formed an LLC with two partners and obtained loans from local bank with 20% down.

    1Reply
  • Harvey Corsino
    Bristow, VA · Member since 2017 · 40 posts · 8 votes
    7y

    @Matt Leber do you use a turnkey company?

    0Reply
  • Bob Woelfel
    Investor/Agent · Kansas City, MO · Member since 2017 · 291 posts · 308 votes
    7y

    My second was a BRRR. Bought it for 32k, put about 55k into it and it appraised for 129k. Since you're sitting on some equity, maybe this strategy might work for you. Try to find a private or hard money lender to help purchase and rehab it. It's gotten significantly more challenging in this market to find deals where you can cash out 100% and pay off your investor, but it might be an option depending on your market. Now, having equity and actually having access to that equity are two separate things. Good luck.

    2Reply
  • Matt Leber
    Rental Property Investor · Orlando, FL · Member since 2015 · 353 posts · 269 votes
    7y

    @Harvey Corsino

    We do not use a turnkey company. Why do you ask?

    0Reply
  • Travis Knox
    Investor · Peoria, IL · Member since 2019 · 6 posts · 3 votes
    7y

    @Bill B. that sounds exactly like what I'd want to do. I understand the power of leverage, but I don't want a million properties to deal with, and don't like the thought of being TOO leveraged. Even though the tenants would be paying the PMI for me, it still bothers me for some reason.

    I think the real key, more than anything, is finding good deals. You don't need that many properties to find independence, it seems.

    0Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y
    Originally posted by @Bob Woelfel:

    My second was a BRRR. Bought it for 32k, put about 55k into it and it appraised for 129k. Since you're sitting on some equity, maybe this strategy might work for you. Try to find a private or hard money lender to help purchase and rehab it. It's gotten significantly more challenging in this market to find deals where you can cash out 100% and pay off your investor, but it might be an option depending on your market. Now, having equity and actually having access to that equity are two separate things. Good luck.

    That's an interesting strategy using hard money loan or private investor to fund a BRRR. Although the price points in my local market are a little high. I've never funding a purchase using a hard money loan?

    David

    0Reply
  • Steve O.Pro Member
    Rental Property Investor · West Caldwell, NJ · Member since 2019 · 104 posts · 65 votes
    7y

    YOU DON’T KNOW UNTIL YOU ASK!!

         I purchased my second property by asking the questions you should be asking, but normally don’t.

          My wife had been searching the mls and following reduced houses/ relisted properties.  The house just went back on the market with $20k taken off the listing price because of a failed home inspection (foundation needed $20k in repairs).  My wife and I went to look at a property on a Saturday.  After seeing the work it needed and the equity we could gain, we crunched the numbers and learned there was no way to get a loan from any bank because our debt-to-income ratio was maxed out.   House was listed for $175k. I decided to ask the sellers realtor if we could put $80k down and seller finance the other $85k @5 % for 15 years.  I figured the worst they can say is “no.” 

         It turns out, the realtor was the sellers mother-in-law.  The sellers son who was living with the seller was a mooch and the family was worried the son would drain the $165k.  So the family convinced her to do the deal I offered.  After putting $70k into the house, it’s arv  is around $350k.  Now I struggle to decide to sell or rent it!

    1Reply
  • Bob Woelfel
    Investor/Agent · Kansas City, MO · Member since 2017 · 291 posts · 308 votes
    7y

    @David Wagner...you may not want to. I don't know your market and price points. Maybe the fees will make it challenging to pull off. There is a pretty active thread going on right now about the BRRR strategy and if it's a viable option in todays market.

    https://www.biggerpockets.com/forums/61/topics/672...

    The way that I look at it though is if we are going in and doing a full rehab and the plan is to hold for a number of years it's really not a big deal to me if I've got to leave a few $$ in the deal.  Just another option for you to consider.  Good luck.

    1Reply
  • Jason Fleming
    Lender · Portland, OR · Member since 2018 · 5 posts · 8 votes
    7y

    @David Wagner

    1st property 3.5% down ($6700) FHA(my name alone)

    One year later we moved into 2nd house keeping the first as a rental

    2nd property 3.5% down ($7200) in my wife’s name

    One year later we moved into the 3rd keeping the first two as rentals

    3rd property 5% down rehab loan (my name)

    Purchased for $167, put $115 into it, lived in it for 6mo and refinanced at $372k appraisal

    With less than $20k of our own capital we now have almost a $1mm in real estate in a market that is hard to break into Portland Oregon

    Buying homes as primaries and moving every year was the only way we could make it happen

    8Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    7y

    @David Wagner first property 10% down conventional loan. Made some sweat equity by renovating most of property myself. Appraised property to remove PMI, found out I had way more equity then planned (almost crash car when lender told me amount). Purchased second property with private money all cash, cash out chunk of equity from first property to renovated second. Planning to mortgage second property later this year to pay back private loan.

    973-975-3895
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    1Reply
  • Michael Ryland
    Roseville, CA · Member since 2018 · 29 posts · 40 votes
    7y

    @David Wagner Great question I’m trying to figure out how I’m going to purchase my second one. I could go with traditional financing with 20% down but one of the properties that I really like is a foreclosure so that’s gets a little more complicated. My wife and I have been discussing the different possibilities all day and I haven’t decided what is best for us right now. I’d be interested to see the different options that people recommend.

    0Reply
  • Dawn Burwell
    Rental Property Investor · Overbrook Hills, PA · Member since 2019 · 84 posts · 26 votes
    7y

    @Frank Geiger will you please elaborate on the regret ??

    0Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y
    Originally posted by @Shawn Mcenteer:

    @David Wagner first property 10% down conventional loan. Made some sweat equity by renovating most of property myself. Appraised property to remove PMI, found out I had way more equity then planned (almost crash car when lender told me amount). Purchased second property with private money all cash, cash out chunk of equity from first property to renovated second. Planning to mortgage second property later this year to pay back private loan.

    I will have a mini celebration once I hit the 79% LTV ratio on my current and only rental ;) Maybe in another year or two this will happen if the upward trend in my area continues. Saving my money for the down payment for the second property will be hardest part from what I am reading.

    1Reply
  • David Wagner
    OP
    Real Estate Agent · Temecula, CA · Member since 2018 · 15 posts · 12 votes
    7y
    Originally posted by @Jason Fleming:

    @David Wagner

    1st property 3.5% down ($6700) FHA(my name alone)

    One year later we moved into 2nd house keeping the first as a rental

    2nd property 3.5% down ($7200) in my wife’s name

    One year later we moved into the 3rd keeping the first two as rentals

    3rd property 5% down rehab loan (my name)

    Purchased for $167, put $115 into it, lived in it for 6mo and refinanced at $372k appraisal

    With less than $20k of our own capital we now have almost a $1mm in real estate in a market that is hard to break into Portland Oregon

    Buying homes as primaries and moving every year was the only way we could make it happen

     The housing market in in Portland has definitely tightened up. You built some very nice positive momentum in your strategy buying your homes as primary residences;).

    0Reply
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