Buying with 20% down? Strategies to scale faster?

Question

Hey everyone! Merry Christmas to all! I recently closed on my live and flip in Las Vegas, NV for a profit. I now moved to Chattanooga, TN and I am here putting in offers on properties here to house hack for multi family only. (Duplex, triplex, 4 plex). My original goal was to buy every year or two putting 20% down but that seems like a lot of money to throw on each property. In my situation house hacking each year or so makes sense, but I would like to scale at a decent to aggressive pace. (1 property a year, then possibly 2 a year in the future). I have considered to do just the one house hack then buy pure investment properties as well, but the financing may become more difficult that way without 20% down. My father wants to invest as well but he only has 55k so far. Working on developing some strategies to make my life easier!

What are some strategies you have been successful with?

Kelly Rastatter · Answer

Care to elaborate on these points or reference where he can learn them?

Shiloh Lundahl · Answer

@Travis Jacobs Scaling up is easier than you think but harder than it is to say.  The way to do it starts with building a good relationship with a bank/banker.  Then finding out from them about the refinancing options/rules or policies that their bank has.  Then, as @Kelly Rastatter explained, you buy properties that are under valued that after you get them repaired (and when I say you get them repaired, I mean that someone does the repairing and it doesn't need to be you) the property is work more (25 - 30%) than you have invested into it.  You will probably need to use a combination of private money lenders or hard money lenders to do this.  Then you follow the bank's guidelines on refinancing the property and you usually don't need to leave 20% into each of the properties because you created value and the value is some or all of the % than you would need to leave into the property.

Kenneth Garrett · Answer

@Travis Jacobs

The method of the BRRRR strategy is your best option or a variation of it.  Whether you house hack or not; forcing the value through rehab is your best bet.  Since the BRRRR method requires buying properties at discounted rates that need repair they most likely will not qualify for traditional financing.  This is how private funding or hard money will help you scale.  Working with a banker that will solve the biggest issue of DTI is essential.

I use a lot of commercial lending to avoid the DTI issue even though the interest rate is higher.  Scaling has some challenges when your holding property.  As you scale, your team becomes more essential as you can’t do everything yourself.  Figure out your goal of scaling and build your team accordingly.  I use multiple lenders, because scaling requires diversification.

Kelly Rastatter · Answer

Yes, you can scale faster without putting 20% down but it will require typically the use of other people's money or value add to build in the equity or both. I have used private and hard money to fund houses that either the house or seller was distressed and solved the situation or fixed up the house to add value and create the equity and then either sold them as a flip or rented and refinanced as a brrrr. Just make sure to study and do your due diligence on everything that you'll need throughout the process because there are many pitfalls to avoid.

Bill O'Donnell · Answer

@Travis Jacobs

Using 3 to 5 % down on each, buy a quad, next buy a triple, then a duplex, finally a single. All fha. In order, a year apart.

If they require updating even better...

Theresa Harris · Answer

What about buying with 5% down and living there for a year or two and then repeating the process?

Joe Villeneuve · Answer

Sure.  To start with, it doesn't involve "buying low and selling high", Conventional strategies, or mos of the traditional methods of REI.  It starts with an understanding of how money "moves" and why.  It involves relearning and understanding new definitions of:

1 - Cost2 - Assets3 - Risk...and the implications of concepts to REI, such as:

4 - Exponential returns instead of linear returns5 - Living on the "left" side of the equal sign, instead of the "right" side.6 - Taking control of the system, instead of living with the answer (I guess that's just #5 restated).

...and refocusing on making money "move" and making "friends", instead of "standing still" and remaining vulnerable to its enemies.

Joe Villeneuve · Answer

Yes.  There are many ways to scale...and as fast as you would like to.

There are three things you have to learn first:

1 - How to analyze "Markets"...not (just) properties.2 - How "Money Works"...and I can guarantee this isn't what you think.3 - What is a "REI Plan", and how to design one specifically for you,...and

...How all three of the above knowledge basics MUST work together as one.

Buying with 20% down? Strategies to scale faster?

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