How to Make a Million Dollars from Real Estate: A Step By Step Path

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The guy who invented the pet rock made a million dollars.

So did the guy who sold  a million pixels on a computer screen for $1.00 each.

Don’t forget about the guy who invented goggles for dogs and made a million dollars.

There are a lot of ways to make a million dollars but unless you happen to get really, really lucky – you aren’t going to invent the next new thing. Instead, most individuals turn to three different means of building that kind of wealth:

  • Stocks/Bonds/Mutual Funds/etc
  • Business creation
  • Real estate

There are plenty of examples in all three of these categories of people who make a million dollars from their investments. I’m sure you’ve heard the stories from individuals like Warren Buffet (stocks,) Bill Gates (Business,) and Donald Trump (Real Estate) and the honest truth is – any of these three categories can make you a million dollars. However – the road to making a million dollars through stocks is slow and methodical, while the road to making a million dollars through business is paved with immense risk and, at best, unpredictable. There is nothing wrong with either of these two categories – and I believe both can be instrumental in your wealth growing strategy.  However- while there are multiple paths to get to a million dollars (and more,) I believe that real estate investing offers the strongest chance of building wealth in the shortest amount of time!  (Tweet This Quote!) Often times discussions on real estate investing is rich in “theory” but short on practical examples.  The purpose of this article is to demonstrate my  beliefs on wealth building with real-world examples and share just one method (of hundreds) of making a million dollars through real estate through a fast but methodical path. This is much of my philosophy behind real estate, summed up in a simple article. Before I begin, though, I want to make a few points clear:

  1. This is not a “get rich quick” plan. It takes place over seven to ten years. It might take longer, it might take less.
  2. This is not the only way to make money in real estate. Just one path that I like.
  3. This is not a guaranteed plan. This works based on ideal numbers. You might find things better or worse, depending on your location.
  4. This is not legal advice.

Let’s get going. If you have any questions – please leave me a comment below this article!

How to Make a Million Dollars in Real Estate(Before we get too deep in this post, we want to invite you to download our book “The Ultimate Beginner’s Guide to Real Estate Investing” which will help you build a solid foundation for your financial future. In other words – you are going to learn exactly how to get started building wealth with real estate! To get the book, just click here and join BiggerPockets, the free real estate investing social network!)

How to Make A Million Dollars: Setting Your Buying Standards

If you want to make millions in real estate – you can not just buy any property. The vast majority of properties out there are terrible investments and will end up costing you more than you’ll make. Instead – there are certain “standards” that you must adhere to in order to make this plan work. The following is an example of the standards I am looking at for my first investment:

  • Multifamily property
  • Cashflows at $200 per unit, per month after following the 50% rule ($800 total cashflow)
  • Property must be able to be purchase for 80% of the value (using smart buying techniques)
  • Property must be able to be improved 10% during the first year (paint job, some landscaping, and other small things)
  • Property will appreciate at 3% per year after year one.

You may be tempted to say that these standards are impossible to find but trust me, they are not. BiggerPockets is full of examples of investors who are following these very standards and succeeding. Perhaps the area you live in might be different – but these locations do exist. (And to quote fellow blogger Jeff Brown, “What’s more important to you — being able to drive by your units, or driving to the bank with much larger bank deposits in retirement? Your choice, no hurry, take your time.”)

Buying Your First Property

Using these conditions, we were able to find a four-plex that needed a little “help.” Perhaps its a bank repo that smells like a hundred cats, or a FSBO of a retired couple looking for cashflow. I’m not talking about a disaster – just something that needs some cosmetic help. The property is listed at $100,000 but we are able to buy it for $80,000. For simplicity – we’ll say that the bank will pay our closing costs which means we are required to put down $16,000 for a 20% down payment.  Additionally, we will spend $4,000 on minor repairs and improvements to satisfy the 10% appreciation during the first year requirement.

Year One:

So, to sum up our portfolio after year one:

  • Our loan is for $63,500.00 (approx.)
  • Our value is at $110,000.00 (10% appreciation during year one)
  • Our cashflow saved (from cashflow): $10,000 (Okay, technically $9,600. I like easy math.)
  • Total Equity: $46,500.00
  • Our total net worth: $56,500.00

Now, I just want to jump in here quickly and remind you: this kind of property doesn’t exist on every street corner.  Is it hard to find these properties? YES. Is it hard to find these properties if you only need to find one property every two years across the entire US? I don’t think so. Moving on.

Year Two:

Nothing changes during year two. The property simply exists. Each month you just maintain.  Maybe flip a house to keep from being bored! By the end of year two, our portfolio looks like this:

  • Our loan is for $63,000.00 (approx.)
  • Our value is at $113,300.00 (3% appreciation during year two)
  • Our cashflow saved (from cashflow): $20,000 (approx.)
  • Total Equity: $50,300.00
  • Our total net worth: $70,300.00

Year Three:

At the start of year three we are going to buy our second four plex, using the $20,000 we have saved from the cashflow. It’s going to be exactly like our first. Identical – same numbers, same price, same cashflow. Remember – this is an “ideal” scenario just to represent how this works in the real world. Maybe you’ll buy a five-plex, or a tri-plex, or four houses. The math is what is important. So, we now have two income streams going: Fourplex A and Fourplex B. For the sake of time, I’ll just post our totals for the end of year three below:

  • Our loans are for $126,000.00 (approx.)
  • Our value is at $227,000.00 (approx.)
  • Our cashflow saved (from cashflow): $20,000 (We used the previous 20k for the last down payment.)
  • Total Equity: $101,000.00
  • Our total net worth: $121,000.00

Year Four:

At the end of year four, we are going to “Rinse and Repeat” once again. You guessed it  – another four-plex, same numbers. We now have three streams of income going: Four-plex A, Four-plex B, and Four-plex C. The end of year four totals look as follows:

  • Our loans are for $177,000.00 (approx.)
  • Our value is at $350,500.00 (approx.)
  • Our cashflow saved (from cashflow): $30,000 (10k from each)
  • Total Equity: $173,500.00
  • Our total net worth: $203,500.00

Year Five

At the end of year four/beginning of year five we are going to make our first “trade up.” If you are familiar with the game of Monopoly – you’ll recognize this strategy. Essentially – we are going to trade our “houses for hotels.” In this example, however, we are going to trade our three four-plexes for one apartment building. As you saw at the end of year four, we have accumulated approximately $203,500 in equity. During the “trade up” there are going to be certain costs associated with it (such as Realtor fees, closing costs, etc.) To avoid the taxes, we will be using a 1031-tax exchange to defer taxes to a later date. After all expenses are paid out, we will have approximately $175,000 remaining to invest in our next property. As you can probably guess, we are going to use this as a 20% down payment on our next investment, allowing us to pay up to $875,000 for a property. With our new property – we are going to buy a property using the same “standards” as above, which were (for reminder)

  • Multifamily property
  • Cashflows at $200 per unit, per month after following the 50% rule ($800 total cashflow)
  • Property must be able to be purchase for 80% of the value (using smart buying techniques)
  • Property must be able to be improved 10% during the first year (paint job, some landscaping, and other small things)
  • Property will appreciate at 3% per year after year one.

Thus, we are able to find an apartment building listed at $1,000,000.00 but we end up getting it for $800,000.00. Our 20% down payment makes the loan amount $640,000 and leaves us approximately $13,000 for minor improvements to be able to raise rent and force the 10% appreciation. (12/13/12 – CORRECTION: This post originally stated that the Total Loan Amount would be $740,000, but it’s actually $640,000 as states above – which adds quite a bit more equity – values below are updated to reflect the correct number ) At the end of year five, our portfolio looks like this:

  • Our loan is for $625,000.00 (approx.)
  • Our value is at $1,100,000.00 (10% during year one.)
  • Our cashflow saved (from cashflow): $57,600 (24 units x $200 x 12 months)
  • Total Equity: $475,000.00
  • Our total net worth: $532,600.00

Year Six

Nothing happens during year six. Just relax and collect the cashflow, saving every penny for our next trade-up. At the end of year six, our portfolio looks like this:

  • Our loan is for $610,000.00 (approx.)
  • Our value is at $1,133,000.00 (10% during year one.)
  • Our cashflow saved (from cashflow): $115,200 (24 units x $200 x 24 months)
  • Total Equity: $523,000.00
  • Our total net worth: $638,200.00

Year Seven

Year seven is another year of rest – if you can call it that! Simply save and collect. At the end of year seven – our portfolio looks like:

  • Our loan is for $595,000.00 (approx.)
  • Our value is at $1,167,000.00 (10% during year one.)
  • Our cashflow saved (from cashflow): $172,800 (24 units x $200 x 36 months)
  • Total Equity: $572,000.00
  • Our total net worth: $744,800.00

Perhaps you want to simply live off the cashflow from this point on. You are making a respectable $57,000 in passive income. However – you only have three-quarters of a million in equity. To get to the final million – you’ll need to make one final trade-up.  Perhaps you do this right away during year seven – or perhaps you wait five years. Work with the market- learn to ride it like a wave. For example purposes – let’s sell now and trade up.

