The 7-Property Retirement Plan ($80,000/Year)

Dave:
If you can save one down payment, you can buy seven properties in 10 years. Most people think real estate investing is only for the wealthy because they assume you need to save up 20% for every new property, but that assumption is wrong. And today on the show, I’m going to show you how. If you can buy your first rental, you can have a portfolio of seven cash flowing properties that completely replace your income in only 10 years. That’s right, financial freedom in just 10 years. With only a single property, you can build equity and then tap into that equity to fund future deals. So you’re not starting from zero over and over, you’re recycling the same small initial investment into bigger and bigger assets. And today in the shop, I’m going to show you step by step and with a real property example, how repeating this one strategy seven times over 10 years can build you a retirement most people only dream about.
Hey everyone, welcome to the BiggerPockets Podcast. I’m Dave Meyer. Happy to have you all here today. Recently, I’ve been thinking a lot about what is enough properties? What is sufficient to actually achieve financial freedom without adding additional complexity in my life? And although the exact number you need is going to be slightly different for everyone, I came up with the number seven. And it wasn’t just random guessing. I built an actual financial model and found that for a relatively “normal American,” this is the number of properties you need to acquire to completely replace your income within 10 years. So that’s pretty exciting. And today on the show, I’m going to show you exactly how you can do this, what strategy to use, what kind of deals to buy, and I’ll walk you through the math that shows that you can replace your income in 10 years or less, whether you’re starting with a $50,000 income or an $150,000 income.
So let’s do it. First things first, big picture here, why I’m proposing the strategy I’m about to talk about is that almost everyone who wants to invest in real estate gets stuck on the same question. Where do I get the money for the next property? Because maybe you save up for that first one, but every subsequent deal is going to require a new down payment, right? So that can be a major blocker. But the answer to this question is that for most people, if you’re buying that first deal right, you already have at least part of your down payment, if not most of your down payment, maybe even all of your down payment sitting in your first deal. And this is the magic of the strategy that we call the BRRR. The BRRR is B-R-R-R-R. Stands for buy, rehab, rent, refinance, repeat. And the magic in this deal strategy is in the refinance step because if you build enough equity through the rehab and rent stage, you can then pull out the equity that you’ve built as cash through a refinance and use it to fund your next purchase.
Let’s just talk a little bit about how that works. So first thing you do is you go out and buy this property, that’s the first B. The R is rehab, and that’s where you renovate a property. You make it worth more than it was before, and you need to do that by spending less than the value you’re creating. So you need to generate $50,000 in new value from the property by investing 20,000 as a simple example. And if you do that, you can actually pull that $30,000 out and use it for your next deal. Any investor I know who scales does this at some part of their investing career because it just works so well. And you can find these deals on the market today and you don’t need to do heavy rehabs. You could just do a cosmetic burr and make this work and repeat deals over and over and over again.
So if you want financial freedom in a short timeline, this is what I recommend you do, the cosmetic burr. So let’s talk about the steps you need to follow to actually do this. First thing you got to do, define your buy box. So you should spend a little bit of time doing what I call a resource audit, which is just figuring out what resources you can bring to your first deal because every portfolio is comprised of basically three things. Time, money, and skill. And so if you have a lot of time, great, you can do more of a rehab, you can spend more time finding a great deal. If you have more money, that gives you a lot of flexibility. If you have more skill, you can do the renovation yourself. So just figure out what you have and what you can contribute to that first deal.
And once you’ve done that, go out and figure out what are the right kind of deals and if they exist in your market. Because in this episode, what I’m talking about is going out and buying a cosmetic burr. You got to go check if this is possible where you live. Just going to tell you right now you live in LA or New York, this isn’t happening for you. That’s okay. You can go long distance. You can do this somewhere in the Southeast or the Midwest or in Texas or in Oklahoma, whatever. There are great places where you can absolutely do that, but all things being equal, if you can do it in your own backyard, I would. So check that out and figure that out. If you can’t go out and find a market, we have tons of different episodes on the show about going out and finding a market, but that is a step that you’ll need to take if you can’t do these in your own backyard.
