Self rehabbing my rental properties

[Gareth Fisher]

I have been buying and rehabbing properties for a few years now. My first was a BRRR. It went well. My second was a flip it did ok but didn't like the added stress of having to deal with agents, the buyers, inspections, banks etc etc. I have 2 more projects in the works. My plan was to flip the one because the neighbors are a mess and I don't want to hold the property. The other I am rehabbing and will be doing a cash out refi then renting out. I also am a general contractor, so I have been doing all the work myself and paying myself.

Generally it is taking 20 -25 k to get these properties up to par once my labor is factored in.   Therefore I am generally having to take out the full 80%ltv.   Which leads me to this question.

 If I am having to borrow money to buy the places, then borrowing to pay myself back for the labor in the rehabs.  It seems that my whole income is now reliant on me leveraging myself or borrowing money.   I was raised conservative and something doesn't seem right.   However when I run the numbers everything seems to work.      So I dont know why this is causing so much anxiety.  Anyone have any thoughts?  It also strikes me as odd that I don't have to report any of it as income... also seems really weird, I guess because I now owe this money?

I guess in another words even thought my bank account continues to grow and my cash flows will continue to increase,  it seems this will be offset by greater debt and liability.    

[Mitch Coluzzi]

It is all about your comfort levels and growth goals. You are absolutely leveraging yourself, but using someone elses money (the banks) will allow you to make more for yourself with what you have and expand further, faster. 80% LTV on rentals is higher than I personally prefer, but that is a decision for you to make. My suggestion would be to set growth goals and stick to them. Utilize your rehabs to build cash reserves while you build your passive rental foundation. Live within your means regardless of what your bank accounts show. When you hit your growth goals, reassess your reserves before making new goals. You may find that having enough liquid to pay for a year of mortgages / holding is your preferred comfort level. As an investor, I keep 8 months of "if the bottom falls out 100%" money saved up. If 50% of my rentals stay active, that gives me well over a year to figure out a solution. I keep my rentals leveraged between 50 and 70% so I stay relatively recession proof. I personally like to be prepared for the bottom and... if a crash comes I have extra liquid / available equity funds to keep buying (assuming my doomsday predictions are overshot). My new investments get added onto more aggressive amortization schedules. My goal is by 2035 to have 102 free and clear units...