End of Year Seven/Start of Year Eight

We take all the equity and cash we have (approximately $744,800), subtract out the sales expenses ($94,800) to give us a nice round  final profit of $650,000.00 to use for our final down payment. Our final purchase is going to be a 75-unit apartment community listed for sale at 3,400,000.00 but we are able to purchase it for just 2,750,000.00 (20% off.)   We’ll use the down payment of $650,000 (making the seller pay closing costs) to make our total mortgage amount of $2,100,000.00. At this final part of our “million dollar journey” – the end of year seven or start of year eight – our portfolio looks like:

  • Our loan is for $2,100,000.00
  • Our value is at $3,400,000.00
  • Our cashflow saved (from cashflow): $0 (but $15,000 per month going forward)
  • Total Equity: $1,300,000.00
  • Our total net worth: $1,300,000.00

We did it! One Million Dollars (1.3 million, actually), with only five purchases in seven full years of investing. (***Correction: Special thanks to Will Barnard for pointing out I was neglecting to count a full $100,000 in my original numbers! Originally the math worked out to $1.2 million – but with correct math it’s actually $1.3 million!)

Final Thoughts

Remember – this is an ideal situation. Many people have moved much faster, others have moved much slower in their investment journey. The purpose of this was simply to give you a “big picture” idea of how this works and provide  a good illustration of what I call “trading up.”

What are your thoughts? Does my math make sense?

Leave me a comment below and please share this if you know anyone who might find value in it! 

About Author

Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on,,, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.


        • Brandon or anyone else. Have you guys ever worked with private lenders that loan based on the ARV of the property and NOT what you paid for it?
          Please let me know!

        • Brian M.

          Hi Brandon,

          If I am reading this correctly, the example uses 1031 exchanges to trade up. Is it realistic to think you could sell your properties in the window of time allotted for a 1031 exchange?

      • Hi Brandon,
        interesting post, I also read Rich Dad Poor Dad a couple years ago, which lead me to buy and rent out a condo for 2 years. But I’m realizing that I should change my target to not just 1 unit but multifamily units now!

        Also I noticed that for each of the purchases or trade-ups that you listed in this scenario you have a list price and what you actually bought it for, and they’re around a 20% discount every property. I personally think you should do the math over with just the 1 price, because if you bought a place listed at $100,000 for $80,000 can you really expect to sell it for $100,000? Shouldn’t the value of the property be estimated at $80,000 instead?

        This might set your 1 million dollar plan back a couple years but it still makes a lot of sense to do real estate investing, too bad it’s very hard to find $100,000 four plexes where I live!

        • This makes more sense if look at it as Appraised/Market Value instead of List Price. For Example they may be Asking 120,000 but its worth 130,000 appraised value, then you would want to get in at 130,000 – 20% = $104,000 Remember List Price is arbitrary… Appraised Value or Market Value is something that you can borrow money against.

          In this scenario if you purchased the property for $104,000 the banks would still lend based on the $130,000 and could in fact be sold for the full appraised/market value.

          I believe being the article is hypothetical one could also assume that the property’s were originally listed at the actual Appraised/Market Value.


    • Can someone help me understand this situation. It seems very very unrealistic to buy a fourplex for 100k and then use 20k to buy it and repair and then cashflow $800 a month.

      • I agree with you Troy. I think it would take a few years to re-coup the repair costs. That being said, I guess in a perfect buyers market it is possible. It has taken me ten years to get to his “Year five trade up” point. I think this is the more realistic time-line.

  1. Jeff Brown

    Not the way I’d go, but different strokes, etc.

    What happens if the properties don’t appreciate 3% a year, every year for the decade? Also, I assume the rents are anticipated to increase along with the value.

    Would love to talk with you about this. Pretty interesting stuff, Brandon.

    • Brandon Turner

      Hey Jeff- if you get bored sometime check out my math that I did in reply to Will’s post further down below. I did the same Math – but with Zero appreciation (except the 10% forced, which I think is justified… but who knows!) because both you and Will brought that up and made me curious. I like to say that appreciation is merely the Icing on the cake – if you get it, great. But make the deal work without it. So I did.

      Thoughts? (and I know – this is all just hypothetical!) 🙂

  2. Jeff, that’s the good thing about commercial properties (5 units and up). You can force appreciation by raising rents. Only buy properties where you can identify this potential from the beginning.

    Even with 4 units or less, you don’t buy unless the equity is there from the beginning so there’s very minimal risk.

  3. Hi Brandon, I was wondering if I have no start up capital, but have not yet bought a house, is it possible to use homebuyer’s programs for the first property? Would you recommend this as a way to get into the game? Also, what are the smart buying techniques you kept mentioning to get it at 20% of list?

    • Brandon Turner

      Hey Cara,

      Good question. There is a USDA loan that is $0 down – and you can get the seller to pay closing costs for a $0 deal – however, the property has to be a non-major city area. If you are a veteran, this is also possible to do a $0 loan. Other than that – the 3.5% down payment FHA loan is probably the best bet!

      Check out the BiggerPockets Forums for more advice on that. It’s a common question and there are tons of great answers from a lot smarter people than me!

  4. Sorry Cara I was tapping that out on my phone earlier, Brandon and I are talking the same thing. To qualify for those loan programs you have to make a commitment to live in one of the units for atleast a year. Check with a lender on what programs are available in your area. Owner occupants are typically going to be able to get the best interest rates/lower down payments than investors from the banks.

    • Brandon Turner

      Thanks for helping out Josh! I agree 100% I bought a duplex early in my career and lived in one half and rented out the other. It’s one of my best cashflowing properties now (the Kurt Cobain house, if you’ve read that article on BP)


      • I bought my first four-family 3 years ago using an FHA 203k loan with 3.5% down. I highly recommend the FHA route to buy a 3 or 4 family if it’s your first property. I had to sign an occupancy affidavit which stated I had to move in the property by a certain date or I could be subject to prosecution. There was no mention of having to live there a certain period of time before being allowed to move out. I ended up living in that property for 3 years, but there was nobody who followed up or stopped by to verify that I actually lived there.

        • Wave,
          I could have refinanced while I was still living there to get out of FHA rules. Banks I looked said I would have needed 20-25% in equity in order to refinance. Unfortunately I didn’t have that since I only put 3.5% down originally. If you find a good enough deal with instant equity then it would be easier to refi right away.

          Aside from having to move into the property as my principal residence, I can’t think of any other rules that FHA imposed that worried me. I have since moved out from the 4 family and still have my original FHA loan.

        • My first house was an owner occupied through FHA. IMO your first property should almost always be your own.

          We then rented it out after about 6 months, bought another (traditional financing) and that is how I got started in Real Estate.

  5. I love your post! What a great vision for a new person like myself. I love this plan and its similar to a plan to what I have. Yours is much more aggressive. Do you have an idea for a person who is interested in SFH investing? There are still some great deals for these in the community that I live and invest in, My plan was to get a hold of one more of these and then acquire a duplex/triplex/quad later when I get some more experience under my belt. This is for sure a slow process, but one that I just love, you know the thrill of the hunt. Thanks again.

    • Brandon Turner

      Thanks Steve,

      This kind of trade up strategy is definitely applicable for single family houses as well. Houses offer really good potential for appreciation and cashflow if you buy right. Try to map out the next ten years of your life using this strategy and see what you can make happen. Can you get $500 per month in cashflow from a single family home? Can you buy one each year? There are million ways to do this – I find it fun to map out the future using different strategies.

    • Brandon Turner

      Hey Kevin,

      Thanks for the question!

      Taxes are generally deferred through the use of a 1031 exchange – which the IRS allows. Basically, when your re-invest your sale profits into a new property, you can defer the taxes until a later time. As for income tax on the cashflow – most of that is offset from the write-offs from depreciation.

      Again – this isn’t perfect and you obviously need to check with a CPA or attorney to see how this all works. But use this as a guide for what is possible!

      • Then what should this RE investor’s target” be if he/she wished to end up with $1 million after paying the capital gains taxes?

        By deferring the taxes due on the sale and by using depreciation to reduce/eliminate taxes on income, wouldn’t the investor be subject to a larger capital gains tax bill? After all, when the investor wanted the funds to spend on himself/herself, he/she would have to sell a property and NOT roll those funds into another purchase. Otherwise the investor ends up with a large portfolio of real estate (investment properties) and little cash.

        • Brandon Turner

          It’s true – when the investor goes to sell everything he has off – he will have to pay back all those deferred taxes. Some investors choose to bite the bullet and pay it all. However others, and what I plan to do when I’m ready to step away and relax, is to 1031-exchange all that money into one final easy real estate investment – like a REIT or a shopping mall. Then just live off the interest. Either that or sell the properties off with an owner contract and just pay the tax over the course of 30 years. Obviously laws may change, situations may change, or whatever – but that’s what makes this game so fun 🙂

        • Dulce Beltran

          Hi Brandon,

          I was under the impression one could only use the 1031 exchange for a like property, how does that equate to a REIT?

