Over the span of last 3 years, I have purchased 18 rental properties, including 7 in red-hot Seattle market. Here, I will elaborate how I was able to not only create passive income sources, but to scale them fast.
One of my life goals was actually to be financially free. A few years ago, I grew this passion for real estate investment back when I purchased my first property. From that moment onward, I realized that one of the quickest and safest means of reaching this goal of financial freedom was to invest in real estate. If properly purchased, you can make a significant passive income from buying and holding real estate.
The key to the growth has been investing in massive cash flow properties, and re-investing the cash aggressively.
The first ever property I acquired earned me a considerable sum in cash flow, after all loan payments, vacancies, and expenses has been accounted for.
Actually, it was a pretty nice deal, but in order to fuel the exponential growth, I needed lot more cash to invest and find many good properties that made investment sense.
However, it took me a lot of effort and a few months to purchase a single property, so I thought to myself, how on earth was I going to purchase more than that?
The Source Of The Challenge
Your real estate growth will always be restricted by few fundamental factors, such as:
- Your capability to obtain additional financing
- Cash availability needed to fund more deals
- Finding good properties that made perfect investment sense
Realizing this at that time actually clicked with me, and I spent the coming months putting in my best to overcome such challenge. To achieve that, I did not do any of the “no-money-down” deal; I did not have any syndicate or partner, and I did not also use creative funding.
All I had to do was to focus my attention on how to use the cash which I had to invest, and I looked out for any additional source of getting finance beyond the conventional mortgage.
However, I don’t have a thing against combining creative real estate deals. My primary aim is to share few tips that saw me through in growing my portfolio. I think they can be used effectively by anyone who wants to buy a property in a period of about three to five years.
How To Maximize The Cash Available
Most arrangements of conventional financing will need you to put in some of your money into each of the transactions. Therefore, the available money you have to invest will limit effectively the number of the property you can purchase and how frequent.
To maximize my available cash, here’s what I did.
My Focus Was On Increasing My Primary Income
Initially, I was not into wholesaling deals or flipping houses (I recently got more into it). Instead, my focus was more on maximizing my income from my various business endeavors and my full-time job. Any extra income I got was directly forwarded into acquiring more real estate. Fortunately, working as a software engineer in big tech companies was a good primary income source for me.
My Lifestyle Was Absolutely Simple
I stayed away from too expensive habits, flashy cars, and extravagant spending. Coupled with maximizing income, this led to a significant saving.
I Re-Invested All The Rental Income
Since I purchased my first property, I haven’t touched a single penny of the income it generates. All I do is to save them all, combine them with my savings, and then use it to fund other purchases.
My focus Was Mainly On Positive Cash Flow Generating Properties
Best thing about cash flow positive property is that, the income compounds faster. They can be compared to monthly compound interest. You have to do your own research to hunt down these type of properties. As most properties in the hot real estate markets are too inflated to generate any significant positive cash flow.
How To Get Constant Financing
Limiting factors to the growth of your real estate portfolio points to financing. If you cannot get a loan, you can’t acquire the property you have in mind. It is quite simple as that. Unless you might want to purchase it cash, which could slow down your growth.
In my opinion, there are two options which you can make use of. We will discuss them below.
Commercial Loan
Though I began with purchasing a single-family home, I eventually moved to acquire multi-family residences, and now looking forward to buying more substantial buildings. To this effect, I diverted to commercial financing. There are varieties of banks that provide this service with different requirements, terms, and rates across the country. I was also able to meet a lender that finance 2 to 4 units with an amortization period of 25 years. All you need to do is to ask around.
Portfolio Loan
This is almost the same with conventional loans, but they are more flexible than the former, and the terms depend solely on the lender. You can make use of these regularly to finance entire “packages” of properties or single-family homes. You will have to carry out some networking with other investors or search online to find these, but keep in mind that the moment you create a relationship between you and a portfolio lender, be sure that almost all financing options will be open to you.
However, there are other financing options available, such as private money and seller financing. But I can’t say much about them because I have never had an encounter with them. I recommend that you stick with a conventional mortgage, till you start searching for an alternative option.
Conclusion
Purchasing more than 18 properties in 3 years is possible. All it takes is a few sacrifices, to live a simple lifestyle, and also hard work on your part. When you do this and follow some of the tips provided above, you will realize that it is achievable.
