All Forum Posts by: Daniel Levine

@Daniel Levine

@Mike Carino (here's a good way to rinse and repeat)

Hi Daniel! 

This strategy is a really good one when it comes to growing your portfolio. However, doing so with Single Family Homes (SFH) will make you hit a wall at some point where the bank won't loan to you anymore. In the US, I think it's around 10 loans/ person. I live in Canada, we don't have this kind of limit nor the seasoning thing as far as I know (but that's not the point). Here's a solution regarding your strategy as it is the one I want to use as well :

When you hit that wall, the point where you can't have loans anymore, let's say you have 10 loans for 10 SFHs, here's what you can do:

Sell them all, cash out, buy an apartment complex with a commercial loan (since the financing doesn't take into account your personal debt ratio) and start all over again with SFH. See, let's say after 3 years, you have 10 SFH worth 100K and financed at 80% (80K loan) and 20K equity in it.

Sell them. This will leave you with 200K (10x20K) (I won't consider tax for this example).

Of this 200K, take 150K and buy a 600K apartments complex (let's say a 8 units since I don't know your market).Put 150K down and finance the rest with a commercial loan for 450K. 

Keep 50K of the 200K and start again building your SFH portfolio following the Buy/Rehab/Rent/Refinance. But this time, you have a 8 units bringing in additional cashflow, appreciation and mortgage amortization.

Take note that selling all your SFH might not get done in 2 months...Also, you'll have to deal with the tenants or sustain empty homes while trying to sell them, pay commissions to broker, etc. Personally, I suggest you to sell maybe 3 at a time. This will surely not be as easy as it seems...but hey, we're talking about real estate, nothing is easy.

Also, assuming you bought all you SFH without your own money (private money), you now have a 600K apartment complex without even touching your own money. ;) Isn't real estate the most wonderful thing in the world?

Best regards,

Kevin

 Not stupid question.

Not the same lending source...two different appraisals, but the lender on the LOC covers the cost of theirs....it's internal.

Appraisals are good for only 2 months anyway

 Joe

In this above what is the purpose of the Line of credit? I am doing a all cash deal with 50% private money and 50% from savings. I think the line of credit would be a great option to pay back the private money while waiting for the seasoning period aND would have a lower rate.

Questions

Do you get an apprasial for  the loc?

Are there closing cost for the loc?

Thank you

 I do all cash in, and get it all back out with the refi...then use the same cash on the nest deal..repeat, and repeat, and ...in the end I never spend any money.  All the deals have NCF over $300/month with a property manager in place.  I don't need new cash since I use the same fash over and over again.  This also means I can, based on property availability, do all 10 deals within a years time (in theory).  Due to negotiations taking time, and rehab timing, the average is between 4 - 7 per year...never spending the money, using the same money.

The numbers:

Average cost per deal including rehab, fess, etc...)          $50,000 - 60,000
Average ARV $80,000 - 92,000
75% REFI (6 month)                                                          $60,000 - 69,000
Average cash out at refi, an additional...                           $ 3,000 - 10,000
Average number of houses per year                                        4  - 7
Minimum added NCF per year (avg. $300/deal)               $  1,200 - 2,100/month
Equity is still around 25% per property

Cash spent total per year                                                    $  0

One of the many added advantages to this strategy is I can outbid most other offers since I can offer more than the AP, as long as my total cost doesn't exceed the 75% of the ARV, since I get it all back at refi.

zzz xLimit in what way? In the amount of LOC you can have total.