Loan strategy problem. Which option sets me up for more deals?

[Kelvin J.]

Hi all.

I just sold my condo and am aiming to buy 4 rental properties in the next 12 months using the proceeds. My problem is my DTI as my pay is pretty horrible, and I'm struggling to see a way through. I don't have enough capital to buy something outright (and am missin out on the great deals on MLS) and need loans, but i do have enough cash for rehab and downpayment.

Today I have my first property all but under contract (REO bank addendums are slowing things down but I have accepted their counter offer. They are waiting for eanest money before signing...) Not a slam dunk but promising. 146k with about 13k rehab needed (its in good shape) ARV 180K and in a great neighborhood. Effective date is today so I have 7 days to source a loan. I had a couple options already lined up -

1. Owner occupied: 5% primary with Mortgage Insurance and then house hack with roommates. (PRO: lowest cash invested CON: high payments and no landlord track record being built)

2. Investment: 20% minimum down. PRO: keep payments low and gets me in the game. Also no mortgage insurance. Also 70% of rent collected counted immediately as income for DTI purposes when rented with a lease (*Quicken loans) BUT very High cash invested and locked up (49K)

I'm struggling to choose the best option based on future needs. It seems the investor option is best but it ties up so much capital. I'm going to struggle with a 2nd property.

How do I choose the best strategy to get in the game and still be able to tee up the next 3 purchases with crappy income?

I'd appreciate your thoughts.

Thanks Kelvin

[Joe Villeneuve]

You are approaching this wrong from the start.  You are approaching the end of the use of the cash you have, instead of where you should be approaching this...from the start of the entire system.

What is the "start of the system" you ask?  Simple...it's an investment that will duplicate your original funds over and over again, with the condition (and this is critical) of NEVER actually spending your original funds...just using them over and over again.

It's really simple.  Here's just one of many examples of how this would work:

1 - "USE" your cash to buy/rehab and flip as many properties as you can at the same time using ONLY your cash.  If that means only one, so be it.

2 - Take the profit from this first flip, and bank it (DON'T touch it...ANY of it)

3 - Since you used cash on that first property/properties, you got all of your original funds back...in cash.  Repeat step #1 again...and again, and again... and...

4 - When the CASH from the profits have built up enough to buy added flip properties (again, with all cash, and ONLY cash), you do so...thus expanding your "width" of simultaneous flips.

5 - Now, when you have reached the desired width of flips, you start using all the profit(s) to buy your rentals.  Since every level of Flips will return all the original buy/rehab cash to you (on every flip), you will just use those same funds repeatedly (never spending...just using, over and over again) for every new level of flips....and, since every repeated use of the cash will generate added sets of profit, you can buy more rentals on a regular basis.  Your flips become your own personal "cash machine".