Buying Strategy with $80k For Rentals

[Tyler J.]

I am trying to figure out the best moves to make for my next couple of rentals and I am hoping you guys can offer some advice. First I will start off with a little background.

I am 23 with a full time job making $60k a year. I live pretty frugal and save about $15k a year that I have been using to fund my rentals along with a few successful flips (will not be doing anymore flips anytime soon). I do not have a set end game at this point, I just want to continue adding more rental property.

I currently have 3 single family rental properties. Two of them have mortgages and a third is paid off. They average about a 20% cash on cash return. 

The properties in my area are in a C class area and I can get them usually for about $30k with putting about an additional $5k into them, roughly. 

I also have my primary residence paid off and the house is work $125k. I am considering getting a new mortgage on it for about $80k to use to continue buying buy and hold properties. I am not sure if I should buy 2 additional houses in cash or if I should use the money as a downpayment and fix up money for multiple. This is also assuming that I will be able to get multiple mortgages without my DTI getting to high and feeling uncomfortable.

Any advice to me would be great appreciated!

[Jay Hinrichs]

@Tyler J. 

  just remember as you get older your expense's will grow.. family etc.

as you make more money your taste's will change to,,, or normally they do... Kind of Human nature to treat yourself to things you may not think you would do today.

If your in a town and it sounds like you are where you can buy these low priced assets its one of the great things we can do with nothing more than a modicum of education and effort and desire and create some financial security... And at those price points I would also look at trying to buy some owner financed deals.. show the owner were a no interest short term loan's NPV  ( see J Scott's post on the topic) equals long term higher rate of return.. shoot for break even and even negative cash flow on those but know you will own them free and clear in 3 to 5 years.. your young enough to do this.. and as your own contract 0 interest notes pay off month by month your cash flow goes up exponentially and so does your net worth.. NO one can criticize you for owning RE free and clear..

Get 20 of these homes paid for over the next 10 years and there you go your 33.. with 10k a month net cash flow and no debt.. now that would be cool right?  and with no debt you can ride out any storm that may come your way.

So that's one way to look at it.