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Updated about 3 years ago on . Most recent reply

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18
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5
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Eddie L.
  • San Francisco, CA
5
Votes |
18
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How to feel comfortable accumulating so many rental properties?

Eddie L.
  • San Francisco, CA
Posted

Hi fellow investors. I wanted to see where everyone's risk tolerance is with accumulating multiple rental properties over time. I currently have 2 rental units (fun and addicting!) but I am a bit hesitant to keep going because at some point, your risk goes up with each property.

Let's say you have 5 cash flowing properties (+$800/mo ea) and you refinanced out at $200k mortgage each. That is $4,000+ positive cashflow each month. That is awesome and exciting but in the back of my mind, I think I am now on the hook for $1M+ worth of mortgages! Sure I can save 6 months PITI in my reserves for each unit, etc but you are still on the books for $1M in debt. Just because it produces money (asset) doesn't mean it isn't debt. What is everyone's view on this? Am I just being paranoid?

FWIW, I had 6 months PITI reserves for my 1st unit and then the pandemic hit. My tenant didn't pay for almost a year (due to eviction halt) and when they were finally evicted 12 months later, my house was trashed ($15k+ to fix). The costs were bad but still doable for me. However, if I had 5 units at $200k mortgage each, and this happened to all 5 units of mine, I would've been in real trouble. I doubt another pandemic hits in our lifetime but you just never know.

What does everyone else think?

Most Popular Reply

User Stats

123
Posts
99
Votes
Brendon Pishny
  • Investor
  • Olathe, KS
99
Votes |
123
Posts
Brendon Pishny
  • Investor
  • Olathe, KS
Replied

@Eddie L.

I would actually argue that you're more at risk with less properties. As long as you stay in a good position like less than 65-70% LTV. If you only have one or two rentals what happens when one tenant moves out or stops paying. You have to make sure you can cover the mortgages. If you have 10 or more the chances of having enough units empty long enough not to be able to cover payments is very slim. I have 13 properties leaveraged at about 55% and feel very comfortable. Hope that helps. I agree buying properties is an addiction. But at least it's a good, money making addiction😉

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