Now, when you’re defining a buy box, you need to figure out what the right property is on top of just the market. And here’s what I want you to focus on. This whole strategy, what I’m talking you through today, the premise is that you should go out and buy a deal roughly every 18 months. So it needs to be affordable. You can’t go out and buy million dollar homes and do this. So I would focus on affordability. Now, the burr is magical because you don’t need to do down payment every time. We’re hopefully going to be getting like 50, 75, maybe even more percent of the next down payment from our burr, but you’re still going to need to save up a little bit. So affordability is going to help you scale. And it’s relative. If you have a super high income, maybe you could buy more.
But for the average income, which is the examples I’m going to be using today, if you could buy properties under 400 grand, I think that’s probably ideal. The next thing you need to look for is cashflow because the whole goal of this is financial freedom and these deals need to cashflow once you’ve done the refinance. That is really, really important here. I would target at least a 3% cash on cash return after the rehab and refinance, because you might be able to get decent cashflow today on the property depending on the condition, but you need to drive up equity and get cashflow once you’ve done the refi. When you go out and talk to an agent, these are the things you need to tell them. It needs to cash flow after. It needs to be able to build significant amount of equity so that I can get 50% of my equity out to put towards my next deal.
So you got to get that affordability. Those are the metrics you need to hit, but whether it’s a two bed, one bath, what location, you need to work on that with your agent and figure that out. But I trust that all of you can do that. So once you have a buy box, time to get deal number one. And your goal here for deal number one is to just get on the board. You need to build equity, get some money out for that next down payment, and learn the system because this is the most important one. If you can do it the first time, if you’ve done the hard work, doing the only deal that requires you to save up 100% of that down payment, deals two through seven are going to be a lot easier for you. So what to focus on in this first deal is number one, don’t lose your shirt.
Don’t do something overly risky. Don’t bite off more than you can chew. Do a manageable rehab with a high probability of success. So that’s number one. Number two here, focus on building your systems for the next six deals. Building your team is going to be the most important thing. Find a great agent, find a great lender, find great contractors. If the contractor doesn’t work out, replace them. Get rid of them. Find a great source for materials. Get good at budgeting, track expenses, et cetera.This is what you need to do. Build the foundation. You do not need to hit a home run here. Set your foundation and get on base. So I’m going to actually walk you through an example. I found a real deal online that we’re going to walk through to show you exactly the numbers of how this will work. We’re going to do that, but we do have to take a quick break.
We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today I’m walking you step by step through how you can get seven properties in 10 years and replace your income. The strategy we’re using is the cosmetic burr. And before I just kind of talked about how your first deal should just be to get on base, to try and do the minimum here, which is getting a cash-flowing rental property and building enough equity that you can pull 50% out. So let me just walk you through how this works from a financial perspective, and then I’m actually going to show you a real deal. So let’s just imagine you buy a duplex for 240,000. Say it can’t be done, can’t. I’ve done it recently. This happens all the time. So we’re buying for 240. My rehab budget’s going to be 60,000. So I’m going to be all in for about 300,000.
And after that, my ARV, I’m going to make this property worth 380 by doing this rehab. Now it’s time to refinance this because we’ve built all that equity. It’s now we’re 380. We got to tap that equity for the next deal. A refinance is essentially getting a new mortgage. So you’re going to need to put a down payment on that new mortgage. And if you’re putting 25% down because you’re an investor, that means you’re going to need to keep $95,000 in this deal in equity. Next, you have to pay off your old mortgage, which is 178,000. And so if you take those two things out, you’re starting with 380, you subtract the old mortgage, which is 178, 178,000. Take out that 95,000 for your down payment, that means you can refinance out about $107,000. That’s incredible. That is money you can go use for your next deal.
Now I’m using really simple math here. There’s going to be sales expenses, refinances do cost money. So let’s just call it 90 grand. You’re going to be able to take out 90 grand and do your next deal. Now, this is a made up example, but it is a real life example. These are mimic deals that I have done and other people do. So this is how you think about it. You drive up the value, you take out the money and do it on the next one. And before I show you the deal, which I will in a second, I just want to show you what I am talking about here is not a perfect burr. People always talk about the perfect burr where you can take out 100% of your capital. I don’t really care. Honestly, I think if you’re getting 50, 60% of your capital out, that is enough in today’s market.
