32 Rentals – What’s Next?

Question

Hi everyone,I’ve been fortunate enough to acquire 32 rental properties by the age of 30. They’re currently 100% occupied, and I’m cash-flowing around $8,500 a month. Maintenance hasn’t been too bad so far, and I recently made the decision to sell my business, so now I’ll be living off my rental income.

My question is: What should my plan be from here?

I do have some balloon notes on a few properties, and I’m wondering if banks might see refinancing as risky since my primary income now comes from my rentals?  Would a cash-out refinance to free up equity and keep growing be a smart move, or should I focus on paying down my existing debts?

I’d love to hear advice from seasoned investors. How would you approach this situation to keep scaling while staying financially stable?

Thanks in advance!

Matt Devincenzo · Answer

Where do you live, and where are your units? At those price points I'm assuming this is a more cash flow area like the rust belt, or other mid west geography. Is your $$$/mo CF a true CF, or is that your net right now without any maintenance coming up? Do you have a PM or is this your job now?

Overall I would personally consider how I can still grow with the freedom that I have focusing on my real estate. Consider offloading an underperformer, or a high equity property and getting better, larger or more assets. Do it very intentionally, not just for the sake of scaling up, but to get better quality or easier to manage properties that will replace lower quality or harder properties.

As far as financing, if you have real CF then it shouldn't be an issue. Try talking to local banks who want to do business with you. Also listen to them if it is difficult to get financing...they're telling you that your math may be off. I have a friend who is a banker locally, he's seen business bank numbers for 40 years...he know what makes a strong business client and when it is a weak business with some good years. If it is a good business with a hard to finance issue, he'll work with the loan team to figure out how to lend to them. He knows the loan will pay and they won't default because he knows they're solid.

Gregory Schwartz · Answer

@Jose Martinez Do you want to grow or coast? Growing means refinancing or selling in order to acquire more assets. Adding value and seeing how big the empire can get. Of course, growing has inherent risks involved. Just like doubling down on a bet you could lose it all. Coasting means taking risks off the table. Paying off the notes, working to pre-emptively make repairs to capex items before they fail or become a major issue think roof, HVAC, and foundation. You increase the likelihood that you continue to receive that $8,500 each month.

Maybe while your portfolio goes into a coast mode you can take advantage of growing personally or starting a new business.

Alecia Loveless · Answer

@Jose Martinez I use a local regional bank that has about 15 branches in northern New England. They view each loan individually and have been lending to me even though I only work my W-2 on a limited part time basis. The majority of my income comes from my rental portfolio.

I’ve got 31 units, and have been filing my taxes on all income from the rentals since I started investing 5 years ago.

The bank does still ask for my tax returns each year and with each deal and my adjusted gross income last year was comparative to your stated cash flow from your rentals.

I would think you should approach some local banks and see how they will handle your situation. You may find 1, 2, or more that will be flexible like mine is.

Basit Siddiqi · Answer

Congrats - you won the investment game!What do you like to do for fun?I would look to see how you can find more time doing the things you enjoy.It is not always about making more moneyCongrats!

Andre Brock · Answer

I agree with @Shawn Ackerman I would start applying the cash flow to debt pay down.!

Shawn Ackerman · Answer

@Jose Martinez if $8500 per month was your cash flow number and you have reached it then it is time to start paying down the debt.  If you'd ask this question while still employed I'd say apply the $8500 toward knocking down the debt quicker but since that is not the case I would build up your reserves to about 6 months then begin applying those funds to bring down the debt.  I'm assuming you are arriving at your cash flow number by applying Gross income - cap ex, maintenance, utilities, vacancy, tax, insurance, mgt, landscape/snow & Debt service?

Congrats on your hard work. Still a bit more work left.  I think all of your attention needs to be applied to paying down debt!

Jaycee Greene · Answer

Hey @Jose Martinez, welcome to the BP Forum! I just helped one of my clients do nearly the same type of deal (his was with 40 SFRs) where he refinanced with a local bank and cashed out 7 figures.

Sharon Porter · Answer

Hi Alecia,

Where in MA are you located. I also live in MA. Maybe we can have some discussion on how do I grow my portfolio in MA.

32 Rentals – What’s Next?

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