How to scale your rental portfolio
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3yQuote from @Ashwin C.:
Some people make more money through their W-2 job.
Some inherit money from family.
Some create revenue through side-jobs or hustles.
People present real estate investing as soooo easy with nooooo money necessary! It's all BS. I saved up $10,000 to buy my first investment. I saved up $20,000 to buy my second investment. I realized I needed to make more money if I wanted to scale, so I figured out a way to make more money with my business and then invested that extra income into real estate. It took a couple years to buy my first three rentals, then I scaled to 33 rentals in three years because I hustled and saved. I also took every dime earned from my investments and re-invested it. I haven't bought anything since November 2021 and am currently in a season of rest and renovation.
There's nothing wrong with listening to what others are doing and trying to find ways to scale but be realistic. Some of those investors inherited money, others are high earners, and some just got lucky with their timing. The majority of wealthy people get there by making wise decisions over a long period of time.
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32 Replies
- Bay area, CA · Member since 2021 · 383 posts · 306 votes3y
Great point. Every investor goes through the same situation. I have tried to find the answer and the answer was kind of obvious, expected, and maybe also disappointing!
It does take a long time, starting out is hard! Including people who we see on YouTube at the top level, even for them, it took forever to get somewhere comfortable but then they took dramatically less time to reach a high level with their connections, experiences, the extra money made with hustles, and HELOC on older properties. When that happens, they become more famous and we get to see that part of their life, but not when they were grinding like a college student on ramen noodles!!
Early grind is real, good luck with that.
Congratulations on your first property. If you don't mind sharing details of it, how you bought it, how're the numbers looking, etc. people would like to know that too!
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Using other peoples money.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Ashwin C.:
Some people make more money through their W-2 job.
Some inherit money from family.
Some create revenue through side-jobs or hustles.
People present real estate investing as soooo easy with nooooo money necessary! It's all BS. I saved up $10,000 to buy my first investment. I saved up $20,000 to buy my second investment. I realized I needed to make more money if I wanted to scale, so I figured out a way to make more money with my business and then invested that extra income into real estate. It took a couple years to buy my first three rentals, then I scaled to 33 rentals in three years because I hustled and saved. I also took every dime earned from my investments and re-invested it. I haven't bought anything since November 2021 and am currently in a season of rest and renovation.
There's nothing wrong with listening to what others are doing and trying to find ways to scale but be realistic. Some of those investors inherited money, others are high earners, and some just got lucky with their timing. The majority of wealthy people get there by making wise decisions over a long period of time.
The DIY Landlord Book4.7248 Reviews - 3yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
getting started is the main part. Start saving your active income and try to avoid using it on personal purchases. Use your passive income for that if need be. Finding a side hustle (selling re on the side as an agent) or flipping a house or two can give you some extra capital to work with.
Alan Asriants - New Century Real Estate 590 Reviews - 3yJoe VilleneuvePro MemberPlymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
When the equity in this property doubles from appreciation...sell it...as long as you have recovered your down payment from the accumulated cash flow too. Don't fall in love with any property,...fall in love with the profits. You are not a property collector, you are a REI.
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes3y
Two items of note come to mind – the financing part and the down payment part of your question:
FINANCING: Fannie Mae and Freddie Mac will make it impossible to scale if you are doing conventional loans. It is true that the limit you on the amount of loans you can have with them, but you'll probably never get there because of "math". Fannie/Freddie require your DTI (Debt to Income Ratio) to be 43% or less (really the upper 40%s, but I'll simply state guidelines here). That means that if you divide your expense payments (mortgage principal, interest, taxes, insurance, HOA payment, auto loan, student loan payments, credit card payments, etc) by your gross monthly income, it needs to be at 43% or less (or at least in the 40%s). Here's the issue: Let's say that you make $1000/month in income. I know it's a ridiculous number, but go with me here for the sake of the example and easy math. Let's say your monthly payments equal $430. Your DTI = $430 / $1000 or 43%. Now let's say you find a great property that cash-flows a positive $200 per month. The rents you'll get are $1000/mo and your PITI + HOA is only $800/mo. Now let's do the math including that rental property. Your DTI now = ($430+$800) ($1000+$1000) = $1230/$2000 = 61.5%. You no longer qualify because of how they calculate cash flow. Enter, the DSCR loan. That is a commercial-style loan where we only look at the cash flow of the property. By not factoring in your personal income and only looking at the property income, you can do as many of those as you want…or at least have the down payment for…which leads me to…
DOWN PAYMENT: I had very little when I started, but I did have a strong lending background and a lot of old customers with money that had indicated that they would love to partner with me. I did have a partner when I first started and we formed an LLC. I had the knowledge and he had the $$$. That really helped me get going. I would have spun my wheels forever if I had not taken on a partner and been willing to give up some of my profit to get the equity capital.
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
Congratulations on purchasing your first investment property! I understand your desire to grow your portfolio quickly and efficiently. It is true that saving up for a down payment each year can be a slow process. However, there are several methods that successful real estate investors use to fund their investment properties.
