All Forum Posts by: Brandon Schlichter

 And that's what I'm wanting to do, but the funding is a bit slow.

Back in 2015 I went to several local lenders and they said the same thing "Brandon, you're 30 years old and have 20 rentals, that's amazing at your age so why try and loan money for more properties, you're doing just fine!"

The thing is, I've been in real estate now since 2006 and I have access to the MLS and can go back all the way to 1996 to look at comps and history. The thing that frightens me is that in 2002-2006 in one county I now have ~25 rentals in there were at best 30 rentals that sold over the entire 4 year period in my area. What concerns me greatly is that prices will edge up (And they are edging up for the past 1-2 years) and price these properties I buy out of the market. I really have no desire to buy B-C grade properties at a 10% cap rate. Now at a 15%-20% cap rate like I've been buying now since 2003 it makes a heck of alot of sense to take on the problems that come with it.

So, my thing is why not take more on while the time is great, so if the market does price me out, I'll be sitting on tons of real estate? Well, the bankers didn't see it that way. They're starting to warm up, but since 2013 I've had the chance to buy hundreds quality rentals in the areas I'm currently located in, I bought just 51. 

That's my concern @Jay Hinrichs and why to this point I've avoided it.

The ONE thing that makes me consider it is talking to a few older developers is guys who did 'new construction' using surplus/cheap material getting their material expenses down to near nothing (4-8 plexes) and getting a decent yield that way compared to rehabbing existing structures. I saw a guy do this locally at $35k/unit with $800/mo in gross rents, certainly not a bad deal when they were 3x SFDs in one go. 

If money is cheap and easy, the margin might not be bad, but the risk of going to a field I have little experience is what concerns me. Especially when I have a list of 20-30 properties to pick from the next time I go out looking seriously.

 Really I want to buy in areas I'm willing to drive to personally on a regular basis. So for me that's Central Ohio.

Tons of properties that make good money. Downtonwn Columbus is doing great and at least for the past ~4 years I've been doing well too.

 That is certainly a consideration, I also wouldn't sell but even if I would have to put 30% or so down on new construction, I could do it. My BIGGEST concern by far is that I've never developed new properties and am kind of scared to go from dealing only with 1-4 rehabs to something brand new, hiring sub contractors and whatnot. I think it could be fun, but also costly at the same time.

 I'm right outside Columbus Ohio, and the expansion end-goal is all the counties right outside of Columbus.

Trying to diversify enough so one or two major employers leaving won't kill me. We had that back in the 70s with Buckeye steel leaving and it hurt Columbus, but now there's a pretty fantastic employment mix, thus the substantial growth over the past few years.

I'd like to buy at least another 25 this year taking me up to ~80 or so. I figure around the 80-100 area I need to look at an assistant or streamlining management, then I want to scale as much as possible in 2018-2019 and work personally solely on growth, and not on management. 

@Derek Carroll - I do have a LOC that we've been using, when it comes time to refinance them out the bank has been apprehensive and wants to see 2-3 years worth of seasoning (At least the lenders I've talked to so far).

The portfolio lenders I've talked to tend to want to see higher values on properties, but maybe I've talked to the wrong ones. 

@Zach Quick - I'm paying a little more than 8% as it is now, if I could find someone at 8% and a steady supply of it, I'd be quite happy.

Since getting in real estate 11 years ago, I knew I wanted to buy rental properties. Then in 2013 I finally got the shot to do it after finally finding a private money partner to go in with and start buying. Since July 2013 through today, I've purchased 51 total rentals, all 1-4 units mostly (About 50% SFDs, the rest mostly 2 units). 

I'm now in contract for more rentals to take me up to #54.

The problem I've had since the start, and continue to have is funding - Banks really are skittish on dealing with me on the lower-end properties that I tend to buy. I think our average property value is in the $75k range. After 2-3 years now of seasoning, a few lenders are starting to warm up to me, but the ones that do want to lend also want to limit the total number/amounts of properties they'll loan to. So, I feel like I'm in a never-ending cycle of trying to find more money to buy with. The management aspect isn't too difficult, dealing with contractors and labor isn't too bad, but the money situation is the one that always bothers me.

I know the traditional answer is "Why the heck would you want to buy small stuff when you could buy ONE apartment complex and do it the easy way" - My answer is that cap rates for that kind of stuff is less than half of what I'm making on 1-4 units in my area. At some point I realize I'll have to hire management help, but my cap rate still is superior to a larger apartment complex,  so to me this route does make a great deal of sense.

All my deals sans one has been just cash purchase. I've been trying the BRRR route since day #1, but the refinance aspect has been terribly difficult, out of all my rentals I have been able to refinance 6 rentals with another ~8 in the process of being refinanced right now. So, I continue to chug along with more private money which I pay closer to hard money rates on. The flexibility with cash is awesome and I get smoking hot deals all the time. I realize the option here would be take money, and shoot for a boatload of seller finance deals, but I don't find those as much as I do distressed sellers needing cash ASAP.

So, in my shoes, what would you consider? Chugging along slowly refinancing properties over time? Some magic source of cheaper money? Or would you bite the bullet, give up the dream and buy larger commercial-type apartment complexes where commercial loans are much easier to obtain?

I'm curious for those of you looking at turnkeys - What IRR rates are you looking for/aiming for when considering turnkey?

I've had great luck so far with rentals here in central Ohio, but I manage them all. I'm trying to grow my portfolio as fast as possible and have thought about selling some of what I own as turnkeys to fund more, but haven't talked to enough people to see what kinds of rates they're looking for.