OK, so you’re asking if you should be able to handle the mortgage and expenses from all your rentals with the income from your day job should you have vacancies all at once, right?
What kind of property will you be looking to acquire?
If it’s a multi-family, chances are you won’t be completely vacant at once and the rent you’re collecting will help cover most or all of your expenses.
You should save up some money to keep in your account. This will help you cover expenses if you have an expensive repair or help you weather a vacancy period. That should be your first priority before acquiring more. Get too big too quickly and you could fall victim just like all these other families that got into payments they couldn’t afford.
Building your savings should put your mind at ease for being able to cover your mortgages.
Thanks for the response. I’d like to get a multi-family one day. Currently I have a really expensive primary home; and a single family-rental (3/1) row home in a great rental location.
Since i’m 95% LTV on my primary (I hate my lender and myself), and only have 20k equity on my primary. I was considering paying down the debts I have (i.e. car, student loan, mortgage), saving some money, and then start investing
Unless I’m missing something - you’re pretty much agreeing with me. If I can’t “afford it” on a bad day (with Day Job, etc…) - then I shouldn’t buy another.
What’s a good rate to acquire rental properties? Is there a good target like 1 every 2 years?
You definitely want to make sure your financial house is in order as far as your income and
expenses are concerned. If you can possibly swing it, pay down (or Off!) any credit card debt
you have. If you’re really aggressive and motivated, student loans & car notes would be nice.
Establish an emergency fund to cover 3-6 months of living expenses. Don’t rely too heavily on
a HELOC for an emergency fund because lenders are clamping down on these loans. If they have
any doubt about your ability to repay (and if you live in America in 2008 they’ll have doubt), there’s
a chance they’ll reduce or eliminate your ability to use these funds.
When you invest, budget for vacancy and repair items. You can draw on these funds on a rainy
Your acquisition rate will depend upon you. Some investors can swing 1 or 2 a year; others have
a goal of 1 or 2 a month. Set your goal according to what’s comfortable and doable for you. If
you follow every investing strategy you read about on the Internet, you’ll be collecting shopping
carts at Wal-mart (you can’t be a greeter until you’ve earned your stripes).
I don’t think anyone can just give you a general rate at which you should acquire properties. It really just depends on what your goals are for your future, the price and market rent for properties you’ll be buying, how much money it will take to get into these properties, and what your income is.
I have a goal to pick up at least 10 more units (multi-units or SFHs) by the end of next year. The properties I’m looking at will support my investing goals, but my goals are most likely not the same as yours.
The last thing you want to do is get yourself in a bad position financially because you went a step too far too soon.
Have you consolidated your student loans? You can do it once with the Fed. Gov. and you may be able to lock in a lower rate. That might free up some cash for you.
Call around to some banks and see what they’re currently offering for NOO loans. Then you can start running numbers to see how long it will take you to save up the down payment. Take all this information and see how things fit with your goals. Then you should be able to calculate how much money you can devote to this and also how fast you’ll be able to acquire new properties.
siloxtreme - it is good that you are thinking and planning before doing… My strategy is to buy & hold. I want to build long term wealth and I like the idea of being a landlord of several units. Before I started I set my long terms goals - this helped me understand that it will take me more than a couple of years to reach my goals. So I changed my attitude from being frustrated with my job and wanting to quit it to being thankful for my job that gives me a W-2 that allows me to execute my real estate investing.
In my case, my goal is to buy 2 properties this year. I am buying my first one in the beginning of October. I will have until the end of the year to buy the second… :O)
My plan is to mix fix&flips with fix&holds. Right now at the price range I am looking at I probably can buy another rental comfortably without putting my home/family/credit at risk. However this would bring my cash reserves down and would probably make it difficult to buy a third rental right away. So my next deal will probably be a fix & flip. The idea is to do fix & flips to build reserves until I can do another fix&hold. And repeat this over and over again.
Another option is to wholesale properties. It may take longer to build reserves than doing the fix&flip, but it is less risky.
And back to my goals - this year 2 properties, next year 5, and so forth.