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Discouraged. No idea how you pros do it!
It varies depending on the person. Some people cash out refi to but addition properties in cash, some have large down payments, some have large cash reserves in the bank they are taking the loan from, some people just have a really good relationship with the bankers they are borrowing from, some use portfolio loans that don't need to conform to fannie and freddie standards etc. Find out which one of these works best for you.
That's what I am saying. I have tried my best to figure this out. I have a great job with great income. I have multiple properties each with lots of equity but this train seems out of steam. How can I possibly keep it rolling past the 7th property if I am going to need loads and loads of reserve funds to get to 8?
The math just doesn't work
So confused
If I cash out to buy another "all cash" property my cash is tied up. If I later refinance the all cash property now I am adding another financed property subject to high reserve fund requirements and DTI limits etc
The system is set up to make it really hard to get past 7 and near impossible to get past 10.
Yet people are on the pod cast like "yeah I buy 10 a year and I just financed my 45th" like, what?? How? ??????
All the videos and posts are motivation. I don't need motivation (I have lots of it). What I need to know is how on earth these people are actually making this happen!
Thank you
maybe you can shop lenders? or don't use a mainstream bank? I know there a lot of ppl here and other companies that offer financing for investors. They are more pricey but allow you to go above 10 properties because they base everything on the deal. I never used one so I cant really give you a company to try but I know plenty of ppl on her have and can steer you in the right direction.
That's what I am hoping for Matt. To be sent in the right direction. I have lots of potential I think but I need to get past this rut.
Hard money is not good for buy and hold if they have short payback terms and high rates.
There must be some trick that I haven't yet figured out.
Many hard money lenders will help you out if you have assets. It's not based solely on cash, so you can continue closing deals without waiting for the cash from the previous properties to come in. Asking for lenders for their lending guidelines is a great way to start to familiarize yourself with their business and how they can help you out.
I have two suggestions. First would be to find a different bank. Specifically, talk to bankers at the smaller, local banks. They often have less strict lending rules and put more weight on getting to know you vs. strictly the numbers. If you can get a local banker to trust you, you can get a lot of leeway to do more deals.
The second is to trade up properties. I'm not sure what your current 5 properties are, but if they are all SFR's then maybe sell a couple and 1031 them into a 4 plex. More units but fewer properties. Ultimately if you want to keep growing in residential real estate you will have to make the move into multi-family. Maybe that time is now.
Good luck.
@David J. You have 5 properties right now - that's a huge start. It's safe to say you have figured out the buying, renting, and rehabbing parts of BRRRR. Now is the time to get incredibly proficient with your financing knowledge. There are many different ways of making your cash continue to help you grow your portfolio, but you've got to figure out how that works in your scenario. You should look into portfolio lenders, cash-out refis vs. rate term refis, down payment reserve accounts, etc. Fannie Mae loans can only be taken so far.
Thanks Jason
I have been working with one lender who has become a trusted friend. He's working magic for me all the time.
I have some moves left, but he has already warned me that after these moves the next ones will be difficult or not feasible.
I am going to refi 3 (leaving 30% in each) and pull out $210K which I want to reinvest in 3 or more (California properties) but he's already saying the most he can do is 2 because the reserve requirements get "insane" after that.
Looks like after the next few deals I am going to have to get very creative. I am just not sure how it will work or what to do.
You don't have to get creative. The answer is find a different bank. I use a smaller local portfolio lender and they don't even ask for required reserves from me.
Experience: currently at 141 rental units across 58 properties in under 7 years with several BRRRR's.
Austin Fruechting that amazes me. It almost seems unreal that someone could have 58 financed properties. Wow! Awesome!
I sure hope I can figure that out. I will look for local banks and see if I can meet someone working as a loan officer there. Mostly we only have big banks like chase, BOA etc.
Do those local banks who don't require reserve funds have good rates?
I'm not the best person to answer; I only have 4 rental loans (BRRRR style) and haven't begun to bump up to the limit.
Keep reading. You're seeking the lowest cost loans that are "conforming" and are originated by your banker/mortgage company, and are available for them to spin off (sell) on the secondary market because they are Fannie Mae/Freddie Mack "conforming" residential loans. As I understand it, the 10 loans maximum means that you eventually need the 9th or 10th (and beyond) loans to become "commercial" loans. Others I have read about and learned from, get a relationship with a local lender and have loans on 30 or more properties. They can borrow (HELOC) style on multiple properties in a combined/blanket loan to easily access cash for another purchase.
Rates on the commercial side will be higher. I've seen online nationwide lenders (colonyamericanfinance.com and b2rfinance.com that offer these loans....I think they even advertise here at BP)
Originally posted by @David J.:
Austin Fruechting that amazes me. It almost seems unreal that someone could have 58 financed properties. Wow! Awesome!
