Think Bigger: How to Buy 100 Rental Properties in 2015

71

Make no mistake, buying 100 properties in a year is absolutely possible, but will require a lot of time, energy and careful execution. Last year, I bought and sold 125 properties, but in the coming year, I’m going to attempt to buy and hold 100 properties. One of the reasons for my shift in focus is the availability of portfolio financing that has recently become available to investors. Additionally, the continued availability of low priced rental properties, low interest rates and decreased competition from hedge funds leaves the window of opportunity still open for investors.

Without getting too deep into the weeds, I’m going to attempt to lay out a road map for acquiring and holding 100 properties next year. I will make assumptions on pricing, interest rates, etc., but the general principles behind this strategy remain applicable to many investors.

Source of Inventory

Before you can set out to buy what averages out to about 2 properties per week, you need to determine what kind of homes you will be targeting and where you will acquire them. As I’ve said time and time again, every market is different. In some markets, inventory is in abundance and picking good deals off of the MLS is no problem. In other markets, it takes more effort and marketing (i.e. postcards, wholesalers, bandit signs, etc.).

Before you can set your goal for the year, it’s important to determine whether or not it will even been realistic to find 2 properties a week. If there simply aren’t that many worthwhile properties to buy in your target market, perhaps you should set a more realistic goal — perhaps 50 in a year is more attainable.

In regards to the types of properties you will be buying, I would assume if your goal is to buy and hold, then the properties need to make sense from a rental standpoint. Therefore, you need to make sure that the properties you target are in areas with strong rents and prices that make sense in terms of price/rents.

Also, I would assume if your goal is to buy 100 properties, you have some experience with where and how to buy rental properties. As such, I won’t go into detail about managing subcontractors to get properties in rent-ready condition, leasing properties and/or using property management. Luckily, there are plenty of articles here on BiggerPockets specifically addressing these topics if you want more information.

Short Term Money

The ultimate goal will be to roll all of your recently purchased rental properties into a portfolio loan. However, to do that, you will need a way to buy, fix and lease your properties before putting them on the loan. This is where short term money comes into play.

Related: The Ultimate List of Ways to Finance Buy & Hold Property

I would suggest using private financing if you have that available to you (ie. friends, relatives, partners). If you do not have access to private financing (or not enough private financing), partner with a reputable hard money lender who can lend you the money you need for a short period of time (i.e. 6 months). Again, the goal here is to use the temporary financing as a bridge loan that will allow you to fix and lease the properties before placing them onto a permanent portfolio loan.

Portfolio Financing

There are now a handful of lenders out there who offer portfolio financing on pools of investment properties (PM me if you want some referrals). This development in the lending industry is what really makes this aggressive acquisition strategy attainable.

Most of these lenders have a minimum loan amount of $500,000 and a maximum of $5,000,000. Thus, you can allocate your 100 properties into different sized loan pools based on your circumstances.

For instance, you may be buying and fixing properties for approximately $50,000 per property. However, you may only have the ability (or desire) to use short term funding on 20 houses at a time (about $1,000,000 worth of short term financing). Once you’ve stabilized your first 20 properties, you may decide to refinance them into a single portfolio loan. Over the course of the year, you could repeat the same steps and put 5 different packages of properties together for a total of 100 properties owned in 5 separate portfolio loans.

Again, there are so many variables here, it’s tough to say what it will look like for you individually, but hopefully you get the gist. Ultimately, you may have 1 portfolio loan with all 100 properties, or perhaps you will have a handful of smaller portfolio loans that add up to your 100 properties.

Equity

So, here’s the million dollar question: How much money will I need to do this?

The short answer is it really depends on how you structure your deals. From the get go, your hard money lender will require some equity contribution on your short term loans. Maybe you are able to front the money yourself, but perhaps you can bring in equity partners to help with the equity requirements.

Related: Buy & Hold Real Estate is the Ultimate Investment: Here’s Why

Also, when it comes time to refinance into the portfolio, the portfolio lenders will typically require 30% equity based on your true cost (purchase + rehab). As you can imagine, when you are talking about 100 houses, this amount quickly adds up. Using the scenario above, 5 million dollars worth of property (100 at $50K/property) at 70% loan to cost would end up requiring $1,500,000 in equity. I don’t know about you, but most folks don’t have $1.5M under their mattress for just such an investment.

This is where equity partners become your best friend.