If you can get a hundred, fantastic, do that. Go do that. But if you can get 50, 60, that’s still amazing. I really hate seeing people not doing the burr strategy because we’re like, I can’t recycle 100% of my capital. This is still a magic trick that is going to supercharge your investing career. So if you’re getting 50, 75% out, that is incredible. All right, enough of my rant about that. Let’s look at this property. I went on the MLS, so I just pulled this up on Zillow. So what I found is a three-unit property in Louisville, Kentucky, four bed, three bath. So one of them’s a two-bed. It’s about 2,300 square feet, old property built in 1900. I like this one because when I looked at the photos, it looked pretty good. It’s brick build, which is good, especially on an older property. And the brick actually looks good.
The roof actually looks pretty nice. And the interiors are solid. They’re not super updated or modern, which is exactly what we want to see. As a value-add investor, we’re looking for opportunities to improve the property. But you don’t really want to spend your money tuckpointing brick, which can be expensive, or replacing a roof. What you want to spend money is where you’re going to get it back in rent and rent it back in equity. And so when I’m looking at this property, and if you’re watching on YouTube, I’m showing it right now, but you could see these kitchen that I’m pulling up right now is actually a good space. It’s super outdated. There’s no stainless. The cabinets are pretty old. It just can use a lot of work. This is a good opportunity to replace a kitchen, drive up the rents. Same thing with some of these bedrooms.
They’re not the best layout. So you can think about maybe taking out a wall. The bathroom is very dated and can use an improvement. But overall, the house is in pretty good shape. It just needs the kind of stuff that is perfect for a cosmetic burn. Can you make the kitchens nicer? Can you make the bedrooms a little nicer? Could you improve the floors? Floors in this one are actually pretty nice, but could you spend 60 grand and drive up the value of this property? Absolutely. I think this is a realistic case for the kind of example I showed you before. So I’m actually just going to run this through now, the BiggerPockets calculator, and we can look at if it’s going to cashflow when it’s done. And if you’re a BiggerPockets Pro member, you can use these calculators as much as possible. It’s the best possible way to figure out if a deal is good or not.
If you want to follow along or do this, go to biggerpockets.com/calculator and you can do this for yourself. So I’m just going to copy and paste in our address here, and then we’ll put in the purchase price. We’re going to say that we’re buying this for 220. I actually think we could probably get it for cheaper. Purchase closing costs on a deal like this. I’m going to put 5,000 bucks, which might be higher. But the key thing I want to do here in the calculator is click this little tab that says I will be rehabbing this property because we are. I think we could drive the value of this deal up to 300,000. I looked at some of the comps, we’re going to say it’s 300,000. And in my example earlier, I said $60,000 budget, but this place, the floors are pretty good. The outside’s pretty good.
I think we could probably renovate this place for like 25,000, but let’s just call it 30,000 and see how that does. So we’re going to do that. Then we got to put in our financing details. We’re going to put 25% down on this because we are investors and you can occupy this, which is good. You don’t need to use a hard money loan on this. I really like that. So I’m going to put six point, let’s call it 6.7 about interest rate. And then the rents on this are actually going to be pretty good. I think it’s getting close to the 1% rule now. I think it’s probably like 2,100 is what my estimate for rents are, but I think we can get this up to 2,700 if we fix this baby up. For taxes, it’s right there in the listing, 2,300 bucks a year.
Insurance is going to be about 1,400 bucks a year. Repairs and maintenance, I’m going to put 5% down, 5% for CapEx, 5% for vacancy, and 8% for management fees if I’m doing this as a long distance investor. Then because this house is metered separately, I’m doing nothing for our utilities. Just going to hit finish analysis here. So I can see that this is a huge cash flowing deal before my refinance. So if we just did the rehab and didn’t refinance, we’d be making $700 a month. That’s a nine and a half percent cash on cash return. That is excellent. But like I said, we need to check that it’s going to cash flow after the refinance because we are still paying our loan on that $220,000 acquisition. But when we refinance it, it’s going to be valued at 300,000. So we need to adjust for that.
