Money Tied Up - How to get another property?

Question

Hello everyone

I have purchased 4 rental properties in the past year and my money is all tied up (even LOC). My question is... how to progress to have the cash for another. The first thing I think of is the brrr, but is there anything else? Obviously need the 20% down here in Ontario and I was thinking about refinancing but I didn’t add much value to the properties I purchased even though they rent well. Any suggestions?

Thanks

Greg

Jonathan Greene · Answer

@Greg Gangle when you are out of your own money and leverage, that's the best time to hit pause, even in a good market. If you try too hard to JV deals or find partnerships, you will invariably run into some bad ones. Focus on your four properties and make them cash flow better. Long-term, save some of that money and do one flip for every three rental buys so you can accumulate more down payments in profit.

Melanie Dupuis · Answer

Hey Greg, Dave and I were much like you ... and we are from Ontario as well. :) We wanted to keep growing but we had a hard time doing so. We personally didn't want to do joint ventures so we discovered the power of creative financing. That's when we solely bought 12 multi-family properties in less than 12 months (56 units).  We now solely own over 100 units and continuing to grow our portfolio. Feel free to email me for more info on how we did this. All the best!

Investor Mel Dave

Roy Cleeves · Answer

You talk with everyone that you know and share your goal and what you need.

And be specific.   Like:  I have found a property that cashflows - it is only $xxx and I need a partner to purchase this property with me.  I wondered if you know anybody that I should talk to about this opportunity?

If you are talking to the right person - they will say - yes - that is me - tell me more.

Greg Gangle · Answer

@Jonathan Greene I like what you’re saying. There are ways I can improve my properties. I appreciate your insight. It does make sense to maximize the rentals i currently own. Thanks.

Joshua Myers · Answer

I think this is something we all forget. It's easy to look back and think that after Lehman collapsed in mid- 2008 house prices were 30% lower by the end of the year of early 2009. If this recession hits as hard as some economists are predicting we probably won't be seeing bargain bin prices until the very end of the 2020 or mid 2021. Maybe later, and plenty of people bought in early 2009 because houses were finally in their pre-crisis price range.

Personally I think the prudent move for most investors is to wait until the virus has run its course and the economy has reopened. The fiscal stimulus and monetary stimulus are good measures economic triage, but consumer spending makes up 70% of the US economy. No-one really knows what happens to consumer confidence on the back end of this thing, but it was at of near record highs before. So best case scenario we get consumer confidence and spending back to where we were before this started, but with and additional $3-5 trillion of Federal and State debt and $7 trillion on the Fed balance sheet.

Nick Gann · Answer

@Evan Polaski

This seems like a healthy perspective Evan.

Evan Polaski · Answer

@Greg Gangle, while I agree that getting some actual operations under your belt is important, I am not feeling the same optimism for great deals as I did in 2008/09.  That being said my take is a great deal is still a great deal whether it is today or in 2022. Trying to time the market is a great way to sit on your cash forever.  Yes, be smart, take a more conservative underwriting with larger vacancy returns.

But I feel like you should still be looking.  If it is with a JV partner, and you can get somethings done, it could very well set you up for more, bigger JV partners down the road. Additionally, looking at 2007 peak, 2008 crash, and the real estate market didn't bottom out until 2010/11.  If we use that for your guide, you will be sitting around for the next 2-3 years doing nothing if you are waiting.  I think there are still deals that make sense out there and are worth pursuing, even today.  If they cash flow today with what probably feels like overly conservative underwriting, then go for them.

I think you will find fewer that make sense through this lens, but they will come.  And if everyone pulls back, you will be the only one buying, so get more opportunities near term, and more likely to get those calls of new deals long term.  The hard part will likely be finding others with money who still see this as a good buying time.

Greg Gangle · Answer

@Jonathan Greene yes I don’t disagree with you. This is something I’ve been inquiring about about for a few months. Regardless of the pandemic it’s something I’m curious how to keep pushing forward.

Jonathan Greene · Answer

If you've purchased four rental properties in the last year and have ALL of your money tied up, including LOC, don't you think, given the pandemic and potential loss on some of those rentals, that now would be a good time to hold tight and not try to spend money you don't have? This is a great time, or at least soon it will be, for investors with cash or open lines with plenty of room to buy, but no one should be stretching and taking on more debt to buy, especially right now.

Greg Gangle · Answer

@Roy Cleeves wonderful. Thanks Roy.

Money Tied Up - How to get another property?

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