Again, it’s up to you how you structure your deals with equity partners, but they will typically have some sort of preferred return on their investment and likely some ownership as well. For example, maybe you give your investors 12% preferred return (meaning they get paid before you do) and 30% ownership. Really, the sky is the limit when it comes to structuring deals. The basic gist is that your investors get some kind of handsome return for partnering with you on the deal.

I will mention that in some cases, the portfolio lenders will use Loan to Value (rather then Loan to Cost) to determine equity requirement after you’ve owned the property for 12 months. Thus, if you are able to utilize short-term financing for 12-15 months and can buy properties significantly under market value, you can greatly reduce (or almost eliminate) the equity requirement on the portfolio loans.

I realize this may seem out of reach to the average investor — and in reality, it probably is. However, there are many real estate investors that have the knowhow and the connections to endeavor something of this magnitude. Yes, it will take a large investment of time and money, but the long term cash flow and wealth creation that can be obtained through owning 100 properties can be life changing.

Do you think 100 properties in 2015 is a reasonable goal? What are your projections for the upcoming year?

Leave a comment!

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.

71 Comments

  1. karen rittenhouse

    Damn, Ken, I love your audacious goals! (can I say damn on BiggerPockets?)

    Yes, 100 properties in a year is doable. That’s our goal for 2015 as well. However, we’ll be selling 99% of them. Buying 100 in a year to HOLD? Well, that’s simply amazing.

    We have well over 100 holds but we’ve purchased those over time. Now we’re moving like a freight train, buying and selling like crazy, to pay off those holds.

    I look forward to hearing about your 2015. I’m sure it’s possible, you work-a-holic.

    Keep us posted and I’m rooting for you all the way!!!

  2. Good luck buddy I hope you succeed! Out here in oakland, ca a 2 bedroom 1 bathroom 900 square foot house in a rough area as a fixer will cost at least 150k!!! Fixed up up to 250k.

  3. I like written goals. You increase your chances of success when you have clear goals. I am sure you will achieve yours. What kind of cash return do you expect to keep for yourself initially after paying your investors their preferred returns? I have struggled with whether it is better to have fewer properties with no outside investors or whether it is worth the additional risk to buy more properties with investors. Obviously, you have chosen the latter. What numbers do you foresee?

    • Ken Corsini

      Hey Michelle – thanks for the post. I agree with you – written goals definitely increase your odds of success.

      In regards to returns – it’s tough project ROI because I haven’t decided how much of my own money to leave in the deal. Even if I use 100% financing + Equity, there will be decent cashflow and principle paydown.

  4. Gary Alford

    I am so glad I opened this post, I learned another great strategy to add to my arsenal. Will of course take some more learning to implement it but definitely will when I’m ready to start building my fleet of rental props. Thanks so much for this!

  5. Gloria Dulan-Wilson

    Hi Ken: Good luck to you on this venture – although, you’ve already guaranteed that you’ll succeed no matter what. I’m just starting out – and am absorbing all this great information – at this point, my target is 10 properties in 2015, 1 in 2014 of which I plan to be an owner occupant. But you’ve given me much food for thought as to what the possibilities can be. Thank you.

  6. Tim T.

    Ken, many thanks for planting the seed on what I see as a very doable strategy. For context, is this approach modeled on the “52 Homes in 52 Weeks” strategy made famous by Dolf de Roos in his 2005 book. If yes, is “Creative/Seller Financing” part of your acquisition strategy or are the properties all cash buys? Either way, I too, like the aggressiveness of the strategy and the due diligence that’s required to make it work. Also, you provide great detail, but is there an even more detailed “blueprint/roadmap” that you can share that’s a deeper dive into the strategic thinking, daily/weekly execution, etc?

    • Ken Corsini

      Hi Tim – I’m actually not familiar with that book or strategy. Honestly, I haven’t employed the creative/seller financing acquisition strategy …. I’m sure they are out there, but we typically put financing on our purchases.

      In regards to a more detailed blueprint, we don’t have anything like that, but we are considering documenting the entire year and process of acquiring the 100 homes.

  7. Larry Russell

    Great post. In my heart, I’m a “buy and hold” investor trying to plot my way to prosperity by incorporating “fix and flips” as well as “wholesaling” into the mix. Seeing this strategy gives me more hope as an alternative way of purchasing more rentals without relying so heavily on the more active approaches.