          Also in your example for the 24 unit, did you use a commercial loan or private money? Commercial loans require 30-40% down now, how does one go about using only 20%?

  6. Hi Brandon,

    Question on your definition of “cashflow saved” in the example. It seems you mentioned the 50% rule only, so how about loan payments (i.e. interest)? I can see the numbers being attainable at $800/month after using the 50% rule (This is basically the 2% rule with total rents = $1,600/month). However, the actual cashflow saved will be less after deducting interest payments as well. So you’ll actually save less than $9,600/year.

    If you’d already deducted interest payments from your formulas, then the rents have to be much much higher than the 2% rule in order to truly net $9,600/year. I don’t know about other areas, but around here, unless you get into war zones (and somehow still manage to be able to collect rents), 2% rent is probably the best you can get.

    Did I miss something in your analysis?


    • Brandon Turner

      Hey Angie – I think you are correct. These properties are not easy to find, but only needing 5 total properties over a 7 or 8 or longer time period is do-able.

      A few thoughts: The $200 per unit is after the 50% rule and the mortgage is paid. This isn’t easy to do, of course. That said, – the 50% counts for having a property manager, which I don’t use with this strategy – which saves quite a bit. I find that the 50% rule is smart to use but there are ways, with a little sweat equity, to lower this percent quite a bit.

      Also – you could do this whole plan with $100 per month, per unit. I think it would double the time frame to 15 years or so (haven’t done the math) but that’s still not terrible for part time, on the side investing.

      Thoughts? Thanks for the comment! I appreciate your analysis!

  7. Brandon, Thanks for this wonderful article.
    Am in the first stage but I started out with single family units that follows most of the guidelines you listed. My next goal is to transition into a multifamily.
    Am always inspired by your articles.

    • Brandon Turner

      Awesome Tracey! I hope it works really well for ya! Stay close to the BiggerPockets forums as your move forward! Any question or problem you encounter as you move forward – you can post to the forums and get responses from a lot of people who have been there and are going through the same thing!

  8. Great post as I’m actually in the process of mapping out my goals for the upcoming year. I also like the thought of going out as far as 10 years to see what that looks like. You mentioned a quote from another blogger — “What’s more important to you — being able to drive by your units, or driving to the bank with much larger bank deposits in retirement? Your choice, no hurry, take your time.” I’ve always been averse to even thinking about being an out of town or state landlord. Do you suggest property management and would that expense be added in before the $200 per month/per unit cash flow? Thanks!

    • Brandon Turner

      Hey Austin, thanks for joining the conversation. I think mapping out your goal is something every investor should do. Even if I don’t follow this plan exactly – just writing it makes me feel motivated because the math works. Math isn’t like art – it’s not subjective.

      As for investing nearby – I’ve never been a fan either. I don’t think it would be impossible to get $200 per unit, per month in cashflow while having a property manager – but it would be pretty darn hard. So perhaps a person would have to compensate some, such as a higher down payment or buying more property.

      I don’t think I’d ever recommend starting as an out-of-area landlord unless I knew the area REALLY well and had good contacts there. Like right now, I feel I could move away and probably be okay. But 5 years ago? Heck no.

      • I think the $200 per unit rule is only hard to follow if you’re not looking that hard. The deals are definitely out there, but you have to discover them quickly and snatch them up even quicker. For a city like Philly, you can buy several per year depending on how aggressive you are. After property management, mortgage and all expenses, I’m seeing more than that with my rental properties, and I bought my first in 2009. I think one of the best ways to acquire rental properties is by buying ones that need work with hard money. More times then not, you can get back your down payment and closing costs when you refi with cash out! So, essentially using hard money makes it a no money down deal in the end.

  9. Not the path I would take either, nor am I, but like Jeff stated, different strokes.
    I also see a math error that actually is not in your favor on your $800k purchase with 20% down which makes the loan $640k, not $740k.
    Also, your assumption of averaging 3% appreciation is complete speculation and “averages” when it comes to appreciation do not work. For example, if the RE is worth $100k and gains 3% to $103k, then a loss of 3% year two takes the value to $99,910. Obviously the difference increases with higher values and potential higher losses. Either way, you only get to the end result because of these assumptions as well as the assumption that the investor holds a job during this time to pay the bills as your example has all cash flow being reinvested to obtain the goal.

    • Brandon Turner

      Hey Will-

      I totally appreciate you taking the time to read and comment. You are one of the best in the business so thanks for analyzing (and catching my error – which yeah, worked out in my favor! I was wondering why I was only getting 1.2 million when I thought it was more!) And yeah – this path isn’t for everyone. It involves tenants and time, plus (like you said) reinvesting the profits.

      So- just for kicks – because both you, Will, and Jeff (two solid investors) brought up the point about not assuming appreciation – I decided to do the same math WITHOUT any appreciation. The only appreciation I left in was the 10% in the first year – because -as you know – that isn’t terribly hard to do. (I’m not saying it’s easy – but flipper’s like you do a lot better than that, and this is kinda a “hybrid flip buy and hold” strategy.) So – here are my numbers (Let’s hope I get them right this time!)

      Initial purchase: Same as above (4 plex)
      Year one ending net worth: 56,500 (one four plex, with 20% discount and 10% forced appreciation and 10k cashflow)

      Year 2 ending net worth: $67,000 (same, with loan paydown and 20k cashflow)

      Year 3 ending net worth: $114k (two four plexes, 46,500 and 47500 plus 20k cashflow)

      Year 4 ending net worth: $173,000 (three four plexes,49k+47.5k+46.5k+30k cashflow)

      Sales costs: $33,000

      Cash for next deal: $140,000
      —TRADE UP—-

      Year 5 purchase:
      20 unit apartment (smaller than example in post, due to cheaper price)
      $800,000 value
      Purchase Price: $640,000
      Down Payment $128,000 ($12k left for repairs, closing costs, whatever)
      Loan amount: $512,000

      Year 5 ending net worth: $426k (10% forced appreciation +10k loan paydown +48k cashflow – which is 20 units x 200 per month per unit)

      Year 6 ending net worth: $484k (just 48k cashflow added, 10k loan paydown)

      Year 7 ending net worth: $542k (just 48k cashflow added, 10k loan paydown)

      Sales costs: $82,000

      Cash for final trade up: $460,000

      —–Final Trade Up —–

      End of Year 7 Purchase:
      60 unit apartment (smaller than example in post, due to cheaper price)
      Value: $2,775,000
      Purchase Price: $2,220,000 (80%)
      Down Payment $444,000 ($16k left for repairs, closing costs, etc)
      Loan amount: $1,760,000

      Total Net Worth at end of year seven: $1,015,000.00

      So – as long as these numbers are correct (which, due to the late hour tonight may not be!) mathematically it is still possible to make it to $1,000,000 in net worth within seven years with only five purchases with no appreciation.

      Okay – for real life : Obviously these numbers are just math. Real life is never this clean. However – these numbers are not un-achievable, especially when people invest smart. Following examples set by guys like you, Will, prove that this is totally possible (like your 7 figure flip … which I’m excited to see the results from!) There will always be other things to come up. Additionally – you’d have to “ride the wave” of the economy and play within it’s bounds (which means someone could be forced to sit on a property for a few years while the market goes crazy and then crashes… that happens.)

      Oh – and for your last assumption, about holding a job, I don’t think that’s true. This is just one stream of wealth. A person could buy more than one property every year or two. They could buy 2. or 4. or Flip houses. Or wholesale. This, in it’s purest sense, is just the “investing” side of a real estate investor. The “Career” side could be whatever a person wants to make it. I think that’s an important distinction to make. This is simply doing what every good business should do – reinvest in itself. A business owner who starts a business and then takes all the profits to live off is just setting himself up for failure, imo.

      Again – thanks for taking the time to analyze this with me and dissect! I know this was probably the longest comment anyone has ever written on a blog. Call the book of world records! This is what I do late at night – math. Does that make me a nerd? (… high school captain of Math League…. yep…)

    • Brandon Turner

      Hey Steve –

      Forced appreciation is when you bring up the value by something you do, rather than waiting for the market as a whole to pick up. This is what Rehabbers and Flippers do.

      For residential – it usually involves some kind of remodeling. For example – a house is listed at $100,000.00, which is about the market value for it. Other homes in the area, of similar style, are selling for $110,000. This house, however, smells like 40 Cats (meow.) Removing the carpet, spraying the floor with bleach and Kilz Oil-Based Primer – and laying new cheap carpet – should make this property worth $110,000.00 like it’s competitors – maybe more (having new carpet).

      For commercial, since the value is based almost entirely on the income it makes- raising rent can force appreciation. So can decreasing expenses. Lowering a vacancy rate from 15% to 5% can add a lot of value- just by managing the property properly.


  10. Steve, forced appreciation is where you force increased values through capital improvements to the property, and, in the case of commercial property and multi family apartments, by increasing income and/or reducing expenses creating a better NOI.

