How did you personally scale your portfolio?

Question

First of all - Merry Christmas! Hope everyone is doing well!

I'm sure we're all making some new years resolutions and potentially planning to scale our portfolios in the coming few years. That being said - how did you personally scale? If you did it again what would you do differently or better?

I'm reaching the crossroads where it's about time to scale. The "business" is caught up paperwork wise, netting solid returns etc. I bought my first place then realized this wasn't a quick road to "retirement", then started to realize after you get a few places the capital goes quick, and finally got to a place where the next step is scaling into something larger. I personally don't plan to be a "guru" and RE is only part of my investment portfolio. But I think, with the right properties - it works.

I bought my first one on the MLS (duplex), second from a private seller (fourplex), 3rd from a wholesaler (SFH), 4th off-market facebook post, 5th was a house I moved out of, 6th as foreclosures and bought a new  primary house that was also a foreclosure. So almost all different methods - which was good and bad. I can't tell you which was the best - they all kind of just happened...

That being said, the capital goes quick  - the BRRRR method seems the most viable way out of this. So you're looking at buying in cash (ok), rehabbing (ok), then having a seasoning period (ouch) then refinancing. How are we getting around the seasoning period (I want to say it changed from 6 months to a year)?

The next thing is getting more leads, leaving less in the properties (I'll be going with DSCR loans now that my personal DTI is as high as I want it), possibly start a partnership and scaling.

So how personally do you like to scale? What'd you use for your main source of funding and how did it work out? If you could change anything, what would you change?

Nicholas L. · Answer

@Chris Seveney

agree with you that partnerships are key.  but... don't you need to bring something to the table?  a lot of investors come on BP with nothing to offer, and so they think they'll "partner" to get... everything they need to invest.

I believe that you should have at least a few deals done before you partner.  I listen to Joe Fairless's podcast even though I don't invest in commercial or large multi (yet) and most folks do a few deals and then partner.  some manage to jump after a single deal, others accumulate dozens of units first.

thoughts?

Chris Seveney · Answer

I have never heard anyone say they partnered with someone too early if its the right partner.

Jeremy H. · Answer

Solid questions - some of these I have figured out.

For the time being I prefer to work alone because I like absolute ownership. I am still in the SFH residential space which I like and plan on staying in for awhile. Just because it's straightforward and predictable. I am however open to the idea of partnering.

I've outsourced property management and plan to do the same with leads/deal finding. I plan to use propstream and SEO (may need to simplify that) to target sellers, then leave the contacting/following up with a calling agency. SEO more likely since I can automate it and it's less time consuming.

I don't like to do book keeping but I haven't found someone reliable that I trust yet. I do this myself now also because I don't have the funds to outsource it, for the time being. I also like analyzing the properties and how they perform.

Money - for the volume I get into I will need a money partner. The thing to contend with here is it just leverages everything more and costs more in the long run. I have been self funding so far.

I work out of the country for roughly half the year which is what makes things difficult (W2 is solid ~200k/year) - I have houses that sit vacant for months at a time simply because I can't meet with a contractor and oversee the project. Having an "employee" to do this can often raise the cost to where the deals don't make sense anymore. Then I'm down to doing fewer houses. It's a weird combination. Like I don't quite have the funds to outsource everything but I don't have the time to manage everything either. Something I need to visit apparently and see what I can outsource and what would free up the most amount of time.

My spouse is not involved in my RE whatsoever and has zero desire to do so. So that's a no go.

Partnerships is something I have been looking into more and more - I need like a little of everything lol. That is a new years resolution I have this year - to get more involved and in the RE world. And I think a partnership is an inevitable part of the journey and scaling - if you want to do more than a few houses a year.

At what point did you decide to partner?

Chris Seveney · Answer

@Jeremy H.

1. Ask yourself are you better off alone or teaming with someone ?

To consider this- ask yourself what are you good at and what are you not good at?

Ask yourself what you like and do not like to do

Most of the times you are not good at what you don’t like. Can you partner with someone to grow your business?

For example, if you need more leads is there someone you can bring on board for that?

If money is an issue, is there a money partner ?

Put together a three year plan of where you want to be, how to get there and who you need to get there

Map it out and start to implement

It will not be a straight road but atleast you have started a road map