    • Ken Corsini

      Great point Larry – I am very much a fix and sell, wholesale investor myself … which is why I’m forcing myself to buy and hold in the coming year. That said, I will absolutely continue buying and selling next year to keep the business cranking and regular income flowing.

  8. There must be something your leaving out! How could u possibley make enough in rent to pay for the investors return and have anything left for your self? Sorry but it sound like your just stealing from Peter to pay Paul to me.R u making some kind of a commission on these deals?

  9. Ken Corsini

    Frank – maybe it’s trickier in your market, but there are plenty of places where you can buy rentals and make these numbers work. In my market, it’s very possible to buy and fix a property for 60K and get 850/mo in rent.

    Roughly, 42K @ 6% (30 yr AM) is 251/mo. 18K @ 12% interest only is 180/mo. Even if you add another 300/mo for taxes, property management, insurance, vacancy, maintenance you’ve still got positive cashflow.

    Now multiply this across 100 properties and there is significant cash flow … as well the benefit of diversification when 1 or more of your properties has problems.

  10. Donna Paget

    Thanks, Ken! I really liked your comments to Frank. by putting numbers to the properties, it made it clear to me how you can do that. It is my goal to have 100 buy and holds for retirement, so I was very interested in your post. Are you marketing aggressively in order to find 2 per week? If so, about how much should an investor expect to pay out for that type of marketing?
    I appreciate your advice.

    • Ken Corsini

      Donna – We actually employ a number of different methods for finding inventory – auctions, REO, HUD, direct mail, wholesalers, etc. … again, some markets require more direct marketing for acquisitions and some can easily be obtained via MLS. – it really depends on where you are buying. If you live in a market with alot of available distressed properties on the MLS and little competition, you may not need to spend any money on marketing to acquire properties.

      – Best of luck on your retirement goals!

      • Donna Paget

        Thanks, Ken. How many are on your team? Right now it’s just me and I’m a bit overwhelmed! I guess we still “eat the elephant” one bite at a time! I’ve been scouring Craiglist and I have a couple realtors that have me on email lists. Now I need to go look for funding! I believe we have a bank in town that may be open to the portfolio lending. Thanks for best of luck wishes! ~Donna

  11. Frankie Woods

    I am definitely small potatoes :(. Shooting for 2 – 4 properties in 2015 which equates to 8 – 16 units. Not anywhere close to your goal, but miles ahead of where I was just a year ago! Thanks for the article. I hope to be in your shoes in a few years!

  12. Really love the audacious goal.

    Would REALLY love it if you drilled deep into a market or a proposed strategy rather than “it depends on your market”, “lots of ways to finance, just pick one”, etc — because that comes off as a fluff article rather than “hey, you can definitely do it, here’s ONE concrete way”.

    Smart readers will figure out how to adapt the plan to another one based on their personal opportunities/objectives..

  13. Ken, what happens if one property (or more) start to go south on you? Since all the properties are financed together, couldn’t that take down the entire portfolio? I’ve seen it happen several times to people who have cross collateralized their properties

    • Ken Corsini

      Sean – Good question. I think the answer is actually just the opposite of what you suggest though. I think the large number of properties actually insulate you from heavy damage from a few bad apples. For instance, if your portfolio is generating 10,000/mo in cash flow … but you have 1 or 2 houses that aren’t producing at all and/or accrue some unforeseen expenses, the cash flow from the overall portfolio should help cover the expenses on the problem properties.

  14. Ken, thanks a million for this post! I currently have 10 rentals cash flowing & I’m looking to get some kind of portfoilio loan on them all to buy more properties! This strategy sounds Great for me! Can u send me the list of banks/institutions doing portfoilio financing right now?

  15. Frank,
    Thanks for your article. I, also, am putting a plan together for building a portfolio of rental properties, but only about 1 or 2 a month. Maybe I should up it. I have some questions. How are you finding thirty year loans for these? All the lenders I am finding do a balloon payment in 3-7 years. This concerns me with interest rates predicted to rise.The good thing is that they will lend based on the LTV, not cost. Also, how are you spending so little on monthly expenses? Is that realistic? I have always heard expenses are about 45 to 50% of rents, not including loan payment.
    Regards,
    Don

    • Ken Corsini

      Good question – you’re right that most will have a balloon payment … but as far out as 10 years. You could very possible refi at a higher rate … or have a strategy to liquidate some or all at that point as well … you definitely need to have a plan though.