    Brandon, thanks for the kind words, I didn’t check your math but let’s assume you got an A, looks like a solid plan. Again, not my path, but definitely a viable one that any buy and hold investor could follow. The kinks are of course, ability to get the 80% financing every time, and finding the deals at 80% of value which is more possible than the financing in my opinion. It also is dependent on the rents not having market drops, which I believe are coming soon to neighborhoods near many of us.

  11. Brandon, great article. Do you feel learning to wholesale to get the initial down payment is a good way to go and use wholesale for reserves along the way? This is what I want to get into and the plan sounds solid, put the initial start up money is the tricky part right now. Thanks again for the great content!

    • Brandon Turner

      Hey Chad – Perhaps. I definitely think wholesaling is a lot better to start with than flipping. However, wholesaling is just another job – so if that is something you are passionate about doing -great, do it. If not – find what you are, do a lot of it – hustle, and save that starting money. You could also start a little slower by purchasing our own property (3.5% down payment through FHA) and use sweat equity to build up enough equity to pull out 20k to start. Just an idea!

    • Brandon Turner

      Hey Wave- Good luck! The good part about this kind of plan is that is tailorable. It’s more about the math than anything. If you can only get $100 per unit, per month – it’s okay. If you can only find single family homes – it’s okay. Really – it’s about understanding the concept behind “hybrid investing” that makes the difference. Thanks for the comment!

      • Brandon, it’s Wave again. I have just been pre-approved by my bank for $90,000 to purchase a 2-4 multi unit building. I have to put down 25% and the closing cost will be about $9,000. Does this sound right?

        • Brandon Turner

          The 25% down seems fairly normal – but the $9,000 in closing costs seem exceptionally high. I usually see between $2,000 – $4,000. You might want to check with a few different lenders. Also – other lenders will most likely let you do 20% down if it makes sense.

          Just make sure when you start shopping to get an amazing deal. It might take some time to get the perfect one, but it makes it worth it!

  12. Hey Brandon,

    Great article. Very good general plan for someone that thinks this is a good end game fo them. I am taking it as intended as a simple example to show a general strategy and its potential for some outstanding returns!

    One thing I am curious about is unless I missed something you don’t have any reserves for the properties when you buy a new one or trade up. Are you assuming reserves coming out and seperately maintained via the 50% or are you assuming that will be built from whatever other income you have?

    • Brandon Turner

      Hey Shaun,

      You are correct, I didn’t plan for much reserves. (Maybe a few thousand I think is left each time for repairs, but nothing major.) I’m kinda assuming the person who is implementing a plan like this had better have some other savings. But you bring up a great point. I am assuming that the big ticket reserves are coming from the 50% – but still, it’s good to have a nice savings account to go along with this plan.

  13. That is a well laid out example of the benefits of buying investment properties. One of the most important parts illustrated here is the importance of Trading Up. Often people get emotionally attached to properties and they don’t want to let go. They can potentially miss out on the benefits of buying larger properties and seeing good increases of equity growth.

    • Brandon Turner

      I agree Sam. I think a lot of it has to do with fear. For example, – right now I have an apartment building that is doing really well (I’m roughly in year 6 of this plan) but I’m nervous to take that next trade-up because I am comfortable where I am. I worry – what if things change? What if cashflow goes down? What if I fail? Those, I think, are issues every investor deals with in the trade up.

      Thanks for the comment, Sam.

  14. Great article, Brandon! I think it does a great job of showing that starting with relatively little money there is a path to what would seem like a great deal of money to someone at the starting block. And with relatively few steps, just a lot of persistence and good choices along the way.
    The only issues I have is that a couple of areas come across as too easy, or under accounted for.
    1) The forcing of 10% appreciation in year one of each purchase. I feel like what it costs to force the appreciation isn’t accounted for sufficiently. Lets say you get a 100% return on whatever you put in to bring the property up to snuff and force the 10% appreciation. For the quads that would equate to $5000 spent to force the $10K increase in value. That would cover new paint and carpet throughout, and a smattering of random handyman fixes. That sounds reasonable, but now it is only a 5% increase, since the hypothetical investor had to kick in the other 5%. And then there is the issue of why the property could be had 80% of market value in the first place. You have to assume that there at least some issues, and additional money needs to be spend to get the property back to FMV, before we get onto figuring out how to force the additional 10% appreciation.
    2) Time needs to be allocated for saving reserves before each property is added. That adds quite a bit. It’s not too bad during the quad phase, maybe another 6 months between quads 1 and 2, and another 4 between 2 and 3. When the hypothetical investor gets to the apartment building phase, I think it becomes quite a bit more of a big deal. For example, there’s no way I’d even look at the first apartment building, the one that is bought for 640K, w/o at least 50K sitting there, and I doubt someone would lend to me if I didn’t have it either!

    All of that said, I’m not knocking it all – just saying “add a few years”. The thing that is totally awesome about your article is that most people with 20K in their pocket looking at quad 1 have a hard time imagining $1M in a real sense, and your article shows a path there just from one thing leading to another.


    • Brandon Turner

      Thanks Harry,

      I agree with what you are saying. This was kinda an “ideal” situation, but chances are, in real life, it would take more time due to things like that. I do believe that finding deals 20% under valued would be possible with good marketing. I mean, Flippers recommend buying at 70% of ARV minus the repairs. So essentially, you could have the same standards as a flipper to achieve pretty much the same results. The time, though, to fix it up would make a difference.

      So yeah, it’s unlikely to happen in 7 years if this is all you did – unless all the stars align. That said – this is only one stream of income,buying only 5 properties (roughly every other year.) Imaging doing two streams, or three? It get’s fun at that point. 🙂

      Thanks for the comment Harry!

      • Thanks Brandon! I agree it’s pretty intoxicating when you consider what happens when you’ve got two or more streams going.
        I’m thinking through different things you could do to make the appreciation occur for each property. What do you think about the idea of light to moderate rehab and hold? You’d buy the quads at about 65-70% FMV, and do a moderate amount of rehab (more than lipstick, but not hard-core) to get them to up to close to 100% when it’s time to sell. In my mind, that could work because you’re buying and selling in different markets – the “not scared of empty property needing work” market as a buyer, and the turnkey rental market as a seller. What do you think? The major downside I see is that you have a fair bit more cash tied up in each property, but it makes getting the required markup when you sell a lot easier.

        One other question about the plan. When it’s time for trade up #1 (3 quads for one apartment building), how do you get it to happen fast enough for the 1031? I think you’ve got 180 days from closing to closing(?), but the clock would start ticking when quad 1 sells, right? Meaning you only have 180 days to sell two more quads and close on the apartment building. Quads sell pretty slowly around here (DFW) – you’ll often see ones that have been on the market a year or close to that. I guess you could sell them as a package deal only, but that would limit your pool of possible buyers to more serious investors who can handle three at a go (who are also likely to be more savvy and strike a harder bargain)…


        • Brandon Turner

          Definitely, Harry. I call that “light rehab and hold” strategy my “Hybrid” investing strategy, which I actually wrote a post on recently.

          As for selling speed – I honestly don’t know that one 🙂 I’ve thought about it, but I think that might be one of those cases where biting the bullet and paying some taxes may help. However, there are probably some strategies (investing in a Roth, etc) that may make this worthwhile. I’m not sure. I think that’s a question I’ll have to sit down with Jeff Brown to discuss!

    • Brandon Turner

      Hey Sarah,

      The plan itself is based of mathematics that will work anywhere. That said, there are certain specifics that are tailored toward the U.S.A. – such as the ability to “trade up” without paying any taxes with a 1031-Exchange. However – there are probably similar ways in any culture to find similar results. Thanks for the comment!

  15. >> Property will appreciate at 3% per year after year one

    Ideals and simple numbers aside, how can you assume 3% appreciation per year after watching the market for the last 5 years? Appreciation is never guaranteed. I know you consider it “icing on the cake” but I think to assume it when one runs the numbers is a tad dangerous.

    I’d also advise getting a real estate license when starting out if only for the cost benefit for the tight-budgeted beginniner. Getting the license costs a few hundred dollars but can save 10 to 20 times that much in realtor fees by doing your own side. Plus, the knowledge gained doesn’t hurt.

    Good article overall. Good stuff on trading up as a wealth building strategy.

    • Brandon Turner

      Hey Dee- It’s true, depending on appreciation isn’t wise. However, this plan still actually makes $1,000,000 (on paper) had I assumed 0% appreciation. See my numbers up above in the comments, where I re-did all the math with 0% for annual appreciation.

      Thanks for the comment and wise words!

  16. Brandon,
    Great article! Great nuggets in this!!!

    I am a beginner and want to start building a real estate portfolio but I lack in capital for a down payment. Most banks require 20-25% down (which I currently don’t have). Do you know of any other creative way to help kick start obtaining capital to invest in my first property? I have a 401K and Life Insurance that equal about $20K but I don’t want to use that now. Any suggestions here will help!