I sure hope I can figure that out. I will look for local banks and see if I can meet someone working as a loan officer there. Mostly we only have big banks like chase, BOA etc.
Do those local banks who don't require reserve funds have good rates?
It varies place to place. It won't be the best terms possible, but comparable. Usually a little higher interest rate by ~0.25% for same amortization (many don't like to go beyond a 20 year amortization).
I think when you are hearing that someone is doing 10+ deals a month, year, whatever they are not buy and hold investors. I move through over 20 or 30 a month but the trick is that I am a wholesaler, I don't hold these properties, in fact I never have my own money tied up in the transaction at all. I assign the contracts and so the end buyer is the one to fund it.
Usually when someone says they do a lot of properties they are not talking about properties they intend or even could keep. They are using hard money, private money, or out of their projects fast enough that the fact they have their capital tied up for a month or even a year doesn't kill them.
You might consider 1031exchanging into more valuable/higher cash flowing properties or even using your 401k (or whatever retirement account you may have) to fund something as well. These are all questions for your accountant really but if you are finding that your personal limit is 6 or 7 or whatever your number is then use them to create more wealth. Get creative.
The last thing I would say is if buy and hold (BRRRR) is stalling out for you then switch it up. If you have reached the highest potential return or at least a point of dramatic diminishing returns then figure out how to do something else. Look into flips, you already have the basics down, to build the capital reserves you need up. If flips don't interest you then look into notes, wholesale, lending, etc. just find a new avenue.
That is probably the biggest secret to this game, no one solution is ever the only solution. If you are finding that you are having a screwdriver problem the hammer method could work but it would be better and easier if you just used a screwdriver. Cheers and good luck!
Originally posted by @David J.:
If I cash out to buy another "all cash" property my cash is tied up. If I later refinance the all cash property now I am adding another financed property subject to high reserve fund requirements and DTI limits etc
The system is set up to make it really hard to get past 7 and near impossible to get past 10.
Yet people are on the pod cast like "yeah I buy 10 a year and I just financed my 45th" like, what?? How? ??????
All the videos and posts are motivation. I don't need motivation (I have lots of it). What I need to know is how on earth these people are actually making this happen!
Thank you
We go up to 10 financed properties without blinking, including cash out refinances, up to 15 financed properties if you're cool with ARMs, and it does get a little bit in the "wtf why don't I just use HML/commercial" zone after that, but you're a ways off from this actually being an issue.
And of course married folks can do 10 in her name alone, 10 in his name alone, bringing you to 20, 30 if you're cool with ARMs.
#5 Wholesaling Contributor
- Real Estate Broker
- Naples, FL
OPM is the key whether it is the banks money, friends, relatives, HML.
When you get over 10, you need to start looking for community banks as Fannie won't consider it anymore. And some banks are easier than others, so you definitely need to look around.
Also, it takes time. BRRRR is the get rich slow scheme. You seem to be making good progress. Keep pushing, but be patient with the process.
Ok. I ran into the problem also. We bundled 10 homes together, and received a 70% ARV using their appraisal (yes were a little low). I think it was closer to a 60-65% but it did free up cash. We were able to get the loan on a 20 year amortization, 5 year fix, with up to 1 % up or down every 3 years. We also had a clause that if we sold any of the properties they would be released but the proceeds went to the balance. It helped us get more property, but now we are getting to sell one, and I will be losing the $700 month, and reduce what I owe, but the mortgage will be the same. So they are the disadvantages also.
Key is make several relationships with numerous small banks. If it was easy everyone would be doing it, Just stay persistent and keep fishing you will find the lenders, just like when you find the deals to buy.
2 words; private lenders.
I often get 100% financing on my deals from my private lender network. My last deal I had a total of $5,500 into it.
Jason Johnson Great thread question!
I'm going through similar questions.
I found this podcast with Caeli Ridge of Ridge Lending Group very informative about maximizing your Fannie Mae loans. It gets into specifics about new reserve requirements and they don't sound unachievable. The link probably won't work, but you can copy and google it.
https://itunes.apple.com/us/podcast/simple-passive-cashflow-podcast/id1118795347?mt=2&i=1000384530055
Ultimately, I agree with the other posters that private lending is the way to go when you are ready.
Originally posted by @Garrett M.:
Jason Johnson Great thread question!
I'm going through similar questions.
I found this podcast with Caeli Ridge of Ridge Lending Group very informative about maximizing your Fannie Mae loans. It gets into specifics about new reserve requirements and they don't sound unachievable. The link probably won't work, but you can copy and google it.
https://itunes.apple.com/us/podcast/simple-passive-cashflow-podcast/id1118795347?mt=2&i=1000384530055
Ultimately, I agree with the other posters that private lending is the way to go when you are ready.
I listened to the post cast and it was really great! thank you for sharing!!
