Game Plan for Acquiring 50 Units in 3 Years

There are many paths that a real estate investor can take, and there is no “one” way. I think it is worthwhile for successful investors to share their paths, because others may follow a similar route. Or, there may be one a small aspect or angle that another investor can pick up on which shapes their path in a meaningful way.

My path began with a foundation of basic investing principles (from reading books), followed by converting those ideas into action, repeating those actions into habit, and churning those habits into realization of a series of deals. All of the acquisition niches I found were developed on-the-fly by searching various avenues (foreclosures, off-market, MLS, etc), and analyzing the deals to see if they would take me toward my goal.

Below are the basic phases I followed. I invested in the Seattle area beginning in the summer of 2012, so I had the major benefit of a rising market and above-average population growth. I also teamed up with an investment partner who has a full-time job and has rolling his excess income toward our new property acquisitions.

First Step
Turn personal residence into income-producing through rent-by-the-room, or by buying a multi-family and living in one of the units. It is relatively easy to get a first-mortgage for an owner-occupied property. Take advantage of this financing option to get your first investment locked up and become a landlord.

Year One (8 transactions, +4 units)
Perform four fix-and-flips, one per quarter. Use hard money loans and/or an equity partner in the flip projects, depending on your resources/needs. These flips can be done serially or in parallel. Roll the proceeds of each flip into the purchase of a single family home or condo which meets your criteria for cashflow/equity. My model was to buy discounted foreclosed properties with 0-down hard money loans, and then refi the properties into 30-year mortgages after fixup. These four rental acquisitions in Year One will require you to build your team of property management, contractors, insurance brokers, agents, and accountants.

Year Two (12 transactions, +20 units)
Perform two fix-and-flip deals and roll the proceeds into purchases of two residential multi-family properties (4-plexes). Sell all four SFR’s acquired in Year One and roll the proceeds into four multi-family properties (4-plexes) using 1031 like-kind exchanges.

Year Three (5 deals, +26 units)
Using the positive cashflow from your existing 24 units and your developing deal-finding savvy, search for small apartment buildings that are being sold with Seller Financing terms. Purchase two 5-plexes, two 4-plexes, and one 8-unit apartment during Year Three. Use a combination of Seller Financing, Private Lenders, and your own cash to acquire these properties. This means you'll need to find one deal every 2-3 months, which may feel a little more "relaxed" after doing twelve transactions in the previous year.

Summary (25 transactions, +50 units)
The principle at work here is that as you build your team and investing skills, you can get more accomplished in each subsequent year, with less work. The above example is a sample roadmap which I hope will provide an idea or spark that you can apply in your path!