Acquisition Line and Scaling Up

Jeff V. · 2020-07-23T20:03:38-07:00

So far we have used a portfolio based HELOC to fund our acquisitions and rehabs. This has limited us to typically 1 BRRRR deal, 1 Fix and Flip deal per year, or 1 note deal. With this model I'm limited to the equity I already have as a limit and have to free up the line to use it again. This typically takes 6 months to a year of seasoning to refinance our capital back out based on ARV instead of purchase plus rehab cost. (BRRR Strategy) Another issue is we generally stop our lead gen once our line is deployed because we don't have the capital to buy another deal while one is going on and that takes more lead time to get rolling again. With alternate acquisition funds like an asset-based line based on the deal or something similar, we may be able to scale up to multiple deals simultaneously. Looking for advice on what others have done to increase their acquisition velocity where it isn't dependant on how much equity we have in our portfolio, but based on the deal itself. For example, if 3 deals cross my desk that are solid, I would prefer not to be reliant on whether my HELOC is tapped at the moment the deal crosses my desk. I have missed more deals from the stop and go, ebb and flow of capital availability than any other thing. Does anyone have any advice on how you were able to overcome any of these stumbling blocks in the beginning of your investor journey? Thanks, Jeff V

Brian Ellwood

Rental Property Investor · Denver, CO · Member since 2018 · 191 posts · 247 votes

6y

For acquisition, you need to start using private lenders to take down the deals, or structure seller finance deals where the seller is the bank.

With these two acquisition strategies, it would remove the bottleneck you have in that part of your business and allow you to scale a lot faster and keep your marketing/lead gen going at all times.

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Todd Pultz

Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes

6y

@Jeff V. It was laid out nice by @brian! A great skill to acquire is finding properties off market and convincing owners to carry the note for you. It’s actually easier than people think, but you have to make it worth it for the owner. You can’t lowball and ask them to carry, but every once in a while maybe.

Private lenders are great, but you still need 10-20% down, so start building your network of private investors. Start with friends and family.

Most people forget about the traditional way of just walking into your neighborhood bank or credit union and asking them to fund it.

My rule always was let each flip fund my gap money on a multi-family!

Good luck to you

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Kenneth GarrettPro Member

Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes

6y

@Jeff V.

I utilize private lenders to scale my acquisitions. There is a cost to this money, but it does give you the freedom to do more than a deal every 6 months. The cost is 10%-12%, but I can find 100% financing.

1 Reply

Jeff V.

OP

Investor · Deridder, LA · Member since 2014 · 298 posts · 185 votes

6y

Thanks @Brian Ellwood, I have been learning the terms business for the past year in hopes to do just that and take a few extra down per year with Lease Options and/or Seller Financing. I'm getting better at it, but it requires much more sales skills to educate a seller that there are other viable ways to structure the deal other than a traditional purchase or cash.

@Todd Pultz thanks for the advice. I have been studying some of Walter Woffords material on structuring private money for the purchase and renovation and then wrapping the private money and seller financing to the end buyer. I like the concept and may do a proof of concept deal to get all of the moving parts down before pitching it to a private lender.

Jeff

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Rick Pozos

Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes

6y

First of all, DONT EVER STOP YOUR MARKETING. If there is a deal that you can not take down, wholesale it to one of your buddies for a couple thousand dollars. Even if it is for $500. You win. The seller thinks you are the boss for helping him/her out. Your buddy is happy with a great deal, win/win. Dont stop marketing.

If you are truly finding great deals you should be able to wholesale the properties for 2k to 5k. Would that money help you to do another deal every year?? I think so.

Also, use hard money to do a deal. Sure it costs a little more, but again if you are finding great deals, its still money, just not as much. Think VOLUME.

If you make 30k on each rehab but can only do 2 per year = 60k. But lets say you partner on some deals and only make 10k, hard money and you make 20k. YES I want to do it by myself, but if I can do 1 per month with others and with hard money, you are making over 150k per year instead of 60k. Scaling sometimes means making a little less per deal, but doing lots more deals.

1 Reply

Brian Ellwood

Rental Property Investor · Denver, CO · Member since 2018 · 191 posts · 247 votes

6y

Originally posted by @Jeff V.:

Thanks @Brian Ellwood, I have been learning the terms business for the past year in hopes to do just that and take a few extra down per year with Lease Options and/or Seller Financing. I'm getting better at it, but it requires much more sales skills to educate a seller that there are other viable ways to structure the deal other than a traditional purchase or cash.

@Todd Pultz thanks for the advice. I have been studying some of Walter Woffords material on structuring private money for the purchase and renovation and then wrapping the private money and seller financing to the end buyer. I like the concept and may do a proof of concept deal to get all of the moving parts down before pitching it to a private lender.

Jeff

I interviewed Gabriel Hamel on my podcast, who has 170 doors, all from seller financing. He said "you never educate sellers on seller financing. They either already know about it, or they won't do it".

So i think you just PROPOSE it to them, and if they are confused or object to it, you just move onto the next lead.

1 Reply

Todd Pultz

Rental Property Investor · Dayton, OH · Member since 2019 · 293 posts · 440 votes

6y

@Brian Ellwood I almost agree with you, lol! Most of the time I think your right, but there are a few times you can make something happen. Example.......found off market triplex and quad owned by older guy. He actually had 8 buildings but told me he was not interested in selling yet because he was not ready to retire. Told me he would be ready in 2 years and call him then. During that conversation he was also unfamiliar with a land contract or owner carry, so I gave him a quick run down. Certainly not interested. I did not wait two years, but called him 5 days later and had an owner carry laid out for him with a 2 year term. However, I structured it with monthly payments of about what I thought his net was. I sold that piece to him that he was still making the same NOI, but did not have to worry about Maintenace, tenant calls, leases, paying bills etc. then at 2 years would get the balloon to sail off into the sunset. He accepted and we closed! Party of these deals are always selling yourself as reliable and creditable so being personable and transparent I have found is key.

That doesn’t happen often, but always worth a try!

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Acquisition Line and Scaling Up

Acquisition Line and Scaling Up

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