Getting the most mileage out of my initial funds

Getting the most mileage out of my initial funds

Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes

Hello investors! I'm mapping out my real estate investment journey and would like to establish a repeatable way to grow my business (1-2 properties in the next 12 months, couple more the year after, etc...). It seems that the limiting factor to this type of accelerating growth is going to be my access to funds.

I currently have enough saved for maybe three properties with traditional 20% down, but then my personal liquidity would be exhausted. I would hate to finally feel like I'm getting a good system in place only to be blocked by a lack of funding ๐Ÿ˜ญ

So I guess my question comes down to: What path would you recommend I go down, and what steps should I be taking now, to ensure I can scale my rental real estate acquisitions? Given $50k in funds, what would you do to get the most mileage?

Traditional financing at 20% down will get exhausted pretty quickly. I don't have the ability to house-hack by living in an investment property for a short period of time so the 3% down options don't seem to be available to me. BRRRR seems like a good option - but with my low amount of up front capital it doesn't feel like I have enough to even get started there. What would you suggest I look into?

Thank you!

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Investor ยท Greenville, SC ยท Member since 2016 ยท 5k+ posts ยท 13k+ votes
7y

Add value. BRRRR...buy, renovate, rent, refinance, repeat...use the same capital over and over again.

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  • Investor ยท Greenville, SC ยท Member since 2016 ยท 5k+ posts ยท 13k+ votes
    7y

    Add value. BRRRR...buy, renovate, rent, refinance, repeat...use the same capital over and over again.

  • Rental Property Investor ยท St. Petersburg, FL ยท Member since 2017 ยท 3k+ posts ยท 4k+ votes
    7y
    @Ryan Daigle if $50k can get you 3 properties at 20% down, I would buy one of those type of properties, and then I would use the remaining to do a BRRRR. That way you get initial cash flow going with the traditional rental, and you can do some value-add BRRRing to make your money go farther.
  • Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes
    7y

    @Jason D. @Mike Dymski Thanks for the reply.

    I guess my initial dismissal of BRRR was due to the fact that with only $50K available, we're only talking about being able to fully fund a property with an ARV of around $75K. Even in investor friendly areas this seems like a C neighborhood at best?

    Also, that ARV would probably be a non-starter in my area (Raleigh, NC).

  • Rental Property Investor ยท St. Petersburg, FL ยท Member since 2017 ยท 3k+ posts ยท 4k+ votes
    7y
    @Ryan Daigle not necessarily... if you leverage a hard money lender, they'll fund 80% - 90% of the purchase and all of the reno. So, you could BRRRR a property with a $200k arv or more if you found a good deal.
  • Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes
    7y

    @Jason D. Ah, right. Combining approaches to get more bang for the buck. I guess that's why this is the "Creative" part of the forums ๐Ÿ˜ฌ

    From what you've seen, hard money lenders are willing to loan to new investors? I was under the impression they wanted to see a body of work to know their money has a good shot of being returned.

  • Rental Property Investor ยท St. Petersburg, FL ยท Member since 2017 ยท 3k+ posts ยท 4k+ votes
    7y
    @Ryan Daigle I used hard money on my first BRRRR. The terms are better as you gain experience, but many lend to first timers. It's all about finding a good deal and having a good plan and exit strategy.
  • Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes
    7y

    @Jason D. Thanks again for walking me through this - very valuable insight!

  • Real Estate Broker ยท Durham, NC ยท Member since 2014 ยท 236 posts ยท 168 votes
    7y

    @Ryan Daigle,

    3 properties is a great place to start.  You'll be surprised how quickly the cash flow compounds, especially after a couple years when you can raise rents etc.  

    There's a lot of different opportunities in real estate. You could partner/JV with someone who has money to lend but not necessarily the time/energy to work on a deal 100% by themselves. You could wholesale any properties that you come across that don't fit your criteria but may work for other investors - a couple of those, and you'll have more dry powder for 20% down on a 4th rental, etc...

  • Rental Property Investor ยท Durham, NC ยท Member since 2016 ยท 7k+ posts ยท 7k+ votes
    7y
    @Ryan Daigle. What I did to start was buy some properties myself, then partner with someone to go buy bigger properties with more units. Do this a couple times and your cash flow starts helping you pay for itself. These things combined with my income increasing over time will allow for a lot of property buying
  • Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes
    7y

    @Caleb Heimsoth @Tiffany Alexy Thank you for your perspectives! Sounds like I just need to get started and let time/inflation/appreciation start working for me.

  • Rental Property Investor ยท Chapel Hill, NC ยท Member since 2017 ยท 144 posts ยท 89 votes
    7y

    Ryan first welcome to BP - great to see a local here. If you want your funds to stretch further than Raleigh (which I understand) you might look at some adjacent markets that still have solid fundamentals in terms of population and income growth and employer diversification. Returns will be better than in the Triangle. I think Greenville (NC) and the Triad are good bets - and lots of smaller towns and towns โ€˜off the gridโ€™ to avoid. My suspicion is that youโ€™re more likely as a newbie to get into those markets too, I.e. the broker community is more willing to invest time in working with you, which is an important factor to consider. So you might think about building your experience and credibility this way, and see where it takes you. If you want my take on the Triad where I am focusing let me know and I am happy to share.

  • Investor ยท Apex, NC ยท Member since 2018 ยท 253 posts ยท 215 votes
    7y

    @Greg Fitch Thanks for the this!

    I am curious about the Triad area - specifically what fundamentals you see that make the area a good long term play. I'll PM you to continue the conversation ๐Ÿ™

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