Craziest idea ever… somebody tell me I’m stupid.

[Ezra Henderson]

Hey BP, I think I might have just had the craziest idea ever, and I need somebody to smack some sense into me and tell me it isn’t possible. But if it is possible, then it would be amazing.

So not too long ago I purchased a LLC from an investor, and in that LLC are 10 rental properties. I didn't purchase the properties individually, I purchased the Business/LLC as a whole. I got a sweet deal from the guy, and did 100% owner financing. All the properties in the LLC were payed off and owned in full. I now pay the previous owner of the LLC a set amount each month, for 15 years at a 3% interest rate. The properties were not held as collateral on the loan, and there was no lien placed on them.

Now my question is: what's stopping me from refinancing these properties, pulling out 75% equity and using that money as down payments on more properties that cash flow? And then using the cash flow from the new properties to pay off my loan on the original LLC? I know it would mean I have two loans, but I would definitely make way for money this way.

For example, to keep things easy let's say I bought the LLC for $1,000,000 dollars, and I pay the previous owner $7,000 monthly.

So on each of the 10 properties, I give $700 of the monthly income to pay off my debt.

So say I took one of those properties, and did a cash out refinance and pulled $80,000 out, and spent it on down payments on 4 new properties, each of which cash flowed $200 each month after all expenses. That would mean that 1 property turned into 5 properties, cash flowing $1,000 between them all! I would then use that money to pay of the $700 I owe from the original loan.

And then say I did that on all 10 of the properties! So I turned 10 properties into 50 properties, am now making more cash flow, and am having debt pay down and appreciation on 50 properties rather then 10.

I know it’s too good to be true LOL. Somebody tell me what’s wrong with this idea.

Thanks!!