Chicago Investor: 25 Years Old & 25 Properties Cash Flow Properties

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Chicago Investor: 25 Years Old & 25 Properties Cash Flow Properties

Andrew Holmes
Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes

Read some great experiences from folks so I thought I would share Ed's Story of what is possible at a young age with the right strategy, passion & focus:

Investor: Ed Boutros

Age: 24

Real Estate Investing Experience: 24 Months

Education: Engineer

Goal: 25 Properties By 25 Year Old. All paid off by 30 years old.

Key Strategy Used: Buy - Rehab - Refinance using 100% Money Recycling Formula

When Ed started, like most people because of his age, he only had $ 20k from this first job saved up so. How does he accumulate good quality properties with so little money?

Most would gravitate to owner finance deals or sandwich lease options etc. Instead he has taken our 2-5-7 Cash Flow For Life model and EXPLODED his investing strategy.

At this point in the Chicago Suburbs he has already accumulated 13 cash flow properties each with a minimum of $ 400 per month in positive net cash flow.  On top of that, there's over 20% equity in each deal to start with.

Within 14 months of starting his real estate investing he was able to walk away from his job. 

Now just 12 more to go.  At 23 he is at 400*13 = $ 5200/Month. 

Not only is he accumulating properties like mad but now he is adding flips as well. 

Well onto his goal of 25 cash flow deals by 25 years old.

GOAL ALL PAID OFF BY 30.

So What Do You Guys Think?

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BOB CRANEY
HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
11y

Can you please post a detailed example of the 2-5-7cashflow for life model and how it would work as a case study. It sounds so simple yet i dont see how you are able to pay off all properties so quickly without adding additional cash not generated from the properties  free cashflow, to accelerate the principal mortgage payoff. If so where does that addtional cashflow come from. Who wouldnt want to payoff their rentals in 7 years and get to that next stage of investing nirvana. I know i would.

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  • Renea Steward
    Massage Therapist · Chicago, IL · Member since 2015 · 613 posts · 84 votes
    11y

    I will past this article to my sister who recommended me to Bigger Pockets a few days ago. I'm very impressed. I'm interested in knowing what is 2-5-7 cash flow, and what is the 100% Money Recycling Formula.

    0Reply
  • William Powers
    Waukegan, IL · Member since 2014 · 75 posts · 35 votes
    11y

    Great one Andrew!!  Great model for others to follow.  I have only been to one of your events but I have been on a bunch of conference calls and you are preaching the right stuff…obviously.  This guy learned well.  The challenge we have had, is our banks require that we leave 20% of our own cash in each deal, so it slows are growth.  Ed seems to have jumped this hurdle with some financing solutions you have provided.  Well done.  

    Hope to see you at one of your events soon.  

    Bill Powers

    RTO Property LLC

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    11y

    How is he refinancing the properties after rehab with no seasoning?  Just curious what lender will allow this.  Thanks

    1Reply
  • Andrew Holmes
    OP
    Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
    11y

    Hey Guys: Thanks for the response on here. I am new here so still getting a hang of things here.

    You guys asked so great questions:

    What is 2-5-7 Cash Flow For Life?

    My belief is that every real estate investor should have a basic goal. 2 years 5 Properties 7 Years all PAID OFF & DEBT FREE. That equation equals Cash Flow For Life. We have a lot of folks that are at 2-10-7 or 2-15-7. A few go getters like Rahul are at 2-25-7.

    The nice part about 2-5-7 is that in today's market even novice investors can learn this same strategy of investing and be free with in less than 2 years.

    How do you refinance properties without any seasoning?

    Well I could this is where you separate men from the boys. In all seriousness this is the most tricky part of the learning curve. First off you have to understand that you cannot refinance the properties with residential loans. You have to go commercial even on Single Family, 2-4 Unit and Townhome deals.

    Sometime I get folk that look perplexed when I say commercial loan on residential properties. YES I DO MEAN COMMERCIAL LOANS ON RESIDENTIAL PROPERTIES. I have over 150 residential properties with commercial loans.

    There is a lot I can go into but for this discussion it would be too much to type out. But to answer the question that someone asked in the above discussion you can get 75% LTV loans based on Appraised value all day long you just have to know what you are doing.

    Does the bank require 20% Down on each deal?

