3 Real Estate Investing Tools That Increased My Cash Flow in 30 Days

by | BiggerPockets.com

It’s known by now that you can invest in real estate without your own cash or credit. There are many times you will need to be resourceful (and a little lucky) if you want longevity in the real estate industry. By reading this article, you will see how I used 3 real estate investing tools that increased my cash flow in 30 days.

Having established credit is not a necessity when starting out. The goal for most investors is long-term wealth through passive income. To get to this level of investing, credit is a great resource. Yes, you can seller finance your way to long-term wealth, but having a financial partner is essential.

Traditionally, wholesaling is my niche because I love the movement of putting together transactions and working within the essence of the deal. What many do not know is that using the profit from the wholesale deals, I purchase rentals in C-class neighborhoods. I am an out-of-state investor who purchases small single families homes. I bring this up because I’m in the midst of refinancing one of the properties to purchase another rental. Thanks to Josh, Brandon and the team at BiggerPockets, I’m exploring the BRRRR strategy (buy, rehab, rent, refi, and repeat) to increase my monthly cash flow. This would not be possible without good credit, wholesaling, and my rental portfolio.

I’m using a small local bank where my current loans are held. They had no issue working on the financing for me on this transaction and here’s why.

wholesaling-sellers

How I Bought, Rehabbed, Rented, Refinanced, and Repeated for 14 Rental Properties

This is the dream right? Going from zero to 10+ rental properties, providing stable cash flow and long-term wealth for you and your family, and building a scalable business model to boot! Learn how this investor did just that, in this exclusive story featured on BiggerPockets!

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3 Real Estate Investing Tools

Networking

I’m from a city just South of Chicago. Every time I go home to visit, I stop in the local bank to say my hellos. I’ve done some charity work with the bank’s asset manager, so I normally have a brief conversation with him. We began to talk real estate, and fortunately for me, one time recently, he had a distressed asset he was looking to unload. He had been holding the unit for about a year and wanted to clear it off his books.

Related: 5 Investment Property Finance Tips to Help You Get the Financing You Need

The BRRRR Strategy

I went by and looked at it, and the house had new systems and was in relatively decent condition to use as a rental. I made the offer he accepted. Naturally, he needed to do his due diligence, so he asked how I would settle the transaction. I clearly heard Brandon’s voice in my head saying, “The BRRRR strategy,” so I informed him I would refinance an existing unit and use that capital to pay for this property. I negotiated the property down to $19,820, already knowing I could rent the unit easily for $750-$850 and I only needed to put about $10,000 into it (carpet, paint, and appliances). Yes, I am a firm believer that you can invest in $30,000 houses.

Credit

After discussing my approach and informing him the terms, we then needed to do the application. This brings me to the importance of credit. I had the cash to buy the property, but I didn’t want to use it. Without good credit — and I mean traditional FICO scores and reputation — I would not have been able to create additional cash flow. In this transaction, I was able to increase my cash flow by $770 from this one transaction. After refinancing my note, it increased only $80 a month, but I was able to pick up another door in return.

Related: Creative Financing: 5 Outside-the-Box Tools Savvy Investors Use to Build Wealth

Conclusion

Investing without cash and credit can limit your opportunities in the investment arena. Sustainability and liquidity of your assets are highly important. It is essential to be in a position to move quickly when finding deals. Those who are able to move the fastest normally get the best deals. By establishing your credit and relationships, you will be able to ensure those deals come to you. Now because of this one transaction, the banker knows who to call when they need to move an asset quickly.

If you have any questions about how I was able to use these 3 real estate investing tools that increased my cash flow in 30 days, feel free to comment below. Make sure you guys say thank you to Josh and Brandon for the webinar on the BRRRR strategy.

Which strategies have helped you boost your rental portfolio lately?

Leave your comments below!

About Author

Marcus Maloney

Marcus Maloney G+ is the Executive Officer of Equity Realty & Investments as well as 3rd Generation Management & Holding LLC, both are family owned and operated real estate investment firms. The firms' goal is to provide affordable solutions in real estate while providing exceptional opportunities for community redevelopment for the residents of Phoenix, Arizona and Chicago, Illinois. You can follow Marcus on Twitter

12 Comments

  1. John Underwood

    Great article. I too am a season investor that like to keep adding 30k houses to my portfolio. To all the naysayers about there I just say more properties for me. I would be laughing all the way to the bank, but my tenants go to my bank and deposit into my account so that I am not troubled with going to the bank!

    • Marcus Maloney

      John, thanks for reading there are a lot of naysayers about 30k investments, but I’ve had tons of success with them. I look for the cash flow after my capex and vacancy rate and still come out way ahead. Its a difference between buying 30k junkers that need to be scraped versus 30k deals that cash flow. Like me I have the money come directly to the account.

      “Enjoying the Journey”

      • Curtis McDonald

        Marcus – How much do you typically set aside for CapEx for these properties? The main argument against 30K homes is CapEx is viewed as a fixed expense and on 30K homes is too high with respect to the value of the home. Thanks for your insight!

        • Marcus Maloney

          Curtis,

          I typically use between 15-20% cap x on these properties. Our aim is to hold these properties long term and because of that we have very aggressive (short) financing terms to pay the property off quicker. I know that sound ox-moronic, but we love the cash-flow. We rather not carry the note in excess of 15 year.

