Direction for scalability?

Question

As someone who is starting out, I am trying to figure out the best direction to scale my real estate portfolio. I currently own a 3 family home with cash on hand and access to hard money.

My main goal is buying and holding for cash flow but with the multi family market so high it is hard to find deals that are giving a decent return.

So what should I do?

- I like the Brrrr strategy but have trouble finding homes to execute this on...maybe this is a work ethic problem but I am interested to hear where people are finding these homes?

- I don’t mind buying a beat up multi and improving as people move out

What are some other options and opinions I am open to just about anything as long as it will get me to my goal

Thank you in advance for time and help

Gualter Amarelo · Answer

@Bobby Pagliarini this is a great question and I do run a training every Monday at 5pm EST that is focused on getting real estate investors in the Massachusetts and Rhode Island market together and on the phones calling motivated sellers.

I have found that either cold calling yourself OR ha ing wholesalers and real estate agents cold-call your lists for you can be an amazing way to generate deals.

I see you are from Providence area. Are you considering buying in Pawtucket? I've seen some opportunities in the following cities: Central Falls, Pawtucket,  providence, Woonsocket, but you have to be in front of the sellers before an agent gets there.

I currently invest heavily in Fall River and am considering expanding to New Bedford and am available for any questions about investing anytime my friend.

I love helping my fellow investor find off-market deals!

Ps, I don't charge anything for my deal finding trainings, I really just want you to find the deals, lol

Cheers to your success!

Joe Rodriguez · Answer

@Luan Oliveira Yes, FHA. I've been able to use FHA twice by buying, renovating, and refinancing once I hit 20% equity in the property.

Bud Gaffney · Answer

@Joe Rodriguez Hi Joe,

Have you looked in the Fall River, New Bedford, Taunton markets? These areas seem to be some of the best cash flow cities in the state. Please PM me if you want to discuss further. Anything I can do to help please don’t hesitate. Good luck :)

James Ma · Answer

That's part of the reason I'm looking at putting a syndicate together -  to enhance the ability to scale faster and generate more passive income and reach financial independence quicker

Stephen E. · Answer

@Bobby Pagliarini you might want to look at out of state properties. It's not hard to find places in Indiana, Mississippi, and Alabama that rent for 2% of the home price. The difficulty is then not finding a place so much as finding a good property manager. But that might fit your strategy better. That's what I've been doing recently, so I speak from experience.

Kai Van Leuven · Answer

@Bobby Pagliarini

I have been anti-scale for most of my investing career. I have always taken the position that I don’t need 200 assets that perform mediocrely. I would like 50 by the time I am done. 50 really quality high performing places. I have 35 years until I stop buying.

I always hear people bragging saying “Just Bought my 10th house this year!” If you bought 10 bad deals you could potentially be worse off. All it means is that someone was willing to lend you money on 10 places.

Anthony Thompson · Answer

@Bobby Pagliarini I've struggled a bit with how to reply to this.

I guess this is because I'm interpreting the question as, "I don't see numbers out there that look good, but how do I keep buying and expanding anyway?"

I think there are two basic answers, only one of which is usually discussed.

The first one, the one which is the standard reply, is that you just need to look harder to find deals where the numbers do look OK/good. Contacting owners directly through some method (direct mail, post cards, SEO/web ads, etc.) to find "off market deals" is the usual recommendation for this.

And I think there's some truth to that, and opportunity in it - but at this late stage of the market, you should know if you go this road there's a lot of competition so you will likely have to spend months of consistent effort to eventually find something acceptable. I do think you can succeed with this method, but you should know how much work you're going to need to put into it.

A related recommendation is to contact wholesalers and try to get on their buyers' lists. If you do have cash on hand and access to hard money, you can certainly do that, but again this will require a fair amount of work as the deals I'm getting sent from most wholesalers these days are usually close to retail price or are just way too thin. I've also noticed a lot of wholesalers trying to start bidding wars among multiple cash buyers, which further drives up the price of course.

Again, I think you can succeed with this method, but it is a grind and you're going to have to kiss a lot of frogs to find an acceptable prince(ss).

The second answer, which almost no one wants to hear or talk about, is that if you just can't find properties where the #s look good... don't buy anything.

It's almost heresy here on BP, but to me, when #s are high and people seem to be paying prices that don't make sense, and doing other crazy things like buying properties without inspections... it may just not be the best time to buy.

No one wants to hear that because it seems like everyone they know is making major money in real estate, and they want to join the party, but I can say that I saw the same thing in 2006 so when I start to feel a sense of "irrational exuberance" in the market, it makes me want to reassess things, start to add more cautious assumptions into my property analyses, etc.

So I think your three choices are: 1) buy something at full retail even though the numbers are awful (and pray rents keep going up as they have for the last decade, so you can service that mortgage); 2) spend a lot of time and effort finding an off market deal (maybe the best option, but I guarantee it will be a grind); or 3) accept that the market is crazy right now and wait until the market changes and #s do start to look better in general.

I'm not saying that any one is the right choice, just that sometimes the right action can be no action at all (right now). Obviously that may not work for you and your personal situation, goals, etc. but I think it's at least worth considering that option as well.

Joe Rodriguez · Answer

@Bud Gaffney I have not looked into Fall River, New Bedford, Taunton markets. I'm hesitant as I'm not too familiar with those areas but I've been interested in doing more research. It just happens that it's in the middle of where I live (Melrose- North of Boston) and where I grew up (providence). Also, my dad who is a carpenter pretty much takes care of my properties and it's easy for him to get to Providence from Warwick (where he lives). But if I get to a point where I can't find anything in Providence, I'll definitely consider those areas.

Joe Rodriguez · Answer

Hey @Bobby Pagliarini I'm in the same position. I live in Boston and bought a 3 family in Providence on Fed Hill last year at a great price. I grew up in Providence so I know the areas pretty well. I've been looking for another one since then but haven't found much with the numbers that I want. Now I have to say I've mostly been looking on market as I'm also an agent and making money back on the buy offsets some of the down payment (as I'm using 3.5% down loans). I need to start putting more time towards off market deals.

Luan Oliveira · Answer

@Joe Rodriguez you mind sharing more about these 3.5% loans. Or is it just FHA?

Direction for scalability?

Most Popular Reply