Next Step -- Growing the Business

[Brad Gibson]

Looking to Bigger Pockets community for some ideas and advice about what comes next.

I'm finalizing my 9th investment property this month.  I started with my first investment property purchase in September of 2016.

All of my units are SFR's and have been done through conventional home mortgage loans. I have a small balance on my original home loan, so that brings me to the cap of 10 total loans allowed by Fannie/Freddie. I manage all of the properties (with the exception of one in another city) and maintain a VERY full time job as a trainer/consultant. All told, the rental properties should earn conservatively 70k net during the next 12 months.

So my question is what comes next?  How do I grow the business and scale it?

Option 1) Use cash flow to pay off smallest mortgages and then purchase the next unit using conventional mortgages through Fannie/Freddie.  The pros are that I'm very familiar with finding quality deals.  I have a local team in place for finance, repair/rehab labor, and quality systems in place to manage things.  Cons: This doesn't seem like an efficient way to scale the business and eventually, I will either have to quit my full time job or find a property manager. (I've tried two property managers, but have fired both because of poor performance...I have one for my out of town property & he is amazing)

Option 2) Use commercial bank financing through my local bank to continue making acquisitions of SFRs to grow the portfolio.  The pros for this are that it allows me to keep the current low interest mortgages and puts new cash flow into new acquisitions to grow the portfolio.  The cons are that the interest rates for these deals are significantly higher than the conventional mortgage loans (1-2 percent higher) which cuts into returns.

Option 3) Save a larger chunk of investment cash for the down payment on a multi-family (small apartment complex) property.  The pros of this is the ability to add lots of units under one roof and to scale the business.  The cons are that I have zero experience evaluating multi-family properties and determining if it is a good deal or not. This scares me considerably since it seems like a whole different world. I would also likely need to hire a property manager specifically for the complex while the talent pool in my area is VERY thin & expensive.  Quality individuals are hard to find and the wages they can command are also very pricey.  It's a part of the reason why the real estate market is so hot as well.

Option 4) I'm open to other ideas, because I legitimately am not sure which is the best way to proceed.

Thanks in advance.

[Aaron K.]

It really depends on what you are comfortable with, a lot of people will go the commercial route or explore blanket loans if they want to be the most efficient others would pay down some mortgages to mitigate some risk, it depends on what you are most comfortable with.  Also it might be a good idea to test out some more property managers now so that when you do get more units you aren't dealing with a bad one when there are too many units to handle yourself.