How do you expand after you buy a rental property? Do you just

The equity you have in the rental can be used as equity towards getting a second property. Eventually you can get to the point where you have millions tied up in your assets, and no longer require cash deposits at all

>>1563055
>The equity you have in the rental can be used as equity towards getting a second property
Could you clarify?

>>1563055
Do you mean I can essentially reuse the down payment from the first mortgage on the second assuming I kept up with repaying the interest on the first rental property?

>>1563071
Your "equity" in the asset is the current fair value of the asset minus all your obligations secured by it. So if you own a property free and clear, you have 100% of its fair market value as your equity.

When you mortgage your property, banks will usually use some percentage loan-to-value to ensure they're not giving you more than your equity now or in a foreseeable future. Depending on the type and length of the loan, the LTV percentage varies between 65% and 95%. Before the market crash in 2008 you could even get more than 100% LTV, but not anymore. For investment the LTV will typically be lower than for primary residence, and the rates higher.

I don't want to confuse you with down-payments and deposits as it doesn't matter (unless you're in Australia, apparently). So, as an example, assume you have an apartment you rent out, which you own free and clear. Lets assume its current FMV is $100K. You go to a bank and mortgage the apartment for a loan (get a loan secured by that apartment) at 65% LTV (typical for condos for investment). You got yourself $65K to buy another unit free and clear. You now have 2 apartments with FMV $165K, your equity $100K and your liability $65K.

Mortgaging the new unit at the same 65% LTV will yield you another $42K loan - you may buy a third unit with this money.

Your equity remains constant when you take the loan and invest it in the new purchase, but the FMV of your assets grows, as does the liability secured by them. But while the mortgage has fixed interest rate (usually, not always), the assets appreciate at different rates. Now, lets be optimistic and assume, for the sake of simplicity of the example, that in 2 years, your $100K condo is worth $200K. Voila, you can take another $65K loan on it. The cycle goes on.

>>1563337
So if I want fast expansion I need to buy rental property that will appreciate fast, got it. How can I estimate beforehand that it will appreciate? Of course I could fix the place up, but what external variables come into play?

>>1563115
If you have a mortgage, no. The house itself is collateral for your current mortgage. It can't be used as collateral for a second mortgage on a second home. That second home would be the collateral. If you owned the house outright, you could do like I said in >>1563337

Your best bet is just to save up for a new down payment. It's only 20%.

Lets say in your location, the typical rental value is 1% of home value. You buy a home for $200K. It'd take 20 months to make enough for a down payment of a second house for the same value, assuming you saved all the GROSS and covered expenses out of pocket.

Expenses is a huge thing as well. You are responsible for everything. Any thing breaks whether on accident or on purpose, you cover it. The tenant doesn't care for the property and the city has to mow the grass because it's too tall, you get the bill. Plumbing or HVAC goes to shit, you pay for it. I'd advise a property management firm. They will deal with all of that for you, while taking 10-20% out.

I personally have 3 houses I own and rent out, and hardly make shit.

>>1563046
Haven't seen that meme in forever.

>>1563355
>Acceptable homes for 200k
>Renting for 1%
MA is truly the land of no opportunities.

>>1563355
>i have 3 rental properties, hardly make shit

Well you must be doing it wrong why the fuck you preaching

>>1563392
You aren't going to make a living off 3 properties unless they are apartment complexes. Renting out houses is always a money pit.

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528KB, 2975x1959px

>>1563392
>you must be doing it wrong
He's not. Rentals mostly pay for the mortgage and maintenance + accidents and vacancies, after that there's hardly any gains.

Renting does not make money unless you outright own the property from the start, like inheriting it.

>>1563400
This. Renters will intentionally break shit, and unless you fix it asap, they can take you to court and you'll lose so much money that you'll lose the property entirely.

>>1563351
I've done this by taking risk on buying 'off the plan' aka brand new, so your buying a the risk of no build but once it exists you usually get a nice bump just from completion.

Also easy to drop another 1-3%of the property value and put a fresh bathroom, kitchen and curtains. Cosmetic renovations can be very profitable - I got a valuation of 580 for a place, lived in it for a year (8%market growth) but did the kitchen and bathroom and it's now been valued at $660 so its not a bad return.

>>1563392
I deliberately have cash flow negative properties for tax purposes.
My income tax rate is the second highest bracket, but investment 'losses' (mortgage payments et al) are deductions meaning I'm getting X% discounted on my holding costs - when I eventually sell the capital gains are also taxed at a lower rate and thus the game is giving me a healthy and legal tax shelter.

my fourplex is netting about $700 a month. its not crazy money but its a decent amount

>>1563567
The higher the amount of units in a complex, the lower risk there is long term.
Houses are a money pit because it's pure loss of money anytime there's a vacancy. A 4 plex is a good move for a starting landlord because there's pretty much always some level of income even if there's a vacancy on a unit or two.

>>1563392
He means there isn't any free cash flow. He's still building equity in the properties, meaning that he can turnaround and sell them and keep his equity stake. Or wait until the loan is paid off and the entire mortgage payment is free cash flow.

>>1563055
Being too highly geared if a market correction happens and you'll be wiped out.
It's prudent to pay the principal too