I have been thinking of starting a rental property business with a friend and am just trying to get my head around a solid low risk strategy for this.
I see other people using the OPM strategy all the time and this looks very lucrative but also very very very risky. I am a Dave Ramsey no debt kind of person and the idea of borrowing money to buy more property to refinance as well just sounds scary to me.
I know however that there can be a smart way about doing this, I am just not sure what it is yet.
My first thoughts is that we would come up with about 50k-80k in cash to be our own hard lender. We could buy our first property outright. Safest thing. Then my guess would be to refinance it to come up with money to buy a 2nd place. My question though, how much down would you put on the 2nd place. Im thinking something like 35-50% would be safe enough for worst case scenerio. Worst case being no one is renting, cant make payments. At worst case I would say losing the properties would be the case. I dont want to be stuck with a tax bill for the refi’s etc…
Am I being “TOO” cautious here? I want to be able to grow this LLC with multiple properties but dont want to do it with the risk of losing everything. I have heard the stories of people going from millionaire to bankrupt. What can I do now starting out to make sure that doesnt happen.
Is there a strategy perhaps of buying 2 places at a time, so if 1 isnt rented the cashflow of the first could handle the 2nd’s expenses? Etc… Im looking for something like that.
Other stradegies I find are. Use a hard lender, refi, buy another play, refi, buy another place, refi… Before you know it you have 10 mortgages and if you cant find renters, you are screweddddd.
Thanks in Advance!
I would really like to hear suggestions on starting out and strategies like this. IE, how much money should the LLC have in reserves, etc… how much should down payments be. Any other good reading would be great too!