how many rentals can you buy in a year?

Asked by Mdfindling, 48382 Tue Jan 10, 2012

We are looking to start buying rentals in se michigan. We see many homes going for 40-50K with 1000-1200 in monthly income. We are starting with 300K in cash with 800/750 credit scores and over 300K a year in income. My question is how fast can we start to accumulate properties, what is the best way to start financing these?

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Michael Cheng, Agent, San Jose, CA
Wed Jan 11, 2012
As attractive as the numbers might appear, you shouldn't expect to just load up on a bunch of these property and get an instant flow of checks for $8-10K in the mail. Owning and managing rentals take some time and skill. You should pick up one or two with cash and get them cash flowing for a good 4-6 months. Once you feel comfortable, repeat the process until you've deployed all your cash. If you're doing it right, you should have enough cash flow to buy a new property every 5-6 months. Seems like a good way to accumulate properties quickly and you can stop and enjoy the cash flow anytime. If you keep financing them, you'll own lots more properties with a lot of management overhead and not much cash coming in for yourself.
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Roland Vinya…, Agent, Sprakers, NY
Wed Jan 11, 2012
Don't jump into deep water without swimming around in a bit first. Make SURE you like the rental business. It is not all gravy. Tenants move out without notification. Repairs need to be made at a faster rate than they do on your own home. There is trash they leave behind.Collections are not always easy. What do you do if you get a call saying, "My toilet is not working"? Do your financial calculations based on a vacancy rate. There should be some vacancies, otherwise you may not be charging enough. But you don't want many of them.

I would buy a few, 2 or 3 perhaps, with your cash and see how you like the business and see how it is working for you. Should you have chosen other areas? Different types of homes? Commercial instead? Answer these kind of questions with a smaller investment. Once your business is established, you will have better luck securing financing for other acquisitions.

Personally, I stick with what I can buy for cash. Conservative, which limits my top side, but safe. I also like knowing a business well before I invest in it.
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Brian Wayman, Agent, Indianapolis, IN
Tue Jan 10, 2012
Honestly, the best way is just to use cash if possible. You obviously want to try to keep a good amount of money liquid but cash is still king. Once you start involving lenders you loss your ability to be quick and easy to work with plus they are running the show. Lenders have been a lot tighter on lending money for investors to buy bankowned/foreclosure and HUD homes. I would talk with bank typically one that is local and handles all their own unwritting which keeps everything in house.
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Ann Ryan, Agent, Doral, FL
Tue Jan 10, 2012
First, you need to talk to commercial lenders, because you're not going to be getting individual mortgages. I suggest you also rethink the strategy just a bit - you shouldn't try to buy things up as fast as possible. Instead, try to concentrate on getting the best VALUE. In your case, that will be based mostly on rental income vs. investment (ROI) but also consider long-term possibility for appreciation. You will want to start developing a network of service providers - a plumber, an electrician, a general contractor, etc. that understand that you're working on a long-term rental stream, and therefore will quote you great prices and give you great service in order to maintain your long-term patronage. I'd be happy to refer you to a local Realtor, who can guide you through local conditions and pitfalls.
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