HOW CAN I BUY MORE HOMES ?

[Thomas Haskell]

ok mentors & guru's here is my question to EVERYONE i just aquired 5 brand new homes in summerville SC (cane bay plantation) from lennar . 1 will be my home & the 4 others will be for investment. all 5 are sfh 4br 3.5 ba. the prices are a avg of $203,0000.00 i am puting down 25% on all of them my credit is good & income also. my question is once i settle in after lets say 3-6 months how can i aquire more homes? most of my $ are going to these 5 homes. programs, tips & tricks , Leverage, etc i want to continue to aquire as many homes as i can get. please advise :)

[Eric Taylor]

Simply take the cash flow from the 4 properties for the first year and set it aside for reserve.  Then using money you have saved ( from income) for that year coupled with future cash flow will allow you to save enough for another down payment.  Then repeat.

[Sherman Ragland]

@Thomas Haskell, first - CONGRATS on taking action!  or in your case, Massive Action!

Based on what I am seeing, is it safe to say you are leveraging your income and good credit to get these deals by going to a "traditional" lender for money?

If yes, the biggest problem you will have is that you are one deal away from being "cut off". Most banks will not provide you with any more investor loans after you hit 5 investment properties, at least not with out having to ask for an "exception", which no lender wants to do.

I am generally in agreement with @Account Closed that "Quality is better than Quantity", but as you probably have already figured out, real estate investing is a very personal thing.  While we should all be striving for good quality deals, what is good quality to one, is not the same for another, so as long as you are happy and getting positive cash flow, month after month, with little to no headaches, then your strategy is no better or worse than mine, just different.

I am a little concerned, however, that you are putting a little too much emphasis on measurements that are really more appropriate for commercial deals (including multifamily). Specifically your references to "Cash-on-Cash", cap rate and running proformas. At the end of the day there are three things that should really drive single-family house investing: 1) What is the ARV (after repair value) a/k/a COMPS for a fixed up property and are you buying well under market values (comps); 2) Are you putting in as little as possible, and therefore, getting a good return on the actual cash invested, 3) Is the cash-flow, month after month, positive. As you have already heard over and over, never make your decision based on appreciation alone. You want some cash flow every month, if for no other reason than to build up a reserve if your tenant stops paying, for any reason.

Once the dust settles on your four new investment properties, you may want to start thinking of "more creative" ways to get your hands on properties, such as sub2 and leas/option so you don't have to always rely on your credit and cash reserves.

Again, congrats - keep going!

[Thomas Haskell]

thanks

[David Oldenburg]

@Thomas Haskell 

 (see my strategy below in this reply) Hi, great to see your post!  This is the problem that all investors eventually have, and many of us have this problem all the time.  Murphy's Law-- the moment you have all of your money invested, the greatest deal in the world will suddenly appear.  I continue looking for deals, even when I don;t have any money.  Why? Because of sites like BP and so many opportunities to network with other investors. I am structuring a $750,000 purchase right now, yet most of my money will not be back for another 30 days.  I have other private investors I know and I contacted them and we figured out a way to structure the deal, and I am including myself in the cut. 

If your goal is to buy rental properties for a long term hold, you need to focus on LTV and not on downpayment. Private investors will loan you money if the LTV is good, regardless of whether you have skin in the game. I do it all the time in my area with investors who I know. I have even loaned 100% to a friend, when the after-improved value on a flip would be much higher. These have to be good cash-flowing homes because investors will want higher yields. Here is what I would do and this is a strategy I have taught to many investors! Look for homes that are like flips (ones that need work and you can buy cheap). Partner with investors who will give you all or most of the money based on LTV and knowing your strategy. Do the basic fix up work and rent the home. Within 6-12 months, you can refinance with a fannie mae loan and pay off the private money lender and you now have a good quality loan on your rental :-)

[Thomas Haskell]

thanks David this is all a part of my learning journey

[Don Coumbs]

So here is how I got loans 5 through 10, actually I am at 8.  Find a lender who has underwriting in house and is able to write to Fannie Mae or Freddie Mac standards.  The rules for each marketplace are different and most lenders will only write loans which could sell on either which means more restrictive rules.

Most people say go to a small local bank or a credit union and that is good advice if you are looking for a line of credit or a personal loan - which you may want.  For straight up mortgages beyond 4 I had no luck that way but was able to find a couple of mortgage brokers who can write to Fannie Mae - which I am told will go to ten.

I was also advised that the limit is ten per person, so if you are married, you may consider some loans/houses in just your name or in your wife's name.  That could take you higher yet.

I am not a mortgage professional, but have received some real help from some who post here.  The people with whom I work don't lend SC.

It looks like you got a bunch of snarky responses, so at the risk of sounding pompous may I add my two cents worth?

With good credit and income and obviously a habit of saving, I think it would be a good strategy to keep saving and putting 20 to 25% down and not play the max leverage- how fast can I get to x rentals game.  Plus, the advantage of organic growth is that you gain experience as you gain properties.  If I had had the kind of money you just spent when I started, I think I would have caused myself more problem than I could have handled.  It sounds like maybe you have a great opportunity to buy "right now", but when you have money there are generally opportunities.

[Thomas Haskell]

thanks don

[Joshuam R.]

Greetings @Thomas Haskell hope all is well, just wanted to learn how the strategy go for you now a year later of this post thread. - Thanks

[Harrison Chiu]

So how did it go? I'm looking at something similar myself. 

@Thomas Haskell