      Not sure what all you consider expenses on a property, but 45-50% seems very high to me.

  16. Louie Bryan

    Great goals you have, I am also a strong believer in making goals to ensure success!

    With your numbers, I don’t doubt them, I am amazed by them. One problem I face are strata\maint fees. Those alone eat up 50% of my rent. I’m still cashflow positive, but not as much as I could be. On average I pay $0.45/sqf. To strata. Why is vancouver so high?

    Are the properties you purchase usually apartment or condominium (strata) or do you focus mainly on 4plex?

    I see you buy in Atl. And have your own firm, that is amazing. So far I have only focused on areas around where I live, down south is not the first option.

    Thanks for your insight!

    • Ken Corsini

      Hey Louie – Interesting questions …. I’m assuming your “strata” fees are similar to association fees in the USA? I personally don’t invest in condo’s for a number of reasons – one of which is the heavy association fees that eat up so much of your cash flow. (similar to your problem with strata fees)

      We mainly focus on single family detached properties in Metro Atlanta.

      Best of luck!

  17. Of course it’s doable – if you have the capital. This applies to ten properties or a thousand. The bottleneck will always be capital. You had better be prepared to have working capital for this strategy. Cashflow will take a while to build up and if you buy two properties a week your cashflow will never be sufficient until you STOP buying properties. Trust me, I’ve been there.

    You can do all the math you want on a single property and come out with positive cashflow (all my properties have positive cashflow), but to make back the insurance, prop taxes, escrow cost etc, it’ll take six months minimum. So you’ve got to float that. I add 10% to the purchase price as contingency in calculating the cost of acquisition – after I’ve added everything I can think of. Don’t forget that a single maintenance occurrence (like an a/c unit) can eat up your cashflow of 5 or 6 months. If this happens soon after your acquisition you need to carry the expense. This type of nitty gritty makes or breaks these strategies.

    For the record, this is exactly the strategy I’m doing – buy to hold, portfolio loan, tap equity thru that loan (which not all private lenders will let you do!), buy more at 0% down. I hold 10K per property in reserve for the first six month.

    That said, I don’t think you can buy 2 properties a week by yourself. And if you do, you’ll overlook things and start dropping efficiency. I’d rather buy 50 good properties than 100 with 20 headaches in it…

  18. Richard Corns

    He who controls the cash, controls the deal. If you read thru the initial article, Ken advises you “if all other financing is not available to partner up with a hard money lender”. Before u all puke, please consider the following. A lender that will lend up to 80% of the PP that could be extended to 100% if u properly structure the deal, 2 year max loan term, credit not an issue as all loans are asset based, not penalized for owning to many properties, and actually given consideration for Reputational Capital. Now how many deals do you think you could qualify for in 2015 using this criteria ? My next question is, how many of you would use your 24.9% credit card to purchase investment real estate if given the opportunity? Some say Yes some say NO. I can bet those that say NO is simply because of the high interest rate with no consideration for the overall potential profit. Those that say Yes recognize the value of getting the deal closed and moving onto the next. Repeat after me ” Create Wealth One Loan At A Time” Believe me when I tell you, you can achieve all your investment objectives by simply aliening yourself with a lender with unlimited funding and structuring your deals according to the lending guidelines.
    Good luck in life and happy investing.
    RAC

  19. Ken,
    Great, ambitious article/goal! I’m just stepping into the buy & hold arena and having some success with seller financing. A portfolio loan would be a great exit strategy for my balloons w/ the sellers. Any idea what the typical minimum number of properties a portfolio loan would cover? I’m hoping for 5 properties within a year w/ a total mtg debt of about $250K.

  20. Michael Seutin

    The title is inspiring, but I see this strategy as risky. Even those numbers you would have to pay a much higher interest on the hard money loans at least for the first 6 months, you also would have to come up with a lot of your own money for the lenders, and if you used partners you have to be ready for some major headaches with that many.
    I love the idea of dreaming big, but not by having such high numbers of properties in such a short amount of time, for me thinking big is choosing quality versus quantity, and I d rather not be married to partners.
    If you succeed I would love to know the actual break down of what your profits are after paying partners, lenders and all other expenses using the 50 % rule of expenses which I believe is quite accurate.

  21. Craig S.

    Good post with ambitious goals and ideas. Curious though, if someone was to have the goal of acquiring 100 buy & hold properties in 1 year, why wouldn’t you instead consider a single 100-unit apartment building, as opposed to 100 SFR’s or 50 Duplexes, etc.?