  2. Rob Cook

    Good short and effective article Marcus! You have cracked the “secret code” and now just keep on doing the last “r” – repeat! So many people try to act and participate in RE investing like “intellectuals.” Yes, it takes some savvy and courage, but it is NOT complex. In fact, when bloggers start talking over my head with all the financial terminology, including “CapEx,” I find it amusing. Not that such terms and the more-important CONCEPTS they represent, are not involved with and critical to most RE deals, but focusing on them instead of the reality and the money itself, is a fault. Like the old “Millionaire Next Door” book states, “dull-normal” types of businesses are what most millionaires profit from, not exotic, sexy ones. Well, often the distinctions people try to make between “passive” or “investment vs JOB” do a disservice to themselves and others. Who cares? If it makes money and satisfies the operator, then YAY! And the best way to get rich is to find something “scalable.” This does NOT only mean find some business that can grow into a much larger business. It can mean, in my and your case, find something that works, and then do it over and over and over………………until it no longer works or you are satisfied. In my own case, I am not an intellectual (I do have a Law degree, so am a “Doctor”). I am smart in narrow niche areas/modalities that I operate in, more from hard work and experience than talent. And I am “dull” enough to not be embarrassed to just keep doing the same successful shit over and over! Not trying to impress anyone, just make money and enjoy myself. And that is a personal thing – enjoyment. I would not enjoy being a slumlord, and though I have a lot of low income properties, some in what many would call “poor condition” I am not a slumlord by ANY definition. I do not need that crap in my life and do not allow it. And, I LOVE working with my hands, on renovations and repairs. Going out to thaw frozen pipes on a unit, saved me at least $600 earlier this week. Took me 2 hours. And had I hired a plumber, they might have “determined” that excavation was necessary, costing me $3K or more. Or every time a furnace won’t stay lit would cost me $100 for an honest service call by an HVAC guy. Usually to wipe off the flame sensor with a napkin – 1 minute on site. AND risk them “diagnosing” a new $2K furnace replacement is needed! And on and on. In my opinion, my biggest “edge” in real estate rental operation is that I do ALL the repair/maintenance/renovations on all of my current 43 doors. I am retired, work 3 hours a day, less than 4 days a week on my rentals, and have NO opportunity cost for my time as a result. I have 3 years of work already in the hopper on just 4 of my properties, all to be done at my leisure, as much or little as I want to work, and when I want to. I LOVE it. No boss. No schedule. No customers. No pressure other than my own greed to get ‘er done and rented! That is a career. A lifestyle. One almost anyone can accomplish if they want to, and seek knowledge of how-to like from your article and BP! With You-tube, anyone can learn in minutes or hours, how to do ANYTHING on a house or building. Literally, and professionally. I am never intimidated by any project or problem that comes up. Each is an opportunity to learn more and make $100 an hour in the process via saving having to pay others to do it, and possibly charge for performing much more work than was actually necessary. Hands-on pays BIG! And your tenants get to know and respect you in the process, and vice-versa. I have tenants in $350 rentals, including all utilities!! that have been in there 14 years already! Never late, no maintenance or repairs, just old guys paying my mortgages for me. And others paying $3,500 a month too. It works if you work it.

    • Marcus Maloney

      Rob,

      You’re right if it works for you, WORK IT. The analysis is good but some people over analyze and they miss great opportunities. For the sake of the economy someone need to offer decent housing for hard working individuals.

      Thanks for your input Rob

      “Enjoying the Journey”

  3. Susan Maneck

    Marcus, i see you are also interested in community development as I am and probably all of us buying 30K properties should be because however good the cash flow is, we also need an exit strategy. And if we sell back to investors we will be lucky to get your 30K back. My dream, really, is to make my tenants into homeowners without going the “rent-to-own” route which is all too often a scam (and maybe illegal under Frank-Dodd.)

    My son just wrote a paper for his graduate level course in urban economics. He found that there is a program under HUD which gives low-income people not just vouchers for rents but vouchers that allow them to buy houses and guarantees a portion of the mortgage payments. For some reason this program is under utilized even though with these houses the mortgage payments would be so much less than rent and our tax-payer dollars would go a lot further. Apparently it is difficult to get lenders to accept these vouchers. Any ideas how to get our tenants hooked up with this program when we are ready to buy out?

    • Marcus Maloney

      Susan,

      I am going to look into this because I have a tenant now that would like to purchase but due to financial issues in the past (housing crisis) he can’t qualify for a mortgage but has an excellent job. The program you mention of is worth exploring, because we are buying these properties there’s very limited equity positions unless you’re holding for 10+ years. Which I am very comfortable doing because these properties are for building legacy. Thanks for the info I appreciate it.
      “Enjoying the Journey”

  4. Isaac A.

    I will like to see the the maths behind a 30K property. I am an Electrical Engineer, PHD candidate and RE investor. The maths behind any project is important to me in both short and long term. But i have been thinking of buying <45K homes in Detroit.

  5. John Santos

    Hi Marcus, amazing article. I have been looking at properties around that range for quite sometime. But then I get discouraged when I look at the crime rate in the area.
    But my question to you is, by using traditional financing, you have to put the property in your personal name correct?
    How do you protect yourself and the property from frivolous lawsuits?

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