How can I acquire 30 units in 3 years?

Question

Hey guys,

I'm 25 years old and starting with $50k from a very successful flip. This was also  my very first flip, so I'm still inexperienced. I'm willing and able to keep flipping but I'm more interested in more passive investing.

How can I take this cash and scale myself to 30 units in the next 3 years?

Thanks!

Bob Okenwa · Answer

@Kevin Wiley

There are lot's of ways to scale up. 2 methods I've seen employed by others on BP is to flip to acquire rentals where some folks will purchase 1 rental for every 2 flips so they can continuously pump money into their business, and many people employ the BRRRR strategy to buy, rehab, rent, refinance, repeat. If done correctly, doing so will allow you to put fresh cash into a project once, then use that seed money over and over when you refinance and get your money back out. The key to BRRRR is to buy a distressed property you can force equity into so that the refinance allows you to get your money back.

David Faulkner · Answer

If you are more interested in passive investing you may want to re-evaluate your plan. Scaling to 30 in 3 years will not be passive in the short run, and the types of properties you are likely to choose doing that will not likely be passive in the long run either. Not saying that scaling to 30 in 3 is not possible, just that it is likely not compatible in the short or long term with your other stated goal to get into more passive investing. So, which would you prefer, scaling to 30 in 3 or investing passively? I'd advise thinking beyond 3 years to the long term goal, then making sure your 3 year goal will actually get you closer to your desired long term state, and then adjust accordingly if needed.

Brian Garrett · Answer

@Kevin Wiley I would also suggest the BRRRR method this way your cash is never stuck in a deal and you can continue to scale up using your same initial investment over and over again.

Will Pritchett · Answer

I have used the BRRRR method by borrowing the purchase money from a private lender at 10 percent and no points then paid the rehab out of pocket and then refinanced. I have been able to get my purchase amount back but not the rehab money when done before six months elapsed. Based on new appraised value but amount not to exceed purchase price. After six months it can exceed purchase price (if I understand correctly).  My PM lender is a relative  (full disclosure) but he wants us constantly buying as it is money he had not earning anything. He also likes that we take him to dinner once a month when we give him his check(s).        I think cultivating a lender like this could be hugely beneficial to your growth as planned.  And it's negotiable to terms you both agree to. Cheaper than HM loans!       One last thought.  I think it is likely that you won't do ten a year for three years, but maybe 4 or 5 year one and double each year. I have found that momentum builds and they get easier to find and fund.      I am a little nervous to grow too fast and become overleveraged. This is my biggest impediment to growing faster. Good to see you have big goals. You can absolutely accomplish them.  Good luck!

Jeff Copeland · Answer

@Kevin Wiley- I'm i'm in St Pete and would be happy to compare notes!

Kevin Wiley · Answer

You guys have been awesome. I've listened to several BP podcasts on BRRRR now and feel pretty confident with it, but I'm wondering how often I could do it with only $50k. I think I'll definitely do a live-in flip when I find a good one to live in. At least that way I can use only 3.5% down with an FHA.

As for finding 30 in 3 years, I know it will be more active, but that's alright. I'm fully willing to work hard for several years to possibly be 30 years old with at least 30 rental units. Just trying to hit financial freedom right now is all.

David Faulkner · Answer

You don't necessarily need a 4 plex to house hack ... there are variations on the same theme. I "house hacked" SFRs ... the first when I was single I rented out extra rooms ... after that my wife and I didn't rent any rooms while living there, but we fixed it up ASAP while living in it then turned it into a pure rental when we moved to the next fixer. Another option is the "live in flip" to fix up while living there 2 years and then sell for tax free profit (up to $500k tax free gain for married couples). Flip-flip-hold could also work, so long as you are ok with tax-tax-tax free.

John Leavelle · Answer

Howdy @Kevin Wiley

To add to the 2/1 Flip/BRRRR strategy I would suggest you plan out your Buy and Hold strategy .  30 units in 3 years.  How do you plan to get there?  What type and how many per year will you need to acquire?  What is the timeline between one BRRRR deal to the next?  Most BRRRR deals using the Cash-out Refinance require 6 to12 month seasoning after the Rehab and it is rented.

Example:  30 days to close, 3 months to Rehab, 1 month to get it fully rented,  6 months seasoning.  That equals 11 months from cash in to cash out.  Will you have the cash to start one BRRRR project and do a Flip in the middle of that timeline?  I am not trying to rain on your parade.  Just providing things you need to be thinking about.

I would suggest targeting 4-Plex's to get you there faster.  Or even small apartments (5 - 30 units).

If you build up enough cash you might want to Buy with Cash and use Delayed Financing.  It would be the quickest method of acquiring properties.  You would have greater buying leverage and you can Refinance one day after closing.  The down side is the Refinance applies only to the purchase price appraisal.  You will receive 70% of your cash back.  It will not include Rehab costs or Forced appreciation.

Kevin Wiley · Answer

Thank you sirs. I really enjoyed the process of flipping a home and kind of want to do it full time as well. I enjoy the grind of a flip much more so than my day job with a title company.

Does anyone know any investors in Clearwater/Tampa/St Petersburg area? I'm having a tough time meeting other investors.

How can I acquire 30 units in 3 years?

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