    I guess this all comes down to buyers preference, management style (self-managed, property manger, etc). But just curious to hear your thoughts on this.

    One thought is that it might be easier to get loans (finance, partners, etc) on one property at a time, rather than 1 single $3MM loan, but what are other thoughts? Personally, a single 100-unit building at one location seems much simpler and easier to accomplish/manage than 100 separate properties.

    • Ken Corsini

      You absolutely could buy a single apartment building instead if you wanted to …. and it would probably be a lot less headache and easier financing as well. I happen to prefer the diversity of single family homes … but that’s just my preference.

  22. Sandeep S.

    Great post and discussion. I am carrying out (or say “testing out”) a somewhat similar strategy in 2014. However, my numbers are much smaller compared to Ken’s. But the underlying strategy is same.

    Given that my home market in California provided no hope for such a strategy – I picked Houston to test/deploy this strategy. I have purchased 7 SFH this year @ $120K a piece on avg. I have financed one basket of 3 SFH in one portfolio loan, and am working on doing similar one on the next 3. My plan is to accelerate this in 2015 given that I have been successful (so far) in 2014 doing this whole cycle couple of times. The key difference in what I am doing that I am not going to private or hard money lenders for my share of equity. So my strategy is not at all “no money down”. However, once I re-finance with portfolio lender based on the appraised value – it does become a “low money down” after 6-9 months of purchase.
    I think buying in large numbers and that too with no money is quite risky for most investors (or their private money partners).
    The key takeaway from this post for everyone should be that being in the right market, buying smartly and combining that with availability of portfolio loans – you can achieve a massive portfolio of rentals rather quickly. (And each investor needs to decide what is “massive” and “quickly” for themselves!)

    • Ken Corsini

      Right on the money – “being in the right market, buying smartly and combining that with availability of portfolio loans – you can achieve a massive portfolio of rentals rather quickly. (And each investor needs to decide what is “massive” and “quickly” for themselves!)”

  23. Why anyone rush to try to keep pace by trying to buy 2 houses a week? So you don’t work then? You don’t have a full time job?, Because the amount of time involved in trying to search for a house find it, schedule an apt to see it, get an inspector and appraiser have them come out to see the property and wait for full reports from them will take a few days (and don’t say you don’t have an inspection done cause that would be foolish) besides even if you don’t want one your private money lender WILL require one. Then you have to make a written offer and wait for a response. All this will take more than a week for each house. Plus many of the houses you go see you will turn down down weather it’s due to price or condition. This gives you an idea how long it will realistically take. Why would you rush? This is not a race ? Your not buying bottles of water these are real houses. We all know many mistakes are made when trying to rush things. An idea situation would be to buy 3 or 4 buildings at 20 to 30 apartments each. That would be 4 roofs, 4 lawns, 4 heating systems as opposed to 100 properties, 100 roofs, 100 lawns, 100 heating systems. That’s my opinion. .. Jersey stand up! Thank you.

  24. Dan Shaker

    Good luck on your endeavors! I think it will all still comes down to one thing in the end. It is your eagerness and your will power to reach your goal. Making a goal is easy but reaching them and achieving them will be the most challenging part of all. You could either give up and lose or fight and win it in the end. If you are that determined to reach your goal I believe it will be easier for you to get there or even go beyond your expectations.

    • Ken Corsini

      George – I Buy locally in Atlanta, GA. However, I work with a lot of investors out of state that buy very successfully in other markets. One of my investors bought close to 50 homes out of state over a 2 year span AND continued to work a full-time job in the process.

  25. Patricio Tellez-Giron

    Great Article Ken, thanks! Also can you elaborate a bit on Portfolio Financing for commercial properties? Can you suggest a couple of lenders willing to take on these kind of deals? I’m evaluating buying a strip mall with NNN leases and 4-6 years still on contracts. 4 well known tenants and 2 smaller.
    tks!

  26. joe yobaccio

    I have between $200,000 – $300,000 to spread out and use as down payments on multiple single family homes, but have no job and not so good credit and am worried I can’t leverage my money to buy a bunch of rentals.

    Is there another blog that Ken can point me to that goes more into the initial acquisition loans?

Leave A Reply

Pair a profile with your post!

Create a Free Account

Or,


Log In Here

css.php