Aside from the BRRR method, which can be a great way to cycle money and fund future projects, other common methods include utilizing creative financing options like seller financing or private lending, partnering with other investors to pool resources, and leveraging equity from existing properties. It is also important to have a solid understanding of the local real estate market and to continuously look for new investment opportunities.
Ultimately, it is essential to have a solid investment strategy and to work with experienced professionals such as a realtor and a financial advisor to ensure that you are making informed decisions that align with your long-term goals. Good luck on your investment journey!
- Real Estate Agent · Member since 2019 · 143 posts · 74 votes3y
Congratulations on your first property purchase! Building a real estate portfolio takes time and patience, so don't be discouraged by the slow process of saving up for down payments.
To answer your question, there are several ways to fund down payments for multiple properties. Here are a few strategies:
- House Hacking - This strategy involves buying a multi-unit property, living in one unit, and renting out the other units to generate income that can be used towards the down payment of future properties.
- Private Money Lending - Some investors borrow from private lenders to fund their down payments. Private lenders are individuals or companies that lend money to real estate investors in exchange for a fixed return on their investment.
- Joint Venture Partnerships - Another option is to partner with other investors to purchase properties. You can split the down payment and other costs with your partner, which can help you purchase more properties more quickly.
- Creative Financing - This includes strategies like seller financing, lease options, and subject-to financing. These methods involve negotiating creative financing terms with the seller of the property, allowing you to purchase the property with little or no money down.
- House Flipping - This strategy involves buying a distressed property, renovating it, and selling it for a profit. The profit can be used to fund the down payment on your next investment property.
Remember, it's important to do your due diligence and research each strategy thoroughly before deciding which one is right for you. Good luck with growing your real estate portfolio!
- San Diego, CA · Member since 2023 · 58 posts · 77 votes3y
Hey Ashwin! Your capital is going to go further in certain markets. There are areas where you only need $30k to close on a property. Of course, it still takes time to save up that capital, but it's a relatively small amount as far as real estate investments go. I would recommend researching markets that could be compatible with the current capital you have, or with what you expect to save up in the next 6 months.
- NH · Member since 2016 · 56 posts · 73 votes3y
Quote from @Doug Smith:
Two items of note come to mind – the financing part and the down payment part of your question:
FINANCING: Fannie Mae and Freddie Mac will make it impossible to scale if you are doing conventional loans. It is true that the limit you on the amount of loans you can have with them, but you'll probably never get there because of "math". Fannie/Freddie require your DTI (Debt to Income Ratio) to be 43% or less (really the upper 40%s, but I'll simply state guidelines here). That means that if you divide your expense payments (mortgage principal, interest, taxes, insurance, HOA payment, auto loan, student loan payments, credit card payments, etc) by your gross monthly income, it needs to be at 43% or less (or at least in the 40%s). Here's the issue: Let's say that you make $1000/month in income. I know it's a ridiculous number, but go with me here for the sake of the example and easy math. Let's say your monthly payments equal $430. Your DTI = $430 / $1000 or 43%. Now let's say you find a great property that cash-flows a positive $200 per month. The rents you'll get are $1000/mo and your PITI + HOA is only $800/mo. Now let's do the math including that rental property. Your DTI now = ($430+$800) ($1000+$1000) = $1230/$2000 = 61.5%. You no longer qualify because of how they calculate cash flow. Enter, the DSCR loan. That is a commercial-style loan where we only look at the cash flow of the property. By not factoring in your personal income and only looking at the property income, you can do as many of those as you want…or at least have the down payment for…which leads me to…
DOWN PAYMENT: I had very little when I started, but I did have a strong lending background and a lot of old customers with money that had indicated that they would love to partner with me. I did have a partner when I first started and we formed an LLC. I had the knowledge and he had the $$$. That really helped me get going. I would have spun my wheels forever if I had not taken on a partner and been willing to give up some of my profit to get the equity capital.
That's not how my lender(s) calculate w/ Fannie/Freddie guidelines. They go off the net K2 income from the properties and add it to the "Income" section.
- Member since 2019 · 38 posts · 45 votes3y
Quote from @Eliott Elias:
Using other peoples money.
Sorry man but seems like all your posts all read like this - short and not helpful. My favorite any time someone asks cash flow or appreciation.... "Get both!" What's the point of posting that? Oh I should buy 10 properties at once for 30% under market with 0 money down that both cash flow and appreciate 10%? Gee thanks.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Quote from @Devin Scott:
Quote from @Eliott Elias:
Using other peoples money.
Sorry man but seems like all your posts all read like this - short and not helpful. My favorite any time someone asks cash flow or appreciation.... "Get both!" What's the point of posting that? Oh I should buy 10 properties at once for 30% under market with 0 money down that both cash flow and appreciate 10%? Gee thanks.
Real estate is simple. I'm not here to feed into the analysis paralysis and over analyzation most posters have. Use other peoples money, next.
- Member since 2019 · 38 posts · 45 votes3y
Quote from @Eliott Elias:
Quote from @Devin Scott:
Quote from @Eliott Elias:
Using other peoples money.
