How do you get to the second property after acquiring the first?

[Walmsley Gedeon]

After securing my first multi unit under FHA how do I purchase the next property without having the funds to renovate a new acquisition? I'm trying to gauge my steps and I was wondering how do I keep this momentum perpetuating to a successful portfolio with limited funds to work with? Any relevant advice would be appreciated. I'm investing in NJ. Thanks everyone.

[Kerry Baird]

Most of us have the ability to obtain 10 conventional mortgage slots at this point in time.  And then there are portfolio options afterwards, from loan 11 onward.

I see two main options:

1.  Save up.  Get serious about saving for down-payments.  The first 6 investment mortgages are 20% down.  An option would be to fill the early mortgage spots with multifamily 1-4 units, to improve cash flow per transaction.  Mortgages 7-10 typically require larger down payments of 25%, and at this time credit scores of 720 are needed.  Reserves are also needed for all of the houses, except the one you owner occupy.  AFTER you get your first 10 properties in this manner, go to portfolio lenders.  

I recommend you listen to a recent podcast by Jason Hartman, episode number 758 where he recently interviewed one such lender.  This lender discusses what the requirements are for their longer term private equity lending.  The interest rates are higher than conventional, but this lender, and other similar lenders, are able to finance properties in entities.  That is something that is challenging to obtain in the conventional world, as conventional lenders do not often want to lend to entities, such as LLCs.  Additionally, the lender in this podcast is able to bundling a few houses under a single loan. 

2.  Buy one owner-occupied building.  4 units gives more cash flow, again.  Rent 3 units and live in one.  Remain in this property for one year, to fulfill the obligation set in place by the lender for owner occupied properties. Move out and buy another.  Understandably, you might not want to live in a multifamily property.  However, owner-occupied situations provide the lower interest rates, and smaller down payment requirements.  Do again 12 months later.  Do again 12 months later.  Keep on.  The best interest rates and down payments are on owner occupied houses.