I’ve had rentals in the past but I’m looking to buy a significant number (10-20 & primarily single family homes) this year due to the excellent conditions. I have good income ($100K) little debt and great credit (780ish) with no negative credit history. I know enough about being a landlord and construction in general to feel pretty comfortable running 20-30 rentals.
In my area single family houses of about 3-bed 1200-1600 ft^2 are my sweet spot. Depending on the neighborhood/condition these typically are in the $165K-$225K territory and the inventory in the market is low. Most properties that are priced right come off the market in <30 days so generally that points towards rising prices. Rents are $1300-$1800 for these houses. With current interest rates I’ve found several that would cash flow for me with $10K down of my own money. I have good income from my primary job and great credit with little debt so I can qualify for owner occupied loans easily but I’ve not tried as an investor to work with banks.
Any tips on finding reliable lenders for banks that work with investors like me?
I think it's admirable to have a goal, and you can get there if you work at it.
Non owner occupied conventional mortgage loans will require 25 to 30% down for a new loan while private money mortgage loans require 30 to 35% down generally to get financing. If you buy and finance with hard money financing you will need to own the property a minimum of 1 year to season the loan before you could refinance.
Hard money loan lenders now require 25 to 35% down on your purchase and may require the payment of points.
I have a few friends who now own 6, 8, 10 or 12 homes buying one owner occupied, living in it 2 years or longer and then buying a new home to owner occupy and making the old home a rental. The problem today is a lot of investors have problems getting past about 6 conventional loans as lenders are harder to find who will make those loans.
A mortgage broker or small hometown bank are generally better to start getting loans through rather than big national institutions, however 10 conventional loans is about it for personal investment holdings. You may be able to buy half a dozen one by one and refinance them as a group in a few years using a commercial blanket loan at some future point, however this is never a guaranteed option depending on your state and location.
At an average $195k price for the sweet spot in your area you are likely to put up somewhere between $1.2m and 1.8m to purchase 20 to 30 homes, you would be better off in the apartment market as $1.5m would leverage a total portfolio of roughly $6m dollars which probable amounts to 120 to 180 class B / C 2/1 units in the average 10 / 12 cap rate area in good markets.
Best of luck,
You got some great advice above.
The deals you are asking about sound like break even propositions at best. My time landlording is not very profitable from a cash flow perspective and mine cash flow at least $300 per unit or 1/3 of gross. IMHO, you need to be buying stuff at about 50x monthly rent to be able to make any real money this way.
That’s a different way of saying the same thing I shoot for. I look for places where the rent is at least 2% of the purchase price. It’s the same principle. If you stay at 50x the rent or less, you should have good cash flow.
For the sake of the OP, who is admittedly a new investor:
The 2% rule I use is only good for a quick evaluation of a property. I can double the price and move a decimal place in my head. It lets me spend 2 and a half seconds evaluating a property and giving a “no” or a “maybe.” Then I can do a better evaluation and go look at the property, etc. if I give it a maybe. It’s no replacement for due diligence.
One question you will want to ask yourself is “am i sure I can afford the time it will take to manage 20 to 30 houses and still keep my job and life?”