    Commercial banks do not require 20% down at all but the deal needs to bought and set up correctly and they will give you 75% of appraised value.

    I can illustrate this with an example

    Purchase Price: $ 60,000

    Rehab: $ 20,000

    Carrying Cost & Cost of Money: $ 7,000

    Total Cost: $ 87,000

    Appraised Value: $ 140,000

    You can refinance: $ 140,000 X 0.75 = 105,000

    So you refinance even more than you have in the deal. I NEVER DO THAT PERSONALLY BECAUSE I JUST HAPPEN TO BE VERY CONSERVATIVE but you can do it and it can be done in mass. You do need the right contact. A good understanding of Debt Coverage Ratios and other issue that a Commercial bank would look at.

    Thanks

    Andrew Holmes

    2Reply
  • Tyler Bedle
    Contractor · Orlando, FL · Member since 2014 · 27 posts · 7 votes
    11y
    Originally posted by @Andrew Holmes:

    How do you refinance properties without any seasoning?

    Well I could this is where you separate men from the boys. In all seriousness this is the most tricky part of the learning curve. First off you have to understand that you cannot refinance the properties with residential loans. You have to go commercial even on Single Family, 2-4 Unit and Townhome deals.

    Sometime I get folk that look perplexed when I say commercial loan on residential properties. YES I DO MEAN COMMERCIAL LOANS ON RESIDENTIAL PROPERTIES. I have over 150 residential properties with commercial loans.

    There is a lot I can go into but for this discussion it would be too much to type out. But to answer the question that someone asked in the above discussion you can get 75% LTV loans based on Appraised value all day long you just have to know what you are doing.

    Andrew,

    Do you have any advice on how to find commercial lenders who do these types of loans? 

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    11y
    I have commercial loans on residential properties as well. Every local lender I tried still required at least 6 months seasoning to refinance to the ARV. Could you please post or PM me what lender does not require any seasoning? Are they a local, regional, national lender? Is there a minimum loan amount?
    0Reply
  • Marco Y.
    Rental Property Investor · North Jersey, NJ · Member since 2013 · 72 posts · 21 votes
    11y
    Originally posted by @Andrew Holmes:

    Hey Guys: Thanks for the response on here. I am new here so still getting a hang of things here.

    You guys asked so great questions:

    What is 2-5-7 Cash Flow For Life?

    My belief is that every real estate investor should have a basic goal. 2 years 5 Properties 7 Years all PAID OFF & DEBT FREE. That equation equals Cash Flow For Life. We have a lot of folks that are at 2-10-7 or 2-15-7. A few go getters like Rahul are at 2-25-7.

    The nice part about 2-5-7 is that in today's market even novice investors can learn this same strategy of investing and be free with in less than 2 years.

    How do you refinance properties without any seasoning?

    Well I could this is where you separate men from the boys. In all seriousness this is the most tricky part of the learning curve. First off you have to understand that you cannot refinance the properties with residential loans. You have to go commercial even on Single Family, 2-4 Unit and Townhome deals.

    Sometime I get folk that look perplexed when I say commercial loan on residential properties. YES I DO MEAN COMMERCIAL LOANS ON RESIDENTIAL PROPERTIES. I have over 150 residential properties with commercial loans.

    There is a lot I can go into but for this discussion it would be too much to type out. But to answer the question that someone asked in the above discussion you can get 75% LTV loans based on Appraised value all day long you just have to know what you are doing.

    Does the bank require 20% Down on each deal?

    Commercial banks do not require 20% down at all but the deal needs to bought and set up correctly and they will give you 75% of appraised value.

    I can illustrate this with an example

    Purchase Price: $ 60,000

    Rehab: $ 20,000

    Carrying Cost & Cost of Money: $ 7,000

    Total Cost: $ 87,000

    Appraised Value: $ 140,000

    You can refinance: $ 140,000 X 0.75 = 105,000

    So you refinance even more than you have in the deal. I NEVER DO THAT PERSONALLY BECAUSE I JUST HAPPEN TO BE VERY CONSERVATIVE but you can do it and it can be done in mass. You do need the right contact. A good understanding of Debt Coverage Ratios and other issue that a Commercial bank would look at.

    Thanks

    Andrew Holmes

     Great post I just have a few questions maybe you can answer.