    • Brandon Turner

      Hey Rob,
      The problem is a familiar one – I’ve been there. There are ways to start with no money, but it’s tough. A good way is to flip or wholesale until you have enough capital to start. Or, you can make your first purchase a 3.5% down FHA loan and make your first your primary residence. Or – you could use a partnership and have them fund the down payment while you do the management and rehab work, if there is any. Those are just a few ideas. Search around BiggerPockets for a lot more great ideas.

  17. Thanks for this article. As my wife and I start the new year we needed something like this that points to a strategy we can get behind. I have a question: Do you use one loan to rehab these properties and then hold with loans from private “long-term” lenders or banks. Or do you only have one loan that you rehab and hold with? Or do you use a combination of strategies?
    Thanks again.

    • Brandon Turner

      Hey Gary,
      Thanks, Glad you liked it! Generally, I’ve done this kind of strategy a few ways. Typically this kind of property doesn’t require too much work (hopefully under 5k) so I just pay for that out of pocket, and get a bank loan with a 20% down payment. I’ve also used partners to fund those repairs/down payment and split the deal 50/50, and I’ve also used Hard Money Loans to buy the property, fix it up, and then refinance into a long term loan. I don’t like holding rentals with private or hard money – because it is difficult to cashflow with 10%+ interest rates.

      Hope that helps! Keep close to BiggerPockets and be sure to join the forums and ask questions as you move forward!

  18. I like your plan. Living in California it is pretty hard to get the kind of deals that you are talking about in any urban area. I did something similar to you but found inefficiencies in the market. As an example the first property that I bought was a single family house in Montana (I lived there at the time) which was zoned for a fourplex. It was run down so I converted it into three units and then added a small house on the back. You have to study zoning laws as well as construction. Being a builder I tried to build one house for myself to keep every year. It didn’t happen every yexar but often enough. From thereI have done about 7 to 10 1031 exchanges. They are simple and complicated. 45 days from sale to identify a property then 180 to close. Pretty hard to do these days. Banks take 45 to 90 days to process the loans and apartments are a hot commodity now a days so you won’t find one at a 20% discount. Times will change. You will need to learn the terms when you buy bigger buildings for
    example DCR, NOI, respectively debt coverage ratio and net operating income. By the way if you have a Million dollars where are you going to get a better return then the cash low? Not the bank that’s for sure.

  19. Hi Brandon,

    Great article in theory. All great ideas and concepts have to begin somewhere, right? Just a few concerns to share concerning actual, which don’t derail the theoretical plan, but that must be taken into account as the plan comes out of the clouds and closer to reality. Just so you know, I tried to read all post replies to see if anyone else commented on same, but didn’t see anything except taxes, which you took care of presuming all “trade ups” were done via 1031X. Anyhow, I don’t see anything contemplated for later rehabs/remodels/facelifts, etc. As well, I don’t see anything in there for reserves, which take care of the vacancies we all have and the evictions we all experience occasionally. Finally, though I am one who likes to be able to drive to my rentals, I am open to owning long-distance, but if those properties comprise much of your portfolio, you must consider the expense of using property management companies, which is also not discussed, but represents an expense that can eat up 1/2 your cash-flow on each unit (if investments are leveraged). It is great to think we can re-invest all of our cash-flow from operations back into new purchases, but I really believe that a sizable chunk of the dollars saved, which you invest in buying new 4-plexes and later, apt buildings, will not be available, hence the timeline will be longer by years. As well, though appreciation rates used to be quite predictable, that is what got a bunch of us into trouble as the last cycle charged into late 2006/2007, then collapsed in 2008. Economically-speaking, based on many factors, we as individual investors who have no control over fed policy and lawmaker in-fighting, should not depend on consistent price appreciation, however, based on same issues, I am one who strongly believes there will be more renters year over year for the next 10 years. So, it’s good to think long-term IMHO.

    Thanks for your thought-provoking article. I enjoyed it. Kind regards,

    • Brandon Turner

      Thanks Bryan! Yes, the theory is great, but obviously real life has different factors involved. I love this strategy to help people visualize what’s possible outside a spreadsheet, which can easily overwhelm. The idea of trading up, reinvesting profits, cashflow, etc are all hard to wrap your head around for newbies, so my hope is this post can help in that! Thanks for the comment and keep in touch!

  20. Brandon –

    I think it has been mentioned already, but I would be interested to read an article about the ‘smart buying techniques’ mentioned that allow you to get in at 80%. I have some ideas/strategies of my own, but would be interested to hear your advice.

  21. Hey Brandon, I Love “” and what You guys are doing to help others!!! That being said, I have been a Real Estate Agent (for over 12 years now) Newby Investor that just started my Investment Company “Canis Major Investment Capital LLC.,” I was wondering how can I, a “Newby,” get in on this? I live in Georgia, and there are still great deals to be had here!!! I’d Love to work with an Experienced Investor and learn more, maybe Offer some of my Commission as as Contribution to the Deal. I do not have much cash to start with, but I am able to offer the Investor more time by doing all the work and a percentage of my Commission, thereby allowing for less Expenses and more Free time.I appreciate any Feedback and Wisdom, that You can Offer me on this. Thank You again and keep up The GREAT WORK!!!.HUGE FAN!!! GREAT ARTICLES!!! I’ll see You on Facebook and Twitter.

  22. New to BiggerPockets and wondering about a few things?

    You never included the cost of renovation. Only a 10% cost for a little cosmetic upgrade. From the houses I have seen this is pretty much a miracle and there will always be renovation costs. Is this what you talk about finding the right property?

    My current home falls in the same category. I have remodeled the downstairs half bath and given a face lift to the kitchen. We bought the home for 134000 and it appraised for 150000. We also got the seller to pay closing costs and used an FHA loan with down payment assistance.

    My question is I qualify for FHA loans based on my current location but in other locations I don’t. If I wanted to buy a property where I don’t qualify for FHA or USDA (they are in the same area) is there another way around the down payment? I don’t really have 20% down to invest.

    Also I was looking into either selling my home for a profit, or making it a rental and buying another home. Which do you think is better? And my final question which I have pondered since I began thinking about renting my current home, what do you do about the timing situation? Meaning what if I can’t find a renter or buyer, or what if I find one too fast? Where do I go, my house is gone? Do I rent an apartment until I fond another home?

    Some insight would be helpful

    • Brandon Turner

      Hey Tim! Thanks for the comment and welcome to BiggerPockets!

      1.) Yes, I think I accounted for just a small fix up because I don’t want to buy a property that needs tons of work. Sure – you have to search for them. But if you only need to buy one property per year, anywhere in the world – shouldn’t it be possible? I just bought one last week, which I documented in detail here. Also – check out my post “How to Buy Smart” for tips on what I mean with that.

      2.) There are banks – especially local, community banks, who will lend with less than 20%. Or you can use a variety of other techniques, which I talk about in my article “How to Invest in Real Estate With No Money“. However – FHA loans, I thought, were applicable anywhere, as long as it’s a primary residence.

      3.) As for keeping it or selling it … that’s tough! I think it’s totally up to you, but it looks like after closing costs and selling fees – you wouldn’t have much left in profit if you did sell. So I would keep it!

      4.) That transition between renting/moving/owning/etc is always tough. I don’t have much good advice on that one! I’ve had to do it a number of times, and it always works out – but it’s never fun!

      Hope that helps! Thanks for the comment, and welcome to the site!

      • Brandon,

        In my area the county you live/want to move to, defines your FHA loan availability. I used to live in Charleston county, wanted an FHA loan and down payment assistance had to move to an outlying county to qualify.

        I was hoping for more advice on the moving thing like what you had done in the past. We had this problem when we moved to our house and the closing took longer than expected, so we had to rent our apartment monthly for the last two months to have a place to stay. Quite expensive.

        AS far as my FHA loan goes now, If I made it an income property can they take away my current mortgage rate if it’s moved from a primary residence to an income property?

        Thanks for responding!


        • Brandon Turner

          Hey Tim, I’d definitely talk to a few different mortgage professionals about that. I’ve never heard that FHA isn’t applicable in certain counties – I believe it is applicable anywhere in the USA. Now, I could be wrong but I don’t think I am. Perhaps there was something special about the last loan you did that made it that way?

          As for what I did – Once I moved into a home owned by a church for 6 months in between houses. Another time I lived at my in-laws for 2 weeks. I’ve also heard some people who do a “Lease-Back” which is where the new buyer of your home agrees to let you rent it for a set amount of time until you find a new home.

          And no -once you have an FHA loan, you can move houses and keep it. It’s fixed forever (as long as you got a fixed rate loan.) However, I believe you can only have one FHA loan at a time, so you’d have to refinance or sell before getting another (and again, I might be wrong on that point – I’d ask a mortgage broker)

          Hope that helps!

  23. I’d like to see an article for a scenario where someone doesn’t have $20,000 cash downpayment for the first property haha.

    I also disagree with your assessment of using cashflow saved as a income or worth. If you save $1 by buying your milk on sale, you dont add that $1 to your net worth. I think thats silly. But just me.

    • Brandon Turner

      Haha Ryan, funny you should say so! Check out my newest post – on how I just bought a 4-plex for $90,000 with $700-$1200 per month in cash flow with no money down! Also check out my post How to invest in real estate with no money!