So I’m going to go back and edit this and just look at what happens if we put 20% down on a $300,000 property. I’m going to turn off the rehab property calculation because we’ve already done that, and we’re just going to update this again. So once we hit update this analysis now. Oh, perfect. This is great. Okay, so our cash flow here at 320 a month. Awesome. So you’re already making 320 a month and you are getting a 3.5% cash on cash return, which is great. I know a lot of people target seven, 8% cash on cash return. If you’re doing a traditional rental, I kind of agree with that, but with a burr, if you were able to earn $320 a month and take out some equity, that’s absolutely unbelievable. So once you understand what kind of deal to buy, and this is just one example, there are other examples, but this is a great example of a good deal to buy.
Once you can do that, you move on and start to stack that snowball and get to your next six deals. And I’m going to show you how to do that. And I will prove to you with my financial model how this can completely replace your income, but we got to take one more quick break. We’ll be right back.
Welcome back to the BiggerPockets Podcast. Today in the show, I am talking about how if you can do a cosmetic burp seven times in 10 years, you can replace your income. Before the break, I showed you a real life example of a deal that you can go out and buy today. And once you can do that, it’s time to move on and start to stack that snowball. So before you move on to your second property, make sure your first property is stabilized. So I kind of skipped over that. I just went into the math, but I want you to make sure that you have a good system in place before you go to that second deal. So make sure you have a great tenant in place. If you’re doing the property management, that you’re feeling comfortable with that. If you’re hiring a property manager, make sure that they’re a good one.
I want you to make sure that your first deal is rock solid. I’d actually rather you buy your second deal slower than going out and buying something when your property isn’t ready. Have happy tenants, great, safe place, in good condition. It’s cash flowing, your system’s in place. You need that before you start getting more because if you go out and buy more and you have problems, those problems are just going to compound with every deal that you get. So make sure they’re in really good shape. Second thing you should do before you go out and buy it is just kind of assess how the last deal worked. Go out and do a post-game analysis. What did you like about the deal? What didn’t you like about the deal? Where could it have gone better? Was my cashflow? What was I expecting? Did I get the equity?
Was my underwriting good? Go out and figure out the things that you want to tweak, things that you can do better, because there’s always things that you can do better. And it’s good to take a minute and be honest with yourself about the things that weren’t optimized, the things that you think you did really well and what you want to do on your next deal. And once you’ve done that, go out and repeat what you just did the first time. Now, as I mentioned at the top of the show, the challenge for repeating is usually financing, but you’re going to be able to finance using your BRR. You have $50,000. So you could go out and just repeat that deal. You needed 55K for that first deal, so you could save up $5,000 and wait. If you want to pay for the renovations out of pocket, which was 30 grand, you would have to save up another 30 grand.
But I think what most people would do in this situation is save up for the down payment and then finance the rehab. Go out and get a hard money loan, a private money loan for $30,000. It’s not going to be that much, right? Only borrowing $30,000. And then you can go out and buy another deal when you’re ready. This can be in 12 months, it can be in 18 months or in 24 months. One thing I should mention is you got to make sure that you have some cash reserves. Don’t put every dollar you have into your second property because something might come up in that first deal and you need to have some cash reserves, but everything else you can put into that second deal. And this is how you do it. This is just what you repeat. Going from one to two is no different from two to three, three to four and so on.
So after every deal, make sure it’s stabilized, assessed what went well and what didn’t. Adjust your buy box a little bit based on that assessment. Do the refinance, pull the money out, save up the rest, maybe consider using financing for some of your rehab costs, and then go do it. Go do it as frequently as you can find good deals, as frequently as you can stabilize these. And over time, you can absolutely replace your income. And I’m going to pull up my financial model to prove this to you. So I built this financial independence calculator and I just wanted to show what it’s like repeating this over time. And so what we have here shows that if your income is $80,000, so that’s right about the national average. I’m not starting with a huge amount of money. And I have an initial savings of $75,000.
So again, we’re talking about saving up enough money to get that first deal. And if you can’t, you can consider partnering. That’s how I got started. That’s how a lot of people get started, but you somehow need to get that first amount for your down payment. So I put it at $75,000, which sort of coincidentally is similar to what we would need for that Louisville deal. You would need 85,000 if you were going to pay for the renovation out of pocket. So sort of similar here. So $75,000. And if you’re buying the average property price at 275, so that’s higher than what I just gave in my example. And I know that’s well below what the national average is, but that’s the goal. You want to buy something well below, renovate it, and drive that value up. So if you’re doing that, even with modest appreciation of 3% per year and getting a decent cash-on-cash return at 10% over the lifetime of your investment, then you can absolutely do this in 10 years.
