Restarting My Business

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Restarting My Business

Jeff Arndt
Investor · Pittsburgh, PA · Member since 2011 · 117 posts · 78 votes

Looking for guidance on where to go to next.  I currently own two rentals that if I were to sell, would net me about 50k in my pocket to use as working capital on another project.  The problem is they both cash flow positive and are a breeze to manage.  I also poured my blood sweat and tears into the second property as a live in renovation and I find it very hard to let it go.  

My problem is my business is moving too slow and I am only using my extra income from my job to purchase more rentals.  When I look at my 5 year goals versus my current pace, what I'm doing. just. ain't. cuttin. it........

My goal is to use a combination of other peoples money and my small ball of working capital to purchase distressed properties, rehab, then hold as rentals.  I want to then cash out refi on the back end and start the whole process all over again.

So, the age old question, if you could start all over what would you do?

Does anyone else implement this strategy and would you recommend it?  Should I continue the long guaranteed (well mostly) method of saving and scrimping to buy my properties with my own funds?  Or should I take on more work and make things happen quicker?

Much thanks in advance!

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
11y

I didn't really have reserves in my first property, a good inspection and staying away from crappy properties goes a long way, lenders require reserves. In fact, I don't recall ever getting caught with any large bill on buying a property in the first 2/3 years. By large I mean no HVAC or roof issues. Rehabs are not unforeseen really, larger rehabs do need a cushion if you're tearing out walls, replacing cabinets and tops as little things happen.

While I may sound conservative, I'd have to say I'm not really, with more knowledge comes the ability to accept more risk, if you really get in a pinch, you should have an exit strategy, like selling it!

Each deal is different! :)

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y

    Buy and hold is a long term strategy, selling out and moving up may be better but it may not provide better cash flow.

    I'd suggest you tap into the equity (several ways to leverage that) and if you're not able to expand with conventional financing, move to taking over tired landlord properties with seller financing. Search those last 6 words and see what you get.

    Sounds like the tired landlord rote would be best for you as you can pick up an entire portfolio from another small investor. Seller financing is ideal due to their tax basis and deferred taxation, they are also accustom to monthly income. :) 

    1Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y
    Originally posted by @Bill Gulley:

    Buy and hold is a long term strategy, selling out and moving up may be better but it may not provide better cash flow.

    I'd suggest you tap into the equity (several ways to leverage that) and if you're not able to expand with conventional financing, move to taking over tired landlord properties with seller financing. Search those last 6 words and see what you get.

    Sounds like the tired landlord rote would be best for you as you can pick up an entire portfolio from another small investor. Seller financing is ideal due to their tax basis and deferred taxation, they are also accustom to monthly income. :) 

     THIS IS MY POST OF THE DAY!

    Get some coffee and read http://www.biggerpockets.com/search?utf8=%E2%9C%93...

    Tired landlords, seller financing, buy in bunches, no dodd frank "investor to investor" (generally speaking).

    0Reply
  • Jeff Arndt
    OP
    Investor · Pittsburgh, PA · Member since 2011 · 117 posts · 78 votes
    11y

    Thanks @Bill Gulley .  My only concern is that I may be running a little cash poor to progress and buy a 3-4 property portfolio from a tired landlord(even with no money down).  In either case I may need to sell the one that is performing the least to have adequate cash reserves.

    Keywords:  Pittsburgh, Buy and Hold

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y

    Jeff, I've picked portfolios up with nothing down, there are some really tired landlords out there. Buying in bulk can get you a better price, if they have 12 properties for example, you can peel off 3 or 4 to sell at settlement (wholesaling) or over a few months and use those higher sales for your cash to the seller! Be a bit more creative and let that old landlord stop fixing toilets! :)

    1Reply
  • Jeff Arndt
    OP
    Investor · Pittsburgh, PA · Member since 2011 · 117 posts · 78 votes
    11y

    @Bill Gulley 

    But what about cash reserves?  How conservative of an investor are you?  What do you typically like to have liquid for evictions, repairs etc..?

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y

    I didn't really have reserves in my first property, a good inspection and staying away from crappy properties goes a long way, lenders require reserves. In fact, I don't recall ever getting caught with any large bill on buying a property in the first 2/3 years. By large I mean no HVAC or roof issues. Rehabs are not unforeseen really, larger rehabs do need a cushion if you're tearing out walls, replacing cabinets and tops as little things happen.

    While I may sound conservative, I'd have to say I'm not really, with more knowledge comes the ability to accept more risk, if you really get in a pinch, you should have an exit strategy, like selling it!

    Each deal is different! :)

    3Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    11y

    @Bill Gulley  I bet you could go into Columbus or Atlanta or Indy and clean up on these poor old tired landlords.

    Now this is just funny...

    http://www.biggerpockets.com/forums/56/topics/1561...

    not for tea totalers.

    0Reply
  • Frankie Woods
    Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
    11y

    Great advice @Bill Gulley !

    0Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    11y

    Brian, a link to a link isn't cool. I didn't go there and no, last thing I'd want now would be to be a residential landlord again,  That stuff doesn't last forever as a lifestyle, at least not mine. :)

    0Reply
  • Ian Hoover
    Bridgeville, PA · Member since 2013 · 395 posts · 105 votes
    11y

    Every investor hits that brick wall, it doesn't matter how much money you make or how good your credit is you will hit the wall at some point.

    If your goal is to gain more rentals then talk to some lenders I know a few that will lend on lesser qualified then the normal big banks, normally if you have decent credit and have a solid income coming in you can finance up to 10 properties.

    You could sell those two properties and take that $50k and put them into flips but more then likely $50k isn't going to get you far in the flip game and you will need to sell quite a few to buy rentals in cash while keeping the flips going, flipping is getting harder by the minute because of all the banks giving first shot to owner occupied.

    Then what most people like myself do when you hit the wall is find owner finance deals, I am an agent and I probably only run into a few possible ones per year and maybe 1 might meet my portfolio requirements. Even once you find the deal the cash flow is never as good as if you can get traditional finance or buy with cash because more times then not they owe money on those properties so you are paying their mortgage, but the way I look at it is $100 per month in net cash flow on $0 investment = infinite return.

    You can always look for a partner too, I hear @Brandon Turner on the podcast all the time talking about how he finds people with the money and then he does all the work and they split 50/50.

    Good luck! let me know if I can help with anything.

    1Reply
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