How Do You Finance 20+ Properties Without Equity Partners?

Question

Hey guys — have started doing a lot of work around thinking about long-term plans for real estate investing (listening to all the podcasts, reading various books, etc.).

I’m in a situation that I’m shocked if it is unique, but there aren’t many answers to this online, so was curious to this community's view:

I have a high paying W-2 job and have no expectation of leaving in the near-term, however, I would like to use the cash flow from this job to invest in real estate over the coming years to be in a position to retire when I’m ~40 from that income (~10 years out), if I choose to.

For someone that has almost no time to spend on day-to-day management / would hire a manager, but also that wants to keep their life simple (i.e., doesn’t want to involve financing partners), how do you think about scaling financing when all properties are your own (after the first few mortgages, how do you get to 20 that are actually yours vs. having a financing partner)?

Know you could do seller financing on a few, but seems improbable / impractical to find that many sellers willing to seller finance.

Would love to hear about how people here think about this.

Thank you very much ahead of time!!

David Garner · Answer

Hey John

Great that you have the foundation of a plan.

If you're end goal is low maintenance passive income, one option is to use your W2 income to build a portfolio of more passive investments like;

Performing Notes

Private lending

Syndications

I have over 100 rentals, and they are NOT passive. I started hiring people in-house from about 25 units, and even now with a fill team looking f after most aspects of the day to day business I'm now a full time people/team manager.

The most passive investments I made have been in good quality paper... both perforning notes and private lending deals.

Whatever you decide to do, I wish you the best of luck.

DG

Matt Lyons · Answer

First, CONGRATS on your plan...I like it and was in a similar position 5 years back...so far I am at 80 doors, about $10k in free cash flow per month and still have my W2 job...not ready to retire from all yet but on th right path.

Second, your route should be pretty easy: Find the right bank!  I currently work with 4 banks and have 13 mortgages. The key is to FIND THE RIGHT BANK for you and for the property.  For example: Triumph Bank will finance any deal I bring to them that has over 10 units and I put 20% down. They really dont want smaller properties (just not a fit for them).  Resource Bank will do 25 year loans at about prime plus 1% with 5 year adjustments on ANY property within their geographic focus (far western IL small towns), with 20% down, but they will do mixed use, commercial, multi-unit and SFR.  Bank of MO will do pretty much any property for me that I can show it cash flows in pretty much any state.  Mr Cooper (mortgage company out of TX) will do a second home loan for me in literally any state, and each state can have a second home so my limit is 50 second homes through them, all 30 year fixed loans with 5-10% down.  And finally First Midwest will do up to 10 loans for me, with 10% down fixed for 30 years but must be either SFR or under 4 units

Those are my examples of how I scaled all on my own...call different banks and ask them simply "What type of real estate loans are your focus"  They all have their niche, you simply need to work through all the banks to find the ones that fit your lending needs the best

Emily And Eric Erickson · Answer

John,

Two answers to your question.

The first, if you don't want to go down the syndication road and want to have actual properties that you control, you will need a great partner to handle the day-to-day operations of your portfolio. That can be the traditional property management role where you manage the property manager and not the individual properties. The main downside to this path is how the property manager gets paid and how profitable each property is to you are not always aligned

The other option is to do a partnership where you are the capital investor and your partner finds and manages the actual deals. Full disclosure, this is the model I use for myself and my capital investors. You give up some equity in this model and you gain a lot more time back since you are not having to manage the manager anymore as no day to day decisions are being pushed to you for final approval.

The second answer to your question is yes. If you have the 20% down for each property, you can find lenders who will fund more than 3-4 properties. It may not be the same lender for all 20+ properties but with the right mortgage broker and investor friendly program, there are plenty of lenders happy to help. I currently have a partner who has 7 mortgages on 7 different investment properties not including his own personal residence and is saving up for his 8th down payment to put another property into portfolio with the goal to buy 1 property every quarter. He uses real estate to balance out his fixed income side of his overall financial portfolio while maintaining a strong position in stocks as well. Works great for him and can for you too.

James Warren · Answer

Hi John,

We are in a similar scenario to you. We’re buying as many properties as possible without partners. We have strong income outside our rentals, but we do also have the time to “self manage” them- with the assistance of one part time admin and a handyman. We started buying in 2017 with business bank loans- a local lender has a portfolio product that we fit in to nicely. 25% down, 15year note with an ARM. We bout 3 properties in 2017 with this program. The original tenants are all still in those rentals, and all 3 have already been paid off. We’ve continued to buy 3 more in 2018, 3 in 2019, 4 in 2020, 7 in 2021. As the income and equity have grown- it’s gotten easier. Goal for 2022 is 12 more purchases for us. We are 3 months in & have had 3 closings, so we are right on track!

My advice is find a local lender that will work with you. Congrats on having the vision- that’s 1/2 the battle. Best of luck to you!

How Do You Finance 20+ Properties Without Equity Partners?

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