PLEASE, VET MY PLAN AND TEAR IT APART

[Gabriel Mouzella Silva]

Hi guys,

I'm a Brazilian living and investing in Mexico, as I'm starting I saw an opportunity to build wealth through RE and would like you to analyze my plan and show me my flaws. Knowing that the Mexican RE market is different than the US I'll try to explain some of the steps in here so you can get in sync with how it works.

I'm currently buying foreclosures in Mexico City. The foreclosure process here is a little slow because the bank doesn't take possession before having a buyer. So first you gotta show interest in the property and pay the initial fee, all of that has to happen through a company specialized in foreclosure (they usually have their salespeople and attorneys to take care of the process). After that initial fee, the company will take care of the process that takes up to 6 months to receive the keys. During the entire process, I'm not allowed to see the interior of the property because it is usually occupied. Also, the property must be paid in cash. However, it's possible to find really attractive deals, as the property can be purchased by 1/3 of its appraisal value, just like I bought a month ago.

The interest rates managed around here are between 8% and 10%. I talked to a mortgage broker and he assured me that with my credit score we could be looking into 8.5%.

My Idea is to, once the property is rehabbed and rented, take a cash-out refi on the amount of the entire project (as long as my cash flow remains positive) and use that money to purchase another property and so on. Always tapping the equity of the property recently bought to purchase another.

I ran the numbers on the BRRRR calculator and the property that I recently bought will cash flow around $50 USD after refinancing the full amount, leaving me with a CaCROI of infinity, because I won't be putting any money down.

The banks here don't bat an eye as long as my DTI is below 50%, and as long as my property is cash flow positive I should not get into 50% DTI (for at least 10 properties) because I don't have any other debt (and usually don't use debt to purchase anything for me, not even cars, I usually pay cash for my car).

So now, if are kind enough, be the devil's advocate and tear apart my plan and expose its flaws, so I can learn from you and avoid most of the beginner's mistakes.

Cheers

[Charles Large]

Hello, Gabriel.

I have over 30 years of experience investing in rental properties in Mexico City, from single family homes to multi-family buildings. I also do it in Texas.  Feel free to PM me, perhaps I can be of help.

Charles.