Need to buy more rentals! How to finance them?

[Greg Barber]

My wife and I have been buying rental properties for 20 years. We currently own 13 rental properties and have paid off all loans/mortgages including our primary residence.  Our goal has always been to bring in enough cash flow to cover ALL of our living expenses.  Unfortunately we are not quite there yet. We need to purchase at least 3 more rentals in the coming years.  I am a realtor and believe my income will not be as high as it has been for the past few years moving forward.  My question is, what is the best way to finance more rentals?  Should we do a conventional loan? Should we borrow against our primary residence or rental properties? Should we do a margin loan against our investments? Or should we sell 3 parcels of land we own and use that money to buy more rentals?  Any advice would be greatly appreciated. Thank you!

[Tim Delaney]

It sounds like you're in a pretty good position with some nice options. I would probably start by analyzing the current returns you are getting on the 13 properties. Is there a way to increase the cash flow from those? Are they all maximizing returns? The return on equity is probably very low considering they are paid off so maybe explore refinancing or selling the lowest performing one(s) or your biggest headaches to reinvest in more lucrative deals.

I noticed you also used a metric of number of rentals to attain your goal rather than $$$/month. Why do you need three properties? Could you sell 1-10 of your existing properties and reinvest in one or two more lucrative opportunities?

If you are set on your strategy of just adding 3 more rentals then you should probably leverage your network of lenders and discuss best options with them to free up some cash for more investments. Remember that the leveraged purchases are not going to add significant cash flow immediately and borrowing against existing properties will also reduce their cash flow.