      And I’m not sure I understand your second comment. I think you may have read the post too quickly?? Cash flow is income, like a job. If you saved $800 per month from your job and put it in the bank – would you call that net worth? So if you saved $800 per month from your cash flow and put it in the bank – you wouldn’t count it? I fail to see where you disagree. Unless you are referring to the equity you build by purchasing the property for less than it’s worth, but you only count that as income when you sell it because it’s cash. So in the same way, if you purchased a gallon of milk for $2 on sale, but re-sold it for $5 – you would now have $3 in your pocket to do whatever you want with. I would call that $3 net worth – wouldn’t you?

      Thanks for the comment Ryan!

  24. Michael Smith on

    Hi Brandon,

    Thanks for posting this. It is such a great help. I have been trying to invest in real estate for a bit now with mediocre success. My wife and I moved from MN to San Diego 8 years ago for my job. We didn’t start investing until after the move. We have purchased two condos and a house since the market dropped and we manage condos ourselves:

    Condo 1 – San Diego
    Purchased in 2009
    Purchase Price: 140k
    Monthly Rent -$1395

    Condo 2 – Lake Arrowhead, CA
    Purchased in 2010
    Purchase Price: 103k
    Monthly Rent -$900

    Our SFR – San Diego
    Purchase Price: $330k
    Rent: 0

    Both condos sold for over 300k in 2006 and the house sold for 580k

    Here’s my dilemma
    My wife and I make decent money and really can’t leave San Diego anytime soon
    We don’t make enough money to put a 200k down on a million dollar 4plex for our first multifamily investment in San Diego
    We haven’t been able to find a property that meets the basic cashflow buying standards here
    We are novice investors and are very timid to invest out of state.

    Do you know of or does anyone in this community know of people that have been in a similar situation? If so, what have they done? How have they handled this? Maybe I am not networking with the right people or am not looking in the right places but I haven’t spoken to anyone who has been able to start out small with cashflow in SoCal. The majority of the people I talk to either break even or have negative cashflow.

    Any advice or suggestions would be very much appreciated.



    • Brandon Turner

      Hey Larry,

      I know banks that will do investment loans for just 5% – you just gotta call a lot of them, focusing on the smaller community banks. 20% shouldn’t be too tough to find. I’d recommend listening to the 6th BP Podcast where Arthur talks about finding his loans – I know it helped me a lot!

  25. I am looking at a 3 unit that has decreased in price over the last 2 months. It is in a class C neighborhood but there is a college a few blocks awya and the college has brought property and the area and is expanding. What does this tell you? I need some advice.;

    • Brandon Turner

      Hey Joe, you are thinking of the other IRS rule that makes it so you don’t have to pay taxes if you live in a house for 2 years. the 1031 exchange is for investment properties only that allow you to “Defer” paying taxes until someday of your choosing in the future, as long as you meet certain requirements. Definitely search around the Forums for more info on 1031 Exchanges!

  26. I enjoyed the relative simplicity of your article, but, as I have just closed on my first ptoperty in Miami, I have seen the real importance of showing a steady income when trying to buy anything. Gone are the days when you can simply show up with a 20% downpayment and the banks throw money at you…. My question is, in your example, how would the banks respond at the end of year three to your much larger potential bank loan, if you were only making 30K at your full-time job?..

    Just sayin’

    North Miami

    • Brandon Turner

      Hey Ray, thanks. Like you said, it is a relatively simple look. The real world takes some more creativity. In my case, I bought an apartment complex pretty similar to what I advocate for in the article and I used seller financing to do it. However, with a size-able enough down payment, experience, and a killer deal – there are banks that will finance stuff. I mean, once we are talking millions of dollars worth of property, it doesn’t matter all that much if you make $3000 per month or $10,000 per month – you still can’t pay the mortgage if something went wrong. So banks look at the deal much more specifically. And if it still couldn’t fly, there are always partnerships, lease options, or a number of other more complicated techniques. Thanks for the comment Ray and for reading through this thing!

  27. Jacob Eldridge on

    Wow!! Great article!!…
    I am 29 years old and finally starting to pursue the desires I have had to get into real estate investing. I am extremely motivated but full of questions. I’ll just stick with one for now though. Where do I start? Is it best just to walk into a realtor office and start talking or scan the papers and websites for foreclosures until you find one in your price range?

    ….I currently own one home whice I rent out for a four dollar a month loss.

  28. I love this article Brandon, I’ve been back to read it probably a half dozen times in the last month or two. The biggest issue I see is the year 5 plan with the 1031 exchange. Isn’t there a 90 day window where you have to complete your sell and buy transaction? If that’s the case, doesn’t that mean you would have to market and sell all four properties and then find and purchase the building within that window?

    • Brandon Turner

      Hey Andrew, thanks for the comment! Yes, there is an issue with timing – you’d have to hit it just right – but I believe it’s 45 days to identify several properties, and another 180 days to actually buy it from the time you sell your first. So it’s definitely not easy, but it is definitely possible. Hope that helps!

  29. Hey Brandon,

    I’m curious, the wife and I were talking (I always start out my questions like this lol) and we were thinking, other than Zillow, what other forms of medium would be used to get the actual assessd value of a property other that the aforementioned, or word of mouth? Obviously, I’m not going to get into buying mode, hire an appraiser to determine the value (Which is usually the asking price of the property anyways) only to back out on the deal after I got the actual figure, and be in hole $300 for the appraiser? I copied a quote from your topic which says,

    “Property must be able to be purchase for 80% of the value (using smart buying techniques)”

    So once I am ready to hunker down the $20k for a conventional loan, how would I know that I am getting the best deal? Take the sellers word for it, and try to lowball him with an 80% offer?

    Thanks buddy.

  30. Hi Brandon,
    Thanks for the interesting and insightful article.
    I’m pursuing a similar strategy here in New York City and I have a couple of questions that I hope you can answer.
    First off, in NYC there is definitely an appreciation factor involved. One of my properties has appreciated nearly 20% year over year for a couple of years. How would you change your strategy in a unique market like this where appreciation is a very large component driving the increase in net worth?
    Second, I am not familiar with the bank requirements when it comes to seeking an investment loan for a large multifamily building. Do you have a summary of what they will absolutely require from me so as not to look like too much of a novice? I’m seeking examples of the profit/loss statements, accounting ledgers and such. The minimal required paperwork that I would be expected to present to a bank loan officer.
    Thanks for your help.


  31. This is the perfect scenario. This article doesn’t address any real world situations:
    -Unpaid rent
    -Property Management
    -Housing Inspections,permits, and violations
    When starting in real estate many people do not have any contacts or very few. Unless you know a successful real estate investor with contacts it takes time and money to build a team. Then even after you have your team you still need the perfect tenants for this scenario to work.

    • Brandon Turner

      Hey Lon – I agree, this is an idealized solution. That said – this analysis DOES include those items listed, as part of the 50% rule (total expenses, including all those listed, tend to add up to 50% of gross income, not counting the mortgage payment.) Is this hard to find properties that cash flow $200 per month, per unit following the 50% rule? Yes. Is it possible, given that you only need 1 property per year, anywhere in the country? I’d certainly hope so! I just bought one 🙂

  32. I agree totally with the statement that this is a perfect scenario. If an investor really knew all the pitfalls that will happen in the process of learning the business, there would be even less people that would try to invest in real estate.

  33. Hi, great article!

    I’m a total beginner and I’d like some advice on my situation, please. I’m a 23-year-old community college drop-out from San Francisco, CA. I’m academically uneducated. For the past three years, I’ve worked as a chef and I knew absolutely nothing about stocks, business, and real estate up until less than half a year ago. I didn’t even know what people meant when they told me they were in finance. But I reached an epiphany when I encountered books like “The Secret”, “Secrets of the Millionaire Mind”, and “Rich Dad, Poor Dad”.

    Anyway, I’m planning to change careers to pursue financial freedom by quitting the life of an employee and practicing real estate full-time at the end of this year. I’d like to use real estate as my foundation for wealth and expland on it by eventually building my own businesses. I plan on returning to my community college next year and reading as many books as I can solely to educate myself on real estate without pursuing any papers or licenses. Meanwhile, I’m thinking of getting into wholesaling to raise enough money to purchase my first property as a means to begin my journey using the strategy in this article. In between each new property that I purchase, I’ll continue to wholesale and perhaps implement other financial instruments as I learn more about them along the way to assist in me reaching enough capital to purchase the next property and so on. Still living with my parents, I’m practically free of any liabilities and I live very frugally. Addition to that, I will have 12k saved up by the end of the year. Basically, I’ll be at a positive 12k from neutral by the end of the year. My goal is to reach the million-mark before age 30.

    Do you think this is a good plan? Pros and cons?

    Thank you!


    • Brandon Turner

      Hey Joseph – I think it is a very solid plan. The only thing I’d caution you on is wholesaling. While I think wholesaling can be great and can work well… 99.9% of people who get into it end up giving up. I don’t know why – maybe cause it’s harder than it sounds? But if you can do it- do it! Then, just make a plan on paper like the one I made above, and see if the math works to where you want to be!

