All Forum Posts by: Amy Raye Rogers

We've been investing since 2020. Our growth was fast thanks to some great deals and easy lending. At our peak we were up to 22 doors. Since then we've pulled back to 12. We realized that more properties meant more headaches. However, we still want to grow. That got us to thinking... what is the most important metric to measure portfolio growth? Is it cash flow? equity? NOI? If doors count is a vanity metric, what ##s on the financial report dashboard should we be striving to improve? The long term goal is passive income, but we are willing to wait 10-20 years to get there. Thoughts?

Yes, It's a portfolio LOC. It grows w/ every deal because we purchase properties with immediate equity or those that require light value add rehabs. My favorites are MLS properties that are mis-listed. Many agents fail to properly price properties and we are able to get an accepted offer fast by offering "cash, no contingencies". We've gained over 200k equity just doing that alone.

It is similar. What makes it unique is the emphasis is building equity and growing the credit line instead of pulling the equity out for down payments as most BRRRR investors do it. You are essentially right, I guess I would consider this a "higher and better use" of the BRRRR method than what is commonly taught.

 You convert the debt on the line of credit into a mortgage.  I'll provide an example:

We had two properties that we had enough equity in to secure an 80k line of credit. We used that credit line to purchase a house for 55k cash and spent 13k on the rehab. the total debt on the credit line was now 68k. The house appraised for 115k so we had better than the 80% LTV to convert the 68k debt into a commercial mortgage. The terms of the mortgage were 25 year amortization and a 5 year balloon @4% interest. The house rented for $950 per mth and cash flowed almost 300 dollars per mth... We left a lot of equity in the house to boost our line of credit value even futher. Now it's signifcantly higher and we can work multiple deals at a time without worrying about down payments ever.

Now rinse and repeat!

What questions do you have specifically? Most of the fundamentals are in the post.  I'm happy to address any gaps that still remain.

@Patrick Rhodes We term the debt out into a mortgage... but only the debt. We don't refinance at the "appraised value" leaving all of the equity in the property. Most BRRRR investors try to recoup their original capital in the form of cash. We don't need to do that as our credit lines are sufficient to buy more purchases without down payments. Hope that helps clarify!

The following is a few reasons why we've used lines of credit to scale our portfolio as opposed to using the BRRRR method. The BRRRR method is a great tool, but has certain drawbacks that are accentuated in the current market place. Let's weigh the pros & cons.

1) The line of credit allows you to capture the equity in your portfolio without having to conduct a risky refinance.  Pitfalls of the refinance include an unpredictable appraisal process, reduced cash flow, reduced equity, and a risk for significantly higher interest rate.  Do you really want to max leverage that 80k 1920's build with impending capital expenses?

2) The line of credit allows you to make "cash offers" that are more competitive then the down payment, conventional loan offers that are less appealing to sellers.  You are more nimble and more attractive using this method.  You can also save considerably on closing costs.  The cash payment off the line can be spun off into a commercial or conventional line later at time most advantageous to you.

3) Your equity saved provides you more exit options for your existing portfolio. You're reduced leverage allows you to make a profit when you sell a property from your portfolio and you are less exposed in a falling market. BRRRR makes much more sense in a rising market with low interest rates than it would right now. A line of credit can be opened or closed at any time without impacting your existing assets.

4) You control your leverage by selecting which properties you want to cross-collateralize.  This is the KEY POINT = control.  As an investor you want to minimize your exposure to risk and maximize your ability to move quickly and competitively when a good deal emerges.

This strategy has allowed us to grow from 1 door to 20 in 2 years.  We also have a massing net worth due to the protected equity using lines of credit.  I highly encourage more investors consider this course of action!

The higher the rate, the better.  It's keeping wannabe investors on the sidelines and providing stronger opportunities to buy.  Think BUY NOW while demand is suppressed and refinance later.  What do you think the investment climate will be when rates drop back into the 5's or 4's? Prices will run up even further make the numbers even harder to work out.  This is our most aggressive acquisition period ever.

Gary Keller or Ken McElroy would be great choices!

As I sit here and scribe away at my 3rd handwritten mailing campaign wondering if any of these sellers will ever respond, I wonder how hard others have had to persevere to land a deal.  Does anyone have a particularly daunting tale of long suffering? Tomorrow there is a chance we get an agreement on a 4 unit we've been nurturing for a year.  There is a high chance it will evaporate before our eyes.  Oh well! We'll just keep blasting mail until we find that diamond in the rough!