(Continued from Page 2)
Are there student rentals in the neighborhood?
Is the local government working to revitalize the neighborhood where you’re buying?
Is this convenient for your construction crews?
Are you comfortable with the local government?
What is my monthly income goal?
How many houses do I need to own in order to achieve that income goal?
Does this fit in with my financing options?
The most successful investors I personally know, know why and where they’re buying their
houses. Most stick to certain neighborhoods for certain reasons. Once they land on their
desired neighborhood and business model, they methodically pick up every piece in the
neighborhood (as long as the price is right).
The next question is:
“How do You Finance HUGE Rental Portfolios?”
This month, on the REI Diamond Interview I had the opportunity to talk with the Area Manager of
Monument Bank, Joe Scorese, and discuss exactly how to create a plan for financing large
portfolios of rental houses. You can check out the REI Diamond Interview with Joe Scorese at
Here’s the idea: To build a large portfolio of rentals, you must create “portfolio packages”. I’m
giving you a quick rundown of how to do this-you’ll still need to talk to your attorney or other
professional to iron out the details and understand your risk.
Start with $250,000 in cash (or more). It can be a private lender, hard money lender, or even
your own savings. Go by 5 houses for an average of $20,000 each. Take title to each of the five
houses in the name of one LLC. So at the end, you have a company holding 5 houses.
These properties should require an average of $20,000 in renovation each to be worth, at retail
appraisal value, $70,000-$75,000 each.
You are going to have to get REAL DEALS on these houses, you can’t just go plunk down the
cash on any house. They have to worth 30% more than your entire cash investment once
Once renovation is complete, place tenants in each of your 5 houses. Then go to a local bank
(the national banks aren’t usually the best option) and ask for a refinance to pay off the $250,000
investment you made in order to complete this portfolio package (plus interest, if applicable).
Some banks may even allow you to take cash out in addition to the amount used for acquisition
and construction. My personal opinion- never over-borrow on real estate investments. That’s
just me though, and I’m adverse to debt. Anytime markets or the economy changes, lower debt
levels keep business and portfolios at less risk.
You don’t have to stop at 5 houses. I have friends who buy & build packages of 10-15 houses
per LLC. They do this with NONE of their own money!! They bring in capital partners to fund the
acquisition and rehab and then go to the bank once the package is stable (ie-houses are
rented). This is how portfolios of 300 houses & up are built!!
Please bear with me- I know that there’s a good chance that you’re neither in Philadelphia or
Chicago, because this Newsletter goes out to thousands of real estate investors across the U.S
but I’m going to keep you posted on my local events. Stop by if you’re ever in town.
(To Continue Reading go to Page 4)
|"Real Estate Investment Jewels of Wisdom"
|REI Diamond Interview