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.
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3 Real Estate Investing Tools
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.
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.
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.
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!