      Finally, keep close to BiggerPockets, and let us help you get there!

  34. Brandon Beatty on

    I really enjoyed reading this post and comments! It is inspiring that you can make money in real estate so many different ways. I am a 21 year old firefighter who just got into real estate. I purchased a duplex about 3 months ago and so for have had great luck! I have a steady income and work roughly 9 days a month so I have plenty of time to explore real estate.

    I was inspired after listening to Rich Dad Poor Dad and have been crazy about investment properties since. I have explored many different paths to achieving financial freedom in real estate and really like the model posted here. My original plan was to own at least 10 properties (each 4 units or less) by the age of 30 and move into larger apartment buildings later when the properties are completely paid off.

    I can fix just about anything, have the free time to do it, and have several close friends that can do work for cheap that I can’t do(electrician, roofer, ect.) The reason I was going to put off moving to large apartment buildings is because I feel as though I can manage many smaller units with little help. If I move to a large building it seems as though there are many more expenses with the management.

    Anyone who has experience managing either types of properties on a large scale your input is appreciated! Any other thoughts or input is appreciated as well.


  35. Very good read, I have already read it 3 or 4 times to let it soak in. I have a question though, the first three properties that you buy, multifamily properties that cash flow $200 per unit after following the 50% rule. I know that a property like that is not EASY to find, what would the scenario look like if you HELD those three properties, maybe even bought one more every few years? I know that would slow the process down but how likely are you to sell your initial 3 properties for 100% of what you are asking for? Wouldn’t a discriminating buyer try to get it for 80% LTV like you were looking for when you bought it? And if you sold for 80%, what would your numbers look like when you buy the first bigger property?

    • OK, and now I have another question lol. I have been reading more about the 50% rule and I see that you are wanting $200 cash flow per unit after following that rule. I understood the 50% rule to mean that the second 50% pays the note and what is left if your profit. It looks like you are saying after the P&I is paid THEN it still needs to cash flow $200 per unit. Am I understanding that right?

  36. Asad M. Asaduddin on

    I own 15 rental houses with 7 free & clear and some others paid down half way. I am looking for apartment building in Houston. Is it possible that this city it is harder to find deals? What should I do? Thanks for your advice.

  37. Michael Ridley on

    I think this was a great article and is exactly what I was looking for as a step by step guide. I plan to make this scenario actually work for me. I just joined bigger pockets and will be following you on twitter!!

  38. Wow, this was a phenomenal article. It’s understandable that real life will be MUCH harder in terms of finder properties, learning the lingo and the ropes of the game, and eventually making the plays, but wow. What a playbook. That’s a model I really feel like I could make a piece of my foundation from.

    • Brandon Turner

      Thanks Amelia! Appreciate it! And yes, it’s not as easy as 1-2-3, but these deals do exist – and when you only buy one per year, it’s totally plausible to find them! But again, this post is more to explain the theory of recycling capital and how that can transform a strategy! Best of luck!

  39. Very very very difficult to get financing for a 2.75 mill+ property. Who, even after year 7, can qualify for a 15,000-20,000/month mtg? The previous monthly rent incomes won’t help you because the current mortgages of your properties already crank your debt to income ratios through the roof… Sure this scenario works if you make 30,000 a month and have no debt, but for the average starting investor it is very unlikely…. Any advice on where to obtain these kind of “lenient” lenders?

    • Brandon Turner

      Hey Marcin, it’s actually much easier than you’d think. The commercial lending world is VERY different from the Residential world. They know you can’t, personally, pay for these mortgages, so they don’t use DTI in their analysis to see if you qualify. They look at the cash flow on the deal, especially the Debt Service Coverage Ratio ( and your experience level to fund the deal. So, on a deal with the kind of cash flow outlined in this post, it’s probably easier to finance than a single family house. I’m working on refinancing a $500,000 apartment right now and it’s such a different process – they hardly even care about me. They just wanna see cash flow!

      Hope that helps some!

  40. Hi Brandon,

    I am 22 and want to start investing in real estate but am not sure where or how to start. I have read a few of your articles but am having some trouble with the terminology. I do not understand things such as equity and how it differs from net worth. Is there a post you might have that goes back to the very basics of real estate?


  41. Shannon smiley on

    This is a great article! My husband and I started off in real estate purchasing a duplex that we resided in. After that we continued buying. First with residential mortgages then commercial lending. We now have 38 units. 3 commercial buildings and am RV park! Our strategy has always been buy and hold. We also both have full time jobs and do real estate on the side whenever we are free. It does help that my husband is very handy. It can be done by the method you describe above. It just takes that first step.

  42. Can anyone answer this question. Is it normal for a property with multiple units to have separate furnaces for each unit? The property that I am looking at will probably have to have a new furnace put in for each unit(3 units). Is this a big expense? I looked at the cost of furnaces along with installation cost and it seems like this would be a big expenditure.

  43. Brandon great job, excellent start out. I am a newbie and I don’t have the money to start out with, you think wholesaling can help me to get the money ? to search for a property like what you start out with, I’m in a tough situation and need to make some money, your post is a excellent way to start out if you have that down payment.
    God bless
    Lorna , I will fight on

  44. Brandon Tuner-
    I am very interested to learn more about the commercial lending. I own a single family rental and recently purchased a duplex. I save a lot of money for future purchases and would like to get into commercial real estate eventually. At what point do they stop looking at you debt to income and start looking at cash flow? Duplex, triplex, and fourplexes I’ve looked at the lenders wanted DTI. Is it when the property is actually classified as “commercial” or when it’s multifamily over 4 units? I know every lender is different, but I would like some advice based on your experience. I plan to buy 2 more duplexes before I look into larger buildings.

  45. Great article! Gives me something to shoot for in my real estate investing journey. I have two questions.
    1. What is the 50% rule you mentioned?
    2. It appears you never spent a dime of your cash flow. Did you work while investing to cover your personal expenses?

  46. Hi Brandon, I’m completely lost and confused about year one equity and net worth. I’m fairly new to real estate so bare with me, because I’m still getting my feet wet. From what I’ve read, equity is basically the down payment you put into the house at the beginning correct? If you bought the four-plex at 80,000 and put 20% down which was 16,000, how is your total equity 46,500.00? Also I don’t know how net worth is determined or calculated, so could you please clarify how you came up with your total equity and net worth? THANKS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1

    • Brandon Turner

      Hey Darren,

      Thanks for the comment. It’s a good question and I kinda glossed over it quickly. Equity is the difference between what you owe and what it’s worth. So yes, normally, it’s the down payment. However, in this example, we bought a good deal and got it on sale! So, the value was at $100,000 but you only paid $80,000, and then put $16,000 down which means your mortgage is $64,000 and your immediate equity is 36,000. The reason we actually get $46,500 is because, over that year, you save up $10,500 in cash flow from the property. So at the start of year one you have $36,000 in equity and at the end of year one you add the cash flow you’ve saved so you have $46,500.

      Hope that helps!

      • Thanks for clarifying that, but I’ve two more question. I’m a military army veteran that is relocating to los angles, California in about a month, and was wondering what would be your advice for me as a novice real estate investor getting his feet wet? I know the example you provide in this article is a great way to start off, but should I go to school to get my real estate degree so I can expand my financial knowledge about real estate first, or should I just start off looking at property’s that can meet your standard that you have mention above. Also lets say I do find this property with the standard above, what would be the best way to finance that property as a novice in this real estate business with not that much money to start with? I know some of the benefits I have as an military veteran is the VA loan, Post 9/11 G I Bill, and the small business start up loan. should I use one of these benefits first or just get a home equity loan, home equity line of credit or something else. Also I’ve read that the days of getting 30 days preapproved loans are over. I would really appreciated it if you just answer these question to the best of your abilities. THANKS!!!!!!!!!!!!!!!!!!!!!

        • Brandon Turner

          Hey Darren,

          First, I’ll warn you – You won’t find any deals like that in this example in LA, or California in general. It’s just too expensive. You could invest at a distance, but you’ll wanna do some research into that.

          As for financing, yes a VA loan is nice with $0 down, but you have to live in the property, and that comes back to the issue above: California is crazy expensive.

          I’ve got a book on creative finance coming out in a few week – I think you’ll love it. Keep an eye out for it 🙂

          Also, I’d recommend jumping into the forums here on BiggerPockets. You are the average of the 5 people you hang out with the most, so spend time there every day, interacting and asking questions – you’ll be amazed at how fast you’ll grow!

        • Brandon Turner

          Oh – and I don’t generally recommend going to school for real estate. It’s not a terrible idea, but going into debt to learn something you can learn on your own: not my top choice!

  47. Ok thanks Brandon, and what’s the title and release date of your creative finance book? Also since you said that using my VA loan would require me to live there, so what method or type of loan u suggest I use for renting out property? I’m not that experience, so will that limit my option as far as banks lending me money? I have a 720 credit score, no debt, one credit card, and some were around $10,000. Thanks!!!!!!!!!!!!