And again, when I say 10% average, it’s not going to be 10% when you first refinance. Like I said, you should shoot for three or 4%. But over time, your cash on cash return is going to grow. Your rents are going to go up and your expenses are going to stay fixed. And so over the lifetime, a 10% cash on cash return average, absolutely. Your most recent deal might not get 10%, but by the time you’re ready to retire, your first deal should be getting 15% or 20%. So that’s why I’m saying an average of 10%. And if you can do that, if you could do this over and over again, in 10 years, you can completely replace your income. In 10 years, even adjusting for inflation, I actually adjusted for inflation here, which most people wouldn’t do. They’d say you could do it in five years or six years.
No, I adjusted for inflation because I think that’s super important. I want your inflation adjusted cashflow to be better when you retire than it is today. And if you’re making 80 grand today, your post-tax income’s going to be 60 grand. Your post-tax income, just doing these cosmetic bursts seven times in 10 years is going to get you 65K in post-tax inflation adjusted income. And this just proves it. The math is right here. I’ve built and worked on this math a lot. It is correct. In this model, you buy a property in year one, in year four, in year six, in year eight, in year nine, in year 10. So it’s actually not even going that quickly for the first couple of years. You wait two full years between your first and second purchase to save up. Then over time, as you build equity in more and more properties and you get better at it, you can accelerate that.
But in 10 years, you buy seven properties and you have a better post-income inflation-adjusted cash flow than you do right now. And this works at almost any different level. I’m going to just do this live right now. If we change this current income to 120,000, it’s the same. It still takes 10 years. Your post-tax income now is $90,000, but you have in 10 years, $91,000 in inflation-adjusted post-tax income. That’s amazing. The math just works regardless of your income because if you’re starting with less money, yes, you have less capital to invest, but you have to replace less. If you’re starting with more money, you have more money to invest, but you have to replace more. So it actually kind of balances out over time. And of course it’s going to be a little bit different for everyone. Your exact savings rate, exact deals that you buy, how much you can reinvest is going to depend person to person.
But this is an average approach using on-market deals. You want to accelerate this? Go house hack. Go find off-market deals. Go find partners. If you go a little bit slower, fine. If you don’t have the time, if it takes you a little bit longer to save up money, your first bur doesn’t hit the exact numbers, and it takes you 12 years, still about a quarter of the time it takes most people to achieve financial independence, if they achieve it at all. It takes most people 45 years to retire. I’m talking about 10 years here. So the whole point here is that if you can save up or find a way to get the capital for that first deal, you can absolutely save up intermittently, but mostly use the equity that you’re building from doing cosmetic burrs to repeat this over and over again. And if you can do it just seven times in 10 years, you will have a higher post-tax income than you do right now.
So this is the plan. This is the strategy I recommend to pretty much every investor out there. This is such a good way to pursue financial independence. Save up for that first deal. Learn a lot about real estate while you’re saving up. Listen to podcasts, read books, do all that stuff. Get that first deal. Don’t focus on hitting a home run. On the first deal, you focus on getting on base and building your systems. Learning as much as you can. Don’t lose your shirt. Get a cash flowing rental and pull out equity. Then repeat that as frequently as you can. Don’t scale before you’re ready. Make sure that your properties are stabilized. But if you can build that foundation and systems where you can do this every 18 to 24 months, and like in my example, it might go slower at the beginning, but if you can average that over 10 years, you can replace your income.
That is the beauty of real estate. Even in 2026, when people say cash flowing rentals are dead, this math proves that it is not. So don’t get caught up in that and just focus on running your own race. Doesn’t need to be complicated. It can be boring like this. You don’t need to go out and do 10 different strategies or raise private capital. You can just do this. You can go do cosmetic burrs and replace your income. And if that is not motivating enough to get into real estate, I don’t know what it is because this is a proven way that you can improve your financial future. And it’s something that I know all of you can absolutely do. That’s our show for today. Thank you all so much for watching this episode of the BiggerPockets Podcast. I’m Dave Meyer, and I’ll see you next time.