All Forum Posts by: Brandon Low

@Jonna Weber

Thanks for your response. I think I need to rephrase my question... Is there any way I can continue to get loans of 30 year fixed with an interest rate of 5% or less after #10? I know that portfolio lenders will do 15 year fixed or 5 or 7 year ARMs, but a 15 year fixed would make it very difficult to cash flow and ARMs seem like a risky idea one the original 5 or 7 year term is up. 

I'm in the process of closing on my first rental property this month and have a goal of acquiring 9 more this year. Currently, I am getting 30 year fixed @ 4.75%. Once I have used up all 10 conventional loans, what would the best strategy be in order to keep going while preserving cash flow?

@Mike D'Arrigo, @Chris Clothier, @Dan Burstain

Thank you for your replies. I will definitely reach out to all of you when I am ready, but I am still early in my research/education phase and feel that I need to learn a lot more before I take up any of your time. The next step that I want to take is to narrow my search down to 1 or 2 specific markets. However, before I do that, I want to compile a list of Pros and Cons for each market. For example, Market A has the highest cashflow, but very little appreciation, while Market B has average cashflow with decent appreciation, etc....

I have decided that my strategy will be to build a portfolio of both SFH's and MFH's. However, I have not decided on the exact location I want to invest in. A few areas I have my eyes on are Kansas, Indianapolis, Austin, Houston, DFW, parts of Florida, etc. Knowing that one area might be great for SFH's, while another area is better for MFH's.... Is it a bad idea to be actively looking at several different markets to choose your deals from as opposed to specializing in one area?

@Account Closed - You are right, I don't know much about real estate yet - I bought my first property in SF 2 years ago, but that was just to live in. But other than that, I know I have a lot of learning to do before I buy my first investment property. I'm just starting out by figuring out the type of investment strategy I want to do, and then work my way over towards the "less exciting" topics of loans.

@Account Closed - wow, $250,000,000 in debt is INSANE! what would happen if something catastrophic happened like a natural disaster destroyed all of his properties (assuming they are all in one place)?? Obviously, the houses would be gone, but could the banks or whoever loaned him the money go after his personal assets? Or would he simply be able to keep the millions of dollars he's made from rent over the years?

Wow! This forum is great... Thank you for all the helpful tips and different perspectives to think about! I've already learned so much in this ONE thread.

@Bradford Myatt - You are right. In my area, I could never dream of using this strategy! I am preparing myself to go out of state in order to carry out this plan. I am currently still researching which area's I would like to invest in. Thanks for the tip on creative financing!

@Wendy Noble - I haven't finished my spreadsheet (not even close), but I will definitely need to factor in the snowball effect. Once I have it all mapped out and have accounted for every detail, I will be glad to share it.

@Jason Vandermark - Good point on setting attainable goals. I would still like to strive for my original goal, but I am definitely plugging in different numbers to see how different scenarios turn out.

@Kevin Wright - Your comments about good debt and bad debt definitely help me put it in perspective. Being in debt $8 million sounds like a really scary idea, but I know that I will have to use leverage in order to reach my goals. I suspect that I will feel less and less worried about debt as I become more experienced.

@Brett Russell - I see, that makes sense. Hopefully, if I ever reached a critical mass of 100 properties, I would most likely be very experienced and would have a majority of my properties fall in the "good deal" range. My question is: What happens when we experience another real estate crash? Are cashflowing properties more "resistant" to a real estate crash? I've read that even in a crash, rents stay relatively stable, and obviously, people still need to live somewhere (and thus still have to pay rent). And of course, there is always a risk of a natural disaster wiping out a huge chunk of your properties. In this case, I assume it would be smart to diversify into different areas.

@Glenn McCrorey - I think I was worried about having all that debt and then the market crashing. But I've now learned that if I buy my properties "right" and have a good margin for error, I should be fine.

@Mike H. - Thanks for taking the time to write out such a detailed response. Hearing about your story is truly inspirational and adds more motivation for myself. I fully intend to utilize a team, but have to admit that owning 100 properties seems like a daunting task regardless. Once I get a few SFR's under my belt, it's probably a good idea to start acquiring some apartment buildings. Thanks for the tip! I don't know much about financing besides the 30 year fixed I have on my own home. Once I start researching the different financing options, I am sure I will reference your post and have plenty of questions! Since you have already gone through the process of buying a ton of rentals, would you say it is possible to do this on your spare time (if you have a team) or would you say this is only possible if you do this fulltime?

@Franklin S. - It would be interesting to see what percentage of people who make a plan (especially a long 20 year plan like this) actually stick with it. I fully expect the plan I make to change as new obstacles or opportunities come up, but am excited for the journey.

@Joe Fairless - I definitely see buying apartment complexes as a better strategy in reaching my goal. How many SFH's did you get under your belt before you made the transition to apartment complexes?

@Daniel Andrews - Thanks for the info on maxing out at 10 mortgages. I did not know that but haven't had the time to research all the different financing options yet. Its next on my list!

@Nate Garrett - Very true... I know full well that this is going to take a lot of hard work and energy on my part. I guess I just used the word "passive" because that is what is associated with rental income vs flipping houses.

@Jeff McCaskey - I am going to be looking out of state, do you have any recommendations? Also, just to clarify, when I say "worry-free", I was really referring to the fact that I won't have to worry about a paycheck due to rental income coming in every month.

@Joe Pickett - I read somewhere that even if the market crashes, rent stays relatively stable. And since people always need to live somewhere, they will still rent - making this strategy seem less risky. This is one of the reasons why I am attracted to acquiring rental income properties. Is this not true?

@Jay Hinrichs - Ya, its crazy.... a $125k downpayment at 25% down would get you a 600 sqft studio. 

@Mike F. - I did not account for rental increases (due to inflation?)... is there a site that shows rental increases and appreciation overtime for the different markets? I'm not going to depend on appreciation (contrary to what we do in CA) but if there is a market that has strong cash flow, decent appreciation and increasing rents, that would be ideal.

@Account Closed - Is there another thread or article where I can learn more about this model? I'm very interested in other strategies that can lead me to my goal.

Can you explain what you mean by this?

@Brett Russell - It looks like you've answered my question with another question. I guess being in debt (even if its huge) doesn't really matter as long as the tenants are the ones paying for it. But are there any scenarios that can happen where having such a large debt could come back and haunt me?

@Kyle Doney - Yes, there are definitely a lot of holes in my plan and things that I have not considered yet. I just wanted to see if having such large debt would be viewed as a bad thing. Now that I know it's a moot point, I can start refining my plan and investing more time in learning.

Thanks for your advice!

Hello,

This is my first post, and am still very much in the learning/education phase of my REI journey. (So please dont be too hard on me!)

I'm 26 and my goal is to make $500,000 a year in passive income by acquiring rental properties. I want to reach this goal in 20 years. I've done some rough estimations using the following criteria.

Rentals Acquired Each Year: 5

Avg. Cashflow per property per month: $350

Avg. Purchase Price: $100,000

Down Payment on each house: 20%

If I were able to stick to this plan, I would be making $441,000 a year with 110 rental properties by the year 2036. That's AWESOME except for one thing: I would be in debt around $8 million. 

Here is my question:

Even though I am making $441,000 a year, it would take 16+ years to pay off all my debt even if I devoted 100% of the income towards paying off the mortgage. The thing about rental properties that attracts me is the "worry-free" mindset that comes with it. However, due to the massive leverage that is being used, and thus huge debt, it doesn't seem like such a great option anymore. Thoughts?