I don't see how this is sustainable

[Matthew Thompson]

Hello, I just finished "The Book on Rental Property Investing". I enjoyed reading the book, I found it very inspiring and informative and I appreciate how the book shows you real world examples on how you can build your real estate fortune.

However I see one major problem that is like a 800 lb gorilla in the room. Financing. The book tries to deal with this, but I don't see how you can make money unless you get low APR fixed rate non balloon mortgage. In other words, a traditional bank loan.

Essentially, you can really only go as far as your income allows. You can buy a (potentially) 150K SFR for 80K and spend 20K to renovate it. You can then straight flip it or rent it out. If you make say, 80K a year you can do this two or three times before the bank will start refusing you loans.

Sure, other ways to get money do exist. Maybe you have a rich buddy, or maybe you can find a loan shark, I mean, hard money lender, that will set you up with a 20% APR loan with a balloon due in 2 years (because you're going to 'season' the property and refinance right?). The fact banks usually only count income from rental properties at 75-80% of what you're actually getting should throw up a red flag.

Some people do pull it off though. It's possible yes. Basically the people who pull this off aren't just property investors but loan brokers. In fact I'd argue that it is in selling loans to banks and securing profitable financial arrangements that they make their real money. Without that skill, they are just holding a few properties and making 10% or so APR per year on that, which would not be enough to live on.

I'm still interested in property investing. However, I think I am going to stick to straight flip and sell or perhaps paying cash for properties and rending them out while slowly acquiring them over the years. 

Another option I've considered is putting 20% down on a $800,000 MFR complex (10-20 units), but that would require commercial financing, and since I have no experience, I don't think I'd be able to qualify for a commercial loan. Correct?

That is, unless someone can explain to me how I'm wrong here. I'd love to be wrong. I'd love to quit my job and live life on my own terms.