HIT WALL - OUT OF MONEY!! help, advice?

[David J.]

Hi 

I am having trouble breaking though to the next level (and trying to not become discouraged).  I managed to secure 7 loans with my own money and now I am mostly out of money (and options?)

With each loan acquired, the next one is more difficult than the last. Now I am hitting road blocks such as LARGE reserve fund requirements for each prior loan in order to secure a new loan.

I have heard of people getting 20+ loans and using BRRRR, but I don't know how to get over the hurdles to make this happen. Firstly, seems the lenders won't give out more than 10 loans, and reserve fund requirements are massive!

I am going to share with everyone my actual portfolio numbers and kindly seek your advice. I want to achieve financial freedom and I need to get to the next level somehow. 

Attached are my actual numbers- All on 30 Yr fixed ~< 5% rates

(all in NorCal market). Please give me your input or ideas. 

What would you do if you were starting now right where I am at?

[Jay Hinrichs]

I guess the question is what are the reserve requirements.. and keep in mind they are for your own good.

lack of reserves was one of the main reasons investors in the landlording business fail.

[Jay Hinrichs]

on the flip side I would be very proud of that portfolio !!!  job well done !

[Brian Hamel]

Sell SFH1, SFH2 and Duplex. After expenses you are losing money. Then go buy one like SFH5

[David J.]

Originally posted by @Jay Hinrichs:

I guess the question is what are the reserve requirements.. and keep in mind they are for your own good.

 I think the next loan (#8), the reserve requirements would be %6 ~$125,000. Plus I would need a down payment. Let's assume 25% of $400,000  which is another $100,000.  So I would need about $225,000 dry powder to get 1 more loan. 

Even if I could pull this feat off by some miracle, This won't get me to 20 homes. Much less, how on earth would I get 9 or 10? Not even considering I am hard capped at 10 by Fannie/Freddie. 

At this rate I should achieve financial freedom at approximately 212 years old :( 
(this isn't working, which is the problem)

[Jay Hinrichs]

sell everything and roll it into a small or mid size apartment this is what most that want to be life long landlords end up doing.

those that own lots of doors tend to have many paid for in cash..

[David J.]

Originally posted by @Brian Hamel:

Sell SFH1, SFH2 and Duplex. After expenses you are losing money. Then go buy one like SFH

 Single Family home 1,2 and duplex were all purchased within the last year. Duplex I have only made 1 mortgage payment on so far. (It's new and I am hoping to raise rents soon) 

where SFH 5 was purchased in 2012. I wish deals like SFH5 existed now but I think it's near impossible to find them at this point. I guess I could sell a bunch of stuff and wait with dry power for the market to tank. But then I am realistically just taking inflation kick in the teeth. Not sure about all that. I have made myself crazy trying to figure this puzzle out which is exactly why I am turning to this forum for advice.

Thank you :)

[David J.]

Originally posted by @Jay Hinrichs:

sell everything and roll it into a small or mid size apartment this is what most that want to be life long landlords end up doing.

those that own lots of doors tend to have many paid for in cash..

Do you think in the long run, the terms of a commercial loan would set me up for success better than hanging onto great 30 year loans at low rates? Would love to hear your analysis, as this could be a great idea. That SFH 5 cash flows like a beast.. Maybe I sell 4 of these and get an apartment out of California? ..

Small apartments in California Cost $2 million.. LOL

[Jorge Hernandez]

how about go 50/50 with another investor so you won't use any of your own money or try to find an owner financing deal. ( I'm sure you have already thought about that)

[Jay Hinrichs]

Originally posted by @David J.:

Originally posted by @Jay Hinrichs:

sell everything and roll it into a small or mid size apartment this is what most that want to be life long landlords end up doing.

those that own lots of doors tend to have many paid for in cash..

Do you think in the long run, the terms of a commercial loan would set me up for success better than hanging onto great 30 year loans at low rates? Would love to hear your analysis, as this could be a great idea. That SFH 5 cash flows like a beast.. Maybe I sell 4 of these and get an apartment out of California? ..

Small apartments in California Cost $2 million.. LOL

careful grass is not always greener.. REno is on fire so is Vegas though..  

[David J.]

Originally posted by @Jorge Hernandez:

how about go 50/50 with another investor so you won't use any of your own money or try to find an owner financing deal. ( I'm sure you have already thought about that)

 I have heard of joint venture investments like this. I tried finding youtube videos on the subject because I have lots of questions. Like, Who is on the loan?   This kind of deal likely will involve lots of trust with a partner.  I tried something like this with a girlfriend who is now an (ex) and got burned but I think the personal relationship was the mistake in that deal.  

It's a great idea, that I need to think over more.

[David J.]

Originally posted by @Jay Hinrichs:

careful grass is not always greener.. REno is on fire so is Vegas though..  

 Yeah well NorCal is literally ON FIRE.. the air is so smokey, But, that would be off topic. 

I get your point though. I like local because I love to be in the property and keep and eye on it. It's rough because I happen to be in a very expensive market.  

[David J.]

How are other folks getting 20 loans?

[Jay Hinrichs]

Originally posted by @David J.:

Originally posted by @Jay Hinrichs:

careful grass is not always greener.. REno is on fire so is Vegas though..  

 Yeah well NorCal is literally ON FIRE.. the air is so smokey, But, that would be off topic. 

I get your point though. I like local because I love to be in the property and keep and eye on it. It's rough because I happen to be in a very expensive market.  

I know I was born and raised there .. fully understand..  speaking of fires you can probably find some decent small multi up in Lake county or up I 5 towards Colusa Willows those areas into REdding..  

[David J.]

Originally posted by @Jay Hinrichs:

on the flip side I would be very proud of that portfolio !!!  job well done !

 For whatever it's worth, that is VERY nice to hear! Thank you!!

[Michele B.]

I think that you could start using commercial loans to get more doors.  For instance you could get a commercial loan to buy an apartment 5-100 doors using  the equity(from other homes) and some cash to move forward. 

[David J.]

Can a commercial loan roll up my current portfolio?

[Caleb Heimsoth]

Jason J. You have to get tricky with jr j believe. If you refinance all of them into one loan and put them in a s Corp it may work.

Confirm with a loan officer

[Bill B.]

almost all commercial loans are going to readjust interest in 5-10 years so be ready to sell or pay off by then if you can’t afford much higher payments. 

Reserve funds usually aren’t a problem assuming you are saving for retirement at a job as I’ve always been allowed to use 401k/Roth’s as reserve funds. 

20 loans ar available if you get 10 and your spouse gets 10 each individually. 

Look at some seller financing deals. 

Sell a few for a downpayment on a small multi and save up for more units with your 8-9 loans?

I would look at selling sfh 1 and duplex a they are making less than 5% cash on cash. That gives you $200k to buy a sfh outright in a cheaper but close market that would probably give you more cash flow than those two combined. Hard to find and. R200k house that doesn’t flow more than $500/mo with no mortgage. 

[Justin L. Morgan]

This looks like a nice problem to have! More than 3k in passive income. I like the other's ideas of selling a few properties and rolling it into an apartment deal.