    1) The idea is great but isn't it based on the investor being able to find deals that are almost half of their ARV? In my market this is extremely difficult to do.

    2) Wouldnt most bank appraise the ARV very low so as to kill any chance of you getting a good refinance? My issue is that I would be going to banks and wasting a couple thousand for an appraisal just for them to give me a number that doesnt work for me.

    Also why is it better to get commercial instead of the traditional residential loan? Do most banks appraise higher on commercial?

    Regardless great post and thanks for sharing!

    0Reply
  • Account Closed
    Wholesaler · Member since 2015 · 6 posts · 9 votes
    11y

    Hey Andrew: This pretty funny. I just joined Bigger Pockets and I found my own pic on here. It's so exciting to see this article that you posted for me. THANK YOU. 

    It's amazing what is possible following the 2-5-7 Cash Flow For Life model.

    Just got done with Deal # 13. # 14 & 15 are already on their way. I am so excited to see a whole community of investors on BP.

    Ed Bourtos

    0Reply
  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    11y
    Edward Bourtros What lender are you using who will loan based on the appraised value without any seasoning requirements?
    0Reply
  • Account Closed
    Wholesaler · Member since 2015 · 6 posts · 9 votes
    11y

    @Hey Darren: We have a lot a huge list of lenders. They are local . Honestly I am not sure I can give it out on the BP site but I got the list from Andrew Holmes. He has a bunch of posts here. I will check if it's ok by him I will be happy to share once I make sure.

    These are all commercial loan where lender do not need seasoning and are all based on 75% of appraisals. 

    Ed Boutros

    0Reply
  • BOB CRANEY
    HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
    11y

    Can you please post a detailed example of the 2-5-7cashflow for life model and how it would work as a case study. It sounds so simple yet i dont see how you are able to pay off all properties so quickly without adding additional cash not generated from the properties  free cashflow, to accelerate the principal mortgage payoff. If so where does that addtional cashflow come from. Who wouldnt want to payoff their rentals in 7 years and get to that next stage of investing nirvana. I know i would.

    2Reply
  • Sonny H.
    Chicago, IL · Member since 2014 · 47 posts · 5 votes
    9y

    A case study of the 2-5-7 would be a great idea. With chicago prices ranging around 200, to 300k, how do you pay them off within 7 years if you down 20- 25%?

    0Reply
  • Andrew Holmes
    OP
    Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
    9y

    Hey Sonny: You cannot make the number work with 200 to 300K to use the formula you need to be in the bread and butter pockets. We still have a lot of those pockets that are great for rental in good stable areas. 

    You need be around 110 to 120 all in cost. 

    You can do any where from zero to 10 to 15% in the deal not down payment. If you use the downpayment strategy you will run out of cash pretty quickly and a lot of your money will get stuck. I will post a new post with a case study.

    0Reply
  • Joe H.
    Developer · Chicago, IL · Member since 2016 · 82 posts · 88 votes
    9y

    If you have a good working relationship with the right commercial bank, they will give you loans with almost no seasoning. Typically my bank will finance me out of a construction project with 2-3 months of rent roll. We usually start the process as soon as I'm done leasing it up and by the time we have all the paperwork done, they are comfortable with the tenants. But I have an ongoing relationship with an institution that trusts the product I put out. 

    Also, not to knock anyone's success, but I just don't think I could handle owning 25 separate properties. But I do my own management, so that's probably the difference. I just sold off a bunch of properties because I owned 14 buildings with almost 50 units a few months ago and was getting sick of the constant repairs and tenant issues. I've now grown my businesses providing the services I've learned to others since it is definitely not a buyers market in the areas I prefer any more. Looks like I've jumped out of the frying pan into the fire though since now I get paid to clean up other people's problems now instead of my own!

    0Reply
  • Sam Yi
    Investor · Chicago, IL · Member since 2016 · 25 posts · 4 votes
    7y

    I'm doing some light research on Holmes guy and wondering why so many of posts he's involved in have "account closed"

    0Reply
  • Ryan Fox
    Investor · NV and CA · Member since 2016 · 374 posts · 227 votes
    7y

    @Sam Yi- Biggerpockets will close your account if you don't follow their terms of use policy.  

    0Reply
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