    • Brandon Turner

      Hey Darren,

      No title yet (I’m still trying to decide) but we’re hoping for a release date around the middle of April!

      As for what kind of loan – that’s tough. Perhaps a Fannie Mae Homepath loan – which is 10% down, but you’d have to buy a property cheaper than 100,000 for that. Besides that – you’ll have to get creative with things like partnerships, Private money, and more.

  48. OK, how did we magically buy a 100k property for 80k? Did we somehow eliminate everyone else that could’ve sniffed out something is being sold 20% less than fair market value?

    10% appreciation in the first year alone?

    This article has serious math issues. How does it say it’s not a “get rich quick” scheme but our equity goes for 16k down in the first year to 56.5k within a year… 250% annual return anyone…

    • Brandon Turner

      Hey Kaveh,

      Thanks for the comment, though I respectfully disagree. In fact, most real estate investors buy properties at 70% of the value minus repairs, so buying at 80% is actually much more than I typically would do.

      Will every property work? Of course not. But if you had an entire year to buy one property anywhere in the US … you are saying you couldn’t find one deal at 80% value? Especially with the wealth of knowledge out there regarding marketing etc.

      As for 10% appreciation, if you read the post slower you would see that I said “Forced Appreciation” which is not appreciation at all but improvements. For example, I bought a 4 plex recently that was worth $110,000 for $90,000, I spent $5k on improvements, and it’s now worth $130k. That’s forced appreciation. House flippers do it all the time, every day, in every part of the world.

      Again.. are you saying you couldn’t find one deal like this, with the wealth of knowledge out there regarding marketing and only needing one per year?

      I think you limit yourself on your capabilities.

      Of course this is not get rich quick… this is a business not a stock market investment. If you turned a $50 bicycle into a $200 paper-route, no one would say you were in a get rich quick scheme. They would say you were doing good business.

      Hope that helps some!

      • @Brandon, I just read your ‘7 Years to 7 Figure Wealth’ (a great read, thanks!) and have 1 question (b/c the link doesn’t work).
        On page 5 you write:

        “There are many techniques you can use to buy properties at steep discounts or force appreciation, and you can read about many of them at my blog”

        I’ve been searching the blogs in search of the “how”/”where” answer to this questions … can you provide me/us a link?

        I’m using your technique to look at some numbers (for multi-family properties) but am looking at MLS info via an agent. There are some foreclosure properties in my area of interest, but they require a ccard to create an account 🙁

        Thanks again!

  49. LaShelle Smith on

    So I actually am thinking of literally putting this into action. What’s the worst that can happen…I become a hundred-thousandaire? I do have a quick question…in reading about 1031 exchanges I was under the impression that you could only “exchange” 1 property for another. How did you exchange three 4-plexes for 1 apartment building?

    • Brandon Turner

      Hey LaShelle, thanks for the comment! So, I’m no expert on 1031s (never done one yet) but I thought it was possible to do 3 for 1, as long as they are like-kind. But I could be wrong. I actually got my apartment complex for almost nothing down, so I dind’t have to sell my other properties to make it happen (though, from a stress standpoint, I wish I had! )


    • Brandon Turner

      Hey Josue, I estimated on the example in this outline (so it’s not exact numbers) but it’s close. If you want exact, search for an online “Amortization Calculator” and you can see the exact amount paid off each year. Hope that helps!

  50. Thank you so much for sharing this great article.

    I just joined this website and have jus recently searched for multifamily investment in NYC area.

    I have maximum of 300,000 to put down as down payment, credit score 750+. So ideally i can start at year 5. However, I can’t seem to find any multi-family unit in NYC and surrounding area priced around 1 million that can provide 57,000 cash-flow using the 50% rule. Am I doing something wrong?

  51. I am 23 and just started my first full time job. It pays well and I enjoy it but I have always been interested in real estate as well, your article has me even more interested now. I have two questions:

    1. How much time does managing these properties really take? I work anywhere from 50-60 hours/week through my day job, just want to make sure I don’t get overwhelmed and quit while I’m behind.

    2. How do you deal with bad tenants? Do you run a standard lease agreement? What happens if they stop paying, or if they trash the place? How often would something like that occur? Just curious.

    Ok so that was more than two questions, but you get the gist.

  52. Great article. I’m curious though on how you would be getting paid for this weekly/Monthly.

    Would you be just getting paid with whatever is left over from your renters after your bills? Or are you just showing how much it’s worth so when you’re ready to retire or just flat out sell it for the 1.3 you could? Just confused on how much actual money you would be putting in your personal bank a month.

  53. Good info. I pretty much did by buying 8 units in so so area in 1970, bought 12 units in 1984. This gave me trouble, assessor was after me 10 plus yrs on taxes for value. Headache, got at 40 % discount 12 units, sold out of town property, manager was cleaning me out, etc got into NNN property in 2003, happy nrtetired.

  54. Brandon, thanks for the article. I can buy a house for 80% of value only occasionally, like 1 every 2 or 3 years hehe. There is not a 75 unit apartment building within 100 miles of me to my best knowledge, and no 24 unit within 50 miles. Still I get the idea. I have been doing the same thing but on a smaller scale using SFRs. I use the built up equity to leverage into another house. I cannot get $200 per door per month, and my lender will only do 15 year loans on a 3 year ARM. Still I build equity quick this way and keep interest to the lowest possible amount. Appreciation in my area is just below 2% and to be honest I never calculate it into my plans. You also need to consider there will be time go by between selling your properties and buying new ones. It helps to plan though, and dream, most plans start as dreams then become plans.

  55. Hussain Haider

    It seems like you are not taking into account any of your mortgage payments in these calculations, which are not included in the 50% rule. Your cash flow figures and the amount you save yearly from cash flow should be a lot less after the mortgage payments. Using a mortgage calculator, in year 1 you should be paying about $5,000 towards the mortgage, leaving you with only about $5,000 left to save from your cash flow instead of $10,000. Am I missing something?

    • Alex Langkamp

      Because of the 3% appreciation increase. From year 1 to year 2, you are correct in the fact that only $500 was paid on the loan, but the value of the house also increased from $110,000 in year 1 to $113,300 in year 2. The equity value in this example is simply just the House Value – Loan Value.

  56. Kevin Lang

    Hello Everyone,

    Forgive me if this is an elementary question. Brandon talks about Monopoly-style “trade ups” by which the investor sells smaller multi-unit properties to finance the down payment on a more expensive one. My question is: Wouldn’t a buy-and-hold real estate investor prefer to take out home equity loans on the smaller properties to finance the bigger purchase instead of selling? This would allow the investor to acquire the larger property and to hold onto the smaller ones, which produce a nice cash flow.


  57. Hello I wish you are fine .I d like to know friendly if you can provide me with a money donation to make me start project .I d be too grateful if you agree so that I can send you my contact details .thx a lot waiting for your answer

  58. Ryan Sanders

    Bringing this back from the dead, but I have a question. Wouldn’t a 1031 exchange be very difficult when trying to sell 4 properties? I am only thinking this because of the strict time frame involved. Thanks for any clarification!

  59. Jessica Ramos

    Thanks Brandon! Quick question: I am a newbie and wanted to know how the whole debt-to-income ratio plays in this scenario/example. Is this only possible for someone who can make enough income to stay within the lender’s ratio? etc.

  60. Camron Stewart

    Brandon, great article, very eye opening. I understand that this is 100% an ideal situation but what would you say to someone who isn’t super comfortable with being so over leveraged but likes such an aggressive approach?

  61. Blake Lawrence

    Finally found this article, it seems very straight forward but I am stuck on one detail. The 16k down payment and the 4k to fix the quad in year 1 don’t seem to be accounted for. At year 1 the property has a net worth of 56,500 but wouldn’t your net worth only be 35,600 considering the 20k you had to pay day 1?


  62. Barry Tatum

    I’m new to real estate investing and have been reading a lot of different material. However, I absolutely love this post. I’m going to make this my blueprint and keep a copy close by to make sure I’m on track but I’m sure after I read it several more times and take notes I will probably have it memorized. Thanks.

  63. Hello Brandon! Great article! I’ve been investing in Real Estate for over 20 years and have never been able to get a 20% discount. I’ve been able to get a 10% discount, but not 20%. Did you ever write an article on your “smart buying techniques” that you could share? I just sold a property and am in the market to buy another one and would love to try something new 😀 Thanks for all you do!

  64. wes rowlette

    I have read your article twice and love it. Thank you. I have a quick question.
    My original plan investing in buy and hold was to start with a single family home in a cheap part of the country, use a property management company since that will definitely not be where I live, get my feet wet and once comfortable keep buying single family homes.
    Your plan is a much faster plan than mine 🙂
    I was wondering where you look to find multi family homes. Are you looking for properties that already have renters in them? If so where do you go to find those type of properties?
    If it does already have renters, how do you fix up the place if the units are occupied?
    Hopefully these aren’t stupid questions 🙂 I am pretty green.

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