Want to buy 500 units per year for 10yrs

[William Benefield]

Im 37 years old and I have $40,000 per month of extra income from businesses I own and have set a goal of purchasing 5000 units in 10yrs. Any suggestions for creative financing to make this happen?

[Sam Grooms]

How active do you want to be? Value-add Refi is the most common approach in multifamily right now. Think of it as the BRRR method on a large scale. The only issue you'll have is that you'll need equity to get started. The typical value-add refi takes 12-18 months minimum for 100+ units, which is where you'll likely need to be to get 5000 units in 10 years. If we assume you'll acquire them evenly over that period, you'll have to fund the first 1,500 units. That's a considerable amount of cash, which is probably why you brought up creative financing.

Instead, I would start with 150 units in the first year. It will still take some considerable equity, but a lot more manageable. In 12-18 months when you refinance, hopefully you've increased the value enough to also pull out your investment plus some additional equity. This time, buy 200 units (over 1 or 2 properties).  Do the same thing the following year and buy 300 units, and 450 the next. Combining your nearly $500,000 per year of income from the other businesses, the cash flow you're getting from the first couple of property and the additional equity you're pulling out, you should be able to get to 650 in acquisitions by year 5, and you're at 1,750 total. Now, all you have to do is maintain that 650 per year and you'll be able to get to 5000 by year 10. 

It would look something like this:

Year	Acquired	Cumulative
Year 1	150	150
Year 2	200	350
Year 3	300	650
Year 4	450	1,100
Year 5	650	1,750
Year 6	650	2,400
Year 7	650	3,050
Year 8	650	3,700
Year 9	650	4,350
Year 10	650	5,000

Having said all that, if you don't want to be active and do value-add, it could become rather difficult. $500,000 in extra business income is significant, but I don't think it gets you to 5,000 units on your own, unless you're buying $25,000 units. 

If you're talking about seller financing, master leases, subject to's, etc when you say creative financing, I don't think that gets you there either. There just isn't enough deal flow with those at this point in the cycle. You'd need a downturn in the market, and probably the economy as a whole. 

The last option would be investing in other people's deals for 9 years and let them double your money every few years. Your $5M investment ($500K per year for 10 years) would turn into $20M (this would take almost perfect execution, and shouldn't be relied upon for even the most experienced sponsors). At 80% LTV, you could buy a $100M property. That still wouldn't get you to 5,000 units, though, unless you're paying $20K per unit.