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Accelerator
4.1 Residential Rentals and Scaling
Cheat Sheet
1. No Closing, No Cry
- Not all offers go through, there will be some failed attempts. But what you must do is keep practicing and keep submitting offers.
- Lenders may reject your offer, sellers may back out, and that’s why having contingencies in place are crucial:
- Add an addendum to your contract requesting an extension in writing if more time is needed.
- Add an amendment if you need additional credits at closing, or if the repairs completed by the seller weren’t done right.
- If you ever feel stuck, then reach out to us on the Facebook Group or join the Live Q&A Coaching Sessions.
2. First Closing
- Once you close on your first property, stabilize it by:
- Keeping it in good physical condition via repairs.
- Keep good records of income, expenses, and documentation such as: rents, leases, and statement of accounts.
- Show a profit on tax returns to get approved for future mortgages.
- Implement the 3 buckets system:
- Save 3 – 6 months of living expenses.
- After you have 6 months of living expenses saved up, increase your savings by taking 30% of your gross revenue and set up automatic transfers from your checking account to your savings account.
- If your debt to credit ratio is above 30%, then take your increased savings and start paying down debt.
- Delegate 10% to charity.
- Delegate 10% to investing.
- Save 3 – 6 months of living expenses.
- Once you’ve met your savings goal, reallocate money to savings for investing, repair your credit to a 640 or higher credit score, wait 3 – 6 months before doing another deal.
3. 2nd & 3rd Residential Closing
- If interested in doing a multi-family deal, reach out to a mortgage broker on how to qualify for a commercial mortgage.
- Keep a paper trail on all personal and business expenses by recording everything on a Schedule E
- To qualify for additional residential mortgages, you’ll need a minimum of 640 credit score, and income from more than one source.
- You may be required to have 6 months of reserves for each property.
- The property needs to be in habitable condition.
- Show lenders proof of funds:
- Business income
- Savings
- Retirement accounts
- If using business credit, it must be seasoned in the bank for at minimum 2 months
- Before doing another deal, make sure the units you already have are:
- Cash flowing $100 per door.
- 8% or higher cash on cash return.
4. Inventory
- Markets tend to fluctuate, but you can still buy in any market conditions.
- If you cannot afford to put down 20% on your next property purchase, then put down 3.5% instead.
- Increase your marketing efforts by networking and focus on wholesaling.
- If your market is limited to single family homes, then buy single family homes for your rental portfolio.
5. Scale
Join the Multi-unit Income Training (MIT) to acquire cash flowing multi-family properties in your local area or out of state.
Words of advice
- Keep it positive, be persistent, and be tenacious.
- Share your successes and issues with our closed Facebook group.
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