Nearly every property mogul with a multimillion dollar real estate portfolio started small.
An empire of this magnitude is within reach the reach of every aspiring flipper, developer and real estate entrepreneur in California.
The key to unlocking your real estate aspirations is knowing how to build your portfolio one step at a time by harnessing the power of hard money.
It begins with a single property flip and leverages hard money loans to grow your portfolio until it reaches the seven or even eight-figure sum you desire.
Here’s how to do it.
Hard money loans
Hard money is like high octane fuel for flippers and developers.
It drives their projects forward offering speed and flexibility that conventional financing simply don’t have.
Hard money loans are short-term asset-based loans secured by the property.
They are the ideal vehicle for building wealth because:
- they offer faster access to cash than traditional loans
- they can be used to fund multiple projects simultaneously
- they base an application on a property’s ARV (After Repair Value) rather than the borrower’s credit history
Your first fix and flip
Let’s take a look at an example of how your first fix and flip might unfold.
You find a distressed property in Fresno ripe for repairs with big upside and decide this is the launching pad for your multimillion dollar real estate portfolio.
Purchase price: $400,000
Renovation costs: $100,000
ARV: $650,000
Hard money loan: 70% of ARV = $455,000
Interest and fees: $50,000
Profit: $100,000 ($650,000 – $400,000 – $100,000 – $50,000)
That’s a tidy result for six months’ work!
But you’re just getting started.
The key to building your wealth is to reinvest the profit from your first flip into multiple projects.
Scaling up
You’re good at what you do and converting or renovating rundown housing comes naturally to you.
Now, you just need to fully appreciate the potential that scaling up unlocks.
By using the profits and knowledge you have gained from your first flip, you can think about taking on multiple projects at once.
Start by trying two properties simultaneously and when you gain in confidence, consider going to three, all the while recycling your capital and funding each project by leveraging hard money loans.
Before long, you will have turned a $300,000 profit in six months after completing three simultaneous fix and flips.
But the possibilities don’t end there.
Multi-unit and commercial properties
This is where the big money starts to roll.
California’s housing shortage has created enormous demand for rental properties.
They offer higher cash flow which is the lifeblood of every successful business.
And they also promise long-term appreciation.
You are no longer simply looking at flipping but becoming a landlord.
You buy a four-unit apartment block for $1.5 million using a hard money loan for the purchase and renovation.
Upon completion, you switch the hard money loan to a cheaper traditional loan and rent out the units for $3000/month each, generating $144,000/year in gross income.
Diversify your real estate portfolio
You now have multiple income sources at your disposal.
You mitigate your risk to economic changes by incorporating a mix of fix and flips, rental properties and commercial developments.
By spreading your investments across multiple markets such as Los Angeles, San Diego and Sacramento, you diversify not just across asset classes but locations.
This is what a multimillion dollar real estate portfolio looks like!
You draw at least $300,000 annual profit per annum from fix and flips in the greater Los Angeles area.
Two multi-unit rental properties in Sacramento earn you a further $150,000 apiece which more than covers the interest payments.
A commercial property in San Diego provides a yield of $100,000 annually as well as long-term appreciation.
Reinvest profits strategically
By strategically reinvesting your profits, you position your real estate portfolio for maximum gain.
Your fix and flips provide short-term income, while you generate long-term wealth with the purchase of residential and commercial properties you lease.
You can use profits from your fix and flips to reduce debt from the loans for your multi-unit and commercial properties.
Or, you can use it to continue to expand.
By utilising $200,000 from flips, you can take on a new $1 million redevelopment project, taking out an $800,000 hard money loan to cover the balance.
Develop a trusted relationship with your hard money lender
By this stage, you have a solid and trusted relationship with your hard money lender.
They identify you as a real estate entrepreneur and look to offer you the best possible deals and terms.
Trust is a two-way street and your proven ability to complete fix and flips on time gives them great faith in all your judgement calls.
That’s why they release funds to you in the shortest possible time frame to finance your next project.
Portfolio management
With your multimillion dollar real estate portfolio established, strategic management in required to realise its full potential while also protecting it from economic downturns or other unforeseen circumstances.
That means carefully monitoring cash flow, ROI (return on investment), loan terms and interest rates, refinancing when necessary.
It also means tracking property appreciation and being prepared to sell underperforming assets to reinvest equity in higher-yielding opportunities.
Get ready for growth today
Building a multimillion dollar real estate portfolio might seem like a mountain to climb.
But with a solid work ethic, strategic planning and by utilising the power of hard money loans, it can be begin to take shape, one property at a time.
Having a hard money lender in your corner with decades of experience in the California real estate market is a key plank in building that dream.
If you are a budding real estate entrepreneur seeking expert advice to kickstart your empire, a call to Equidy is a must.
Equidy has an intimate and personal history with property and has covered all aspects of real estate and property development in California for more than 40 years.
They work creatively with their clients every step of the way, sharing their wealth of knowledge and support networks as their clients’ projects begin to materialize.
Equidy is also a hard money lender with one of the most respected and enviable reputations on the west coast.
They have a comprehensive knowledge of the business and strive to provide hard money solutions for every circumstance.
They never waver from their core belief that anything is possible and they love proving it every single day.
Even in tough economic times, they strive to reward entrepreneurship and always help their clients realize their wealth creation dreams.
Equidy enjoys long and established relationships with serious investors, sellers and real estate professionals while leveraging their reputation and trust, using clear communication to minimise the risk to all parties.
Contact Equidy today to book your free strategy call.
