Quote from @Matthew Brown:
I am in a position I am not exactly sure of the best strategy to take. I currently own a 3-unit multifamily I am selling/1031ing. I initially wanted to buy something using the BRRR strategy that fits the 1031 profile. My father is pretty close to retiring and has had a very successful last couple of years of his career. He approached me about taking a low-interest loan from him instead of a bank. I would be foolish at the rate he gives me not to take him up on it; I just do not know how to leverage the property to buy another one. I am looking to build my portfolio for cash flow through MTRs and STRs - I run a STR management company as my job. My question is, how do I take money out of the property or leverage the property so I can buy the next one?
My current property will probably sell for around $800k. I purchased it two years ago for $700k and have about $600k left on the loan.
Any advice helps :)
How much leverage are you comfortable with? (The more leverage the higher the risk). How deep into “creative” financing do you want to go?
you’re in a unique position being full time property manager. As a result, you can take on greater leverage than a typical investor, without taking on more risk - to a certain point.
Here are some “creative financing” strategies / tactics that increase your leveraging/buying power. Please note they can be risky, and I am not endorsing them, although I have personally used them at one time or another
1. Purchase a property with loan from your dad, issue 2nd lien mortgage on same property, use this created note as down payment on owner financed additional property purchase
2. Create LLC have dad lend money to LLC, use this loan as down payment on larger property(s) as your dad’s loan is NOT secured by real estate but by the LLC.
3. Have dad invest as “silent” partner entitled to a return equal to the interest rate he wants to charge you. This becomes EQUITY, which can be leveraged 4 to 1 to purchase income producing property.
4. Find a good property being totally mismanaged - offer to purchase 60% and take operational control selling your property management expertise and future profitability, providing property owner/seller with enough cash to pay off his pressing debts keeping current loan in place.
Best of luck!
