All Forum Posts by: Kyler J Sloan

I am trying to develop a long-term default financing strategy to fall back on before making my first investment, and would be thankful for any feedback which could be given for the one described below. 

I would like to see if it is possible to scale using only conventional financing, and home equity loans, in order to maximize self-sufficiency with respect to financing. 

Because my income starting out is expected to be around 200 K, I believe that I can rely exclusively upon conventional financing to begin with, until I exhaust the total of 10 mortgages for which I am eligible, and proceed to snowball all profits into paying off each consecutive property -- each time I pay one off, I will be eligible for another (10th) conventional loan, as well as a home equity loan secured by the recently paid off property, which I can use to buy 1-2 more properties. I would like to continue this way, with a maximum of 10 loans taken at any given time. In this way, I could eventually come to a position where it is possible to "self-finance" every new property I buy, and become self sufficient with regard to financing -- This, and still maintain exponential growth. 

Because I have reduced my expenses to less than 500 a month, and enjoy a more frugal lifestyle as it is, I am content pooling all available income to real estate, in order to accelerate this process. 

Considering that the back-end ratio needs to be roughly 36 percent in order to qualify for a loan, it seems that the mortgage costs associated with each newly purchased property should be 36% of the revenue generated by that property -- we might call this a 36% rule: 

mortgage cost / rental income = .36

Please let me know -- is this feasible or advisable? Am I missing something? 

I am not sure how long each property needs a rental history in order for it to be counted as income, if they only count a certain percentage of this income, etc. 

Thanks in advance. 

I plan to buy my first house by the spring, but would like to have a plan for financing properties as I scale long term, but am not sure how feasible my current plan is, considering that I have not heard of it before.

I would like to remain as self sufficient as possible with the financing, and avoid relying upon portfolio or private lenders.

Pre- note: my annual salary will be roughly 200 K, I am single, and have reduced my expenses drastically (spending no more than 12,000 a year on personal expenses). I will also be targeting vacation rentals, nearby the nation's most popular national forests.

Phase 1: scale by buying one property roughly every 4 months for first three years (averaged -- fewer in first than second; fewer in second than third), until I have the maximum of 10 conventional loans which I am permitted.

Phase 2: Snowball all cash flow and income into each house in order of loan age, and take out a home equity loan, in addition to another conventional loan, in each payoff event ( i.e. when first house is paid, get another 10th conventional loan, and take out home equity loan secured by the newly paid house, and use each to purchase 1-2 more rentals).

By following this method, it should be possible to achieve exponential growth, in spite of the fact that only conventional methods are being used -- and, even come to the point where every new property is "Self-financed" -- secured by another asset which I own.

I would be interested in knowing whether this is ill- advised when considering asset protection, ect. I am new to real estate, and would like to have a schema for what I intend to do before getting started.

Thanks in advance for any advice.