Sorry man but seems like all your posts all read like this - short and not helpful. My favorite any time someone asks cash flow or appreciation.... "Get both!" What's the point of posting that? Oh I should buy 10 properties at once for 30% under market with 0 money down that both cash flow and appreciate 10%? Gee thanks.
Real estate is simple. I'm not here to feed into the analysis paralysis and over analyzation most of you have. Use other peoples money, next.
Then don't post. It's condescending as heck. You think people discussing these topics with a bit more depth than 'other people's money' is analysis paralysis? Yikes. And the irony of that being your 8,066th post for something so simple is not lost on me.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Quote from @Devin Scott:
Quote from @Eliott Elias:
Quote from @Devin Scott:
Quote from @Eliott Elias:
Using other peoples money.
Sorry man but seems like all your posts all read like this - short and not helpful. My favorite any time someone asks cash flow or appreciation.... "Get both!" What's the point of posting that? Oh I should buy 10 properties at once for 30% under market with 0 money down that both cash flow and appreciate 10%? Gee thanks.
Real estate is simple. I'm not here to feed into the analysis paralysis and over analyzation most of you have. Use other peoples money, next.
Then don't post. It's condescending as heck. You think people discussing these topics with a bit more depth than 'other people's money' is analysis paralysis? Yikes. And the irony of that being your 8,066th post for something so simple is not lost on me.
I apologize if simplicity is condescending to you. If my posts do not resonate with you, move on.
- Real Estate Agent · Member since 2019 · 569 posts · 257 votes3y
Quote from @Ashwin C.:
I recently purchased my first property (turnkey) using a conventional mortgage. After purchasing it, I realized that saving up for the down payment (25%) every year is going to be a really slow way to grow my portfolio but I see many investors buy multiple properties a year. How do you do it? How do you fund the down payment?
I understand that the BRRR method is one-way to cycle money and fund future projects but what are the other methods that people use?You will notice that the quickest way to scaling is through wholesaling, high income earner, flipper or builder. It helps us grow much quicker than holding long term because we scale up production in a shorter amount of time. I would only keep a property that us very hard to replace or bigger infrastructure that takes years to build.
- Member since 2020 · 239 posts · 104 votes3y
@Doug Smith that was an awesome example, are there any calculators out there or is it just a simple DTI calculator?
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes3yNot that we use. Many of my 32 years in lending I was a commercial lender for Wachovia and a couple of community banks, so you get used to it when you do it every day for that long.
Quote from @Mario Morales:
@Doug Smith that was an awesome example, are there any calculators out there or is it just a simple DTI calculator?
- Member since 2022 · 17 posts · 22 votes3y
Quote from @Nathan Gesner:
Quote from @Ashwin C.:
Some people make more money through their W-2 job.
Some inherit money from family.
Some create revenue through side-jobs or hustles.
People present real estate investing as soooo easy with nooooo money necessary! It's all BS. I saved up $10,000 to buy my first investment. I saved up $20,000 to buy my second investment. I realized I needed to make more money if I wanted to scale, so I figured out a way to make more money with my business and then invested that extra income into real estate. It took a couple years to buy my first three rentals, then I scaled to 33 rentals in three years because I hustled and saved. I also took every dime earned from my investments and re-invested it. I haven't bought anything since November 2021 and am currently in a season of rest and renovation.
There's nothing wrong with listening to what others are doing and trying to find ways to scale but be realistic. Some of those investors inherited money, others are high earners, and some just got lucky with their timing. The majority of wealthy people get there by making wise decisions over a long period of time.
So what changed that allowed you to buy 33 properties in 3 years in comparison to the initial 3 rentals?
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Ashwin C.:
I recently purchased my first property (turnkey) using a conventional mortgage. After purchasing it, I realized that saving up for the down payment (25%) every year is going to be a really slow way to grow my portfolio but I see many investors buy multiple properties a year. How do you do it? How do you fund the down payment?
I understand that the BRRR method is one-way to cycle money and fund future projects but what are the other methods that people use?Do you want to have 10 properties and $1000/mo from all total cash flows OR you want to have 2 or 3 properties that produce significant $200K-$300K every 2-3 years or so by means of BRRR/flips?
Sometimes "to scale" is to "minimize". These days I would just smile if someone says they have 999 doors in BP LOL :) why in the world do we need to scale up properties ? it's the end goal that matters (profitability).
Even someone that has no rental but have invested in 20 notes, probably have more 'equity' than the cash-flowing investor that has 2000 doors. - 3yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
@Ashwin Chidanand
I was able to get 12 properties with no out of pocket $ from cash out refis when my equity built up. It felt like I was buying houses for free since I wasn't using any out of pocket $. It took a few years to build up equity, and I put every cent I made off RE back into paying off rehab debt or the next deal. I bought another one with cash with a 401k loan. I took out a HELOC to buy a couple more. I got creative and found ways to scale up without using my own money. I got into RE 8 years ago with only 30k in savings to my name. I was able to scale up to 18 SFR by getting creative with finances to scale up. I'm bullish on RE over the next few decades due to low inventory. Find ways to acquire more properties. And never sell, unless it's a 1031 exchange to scale up!
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes3y
Quote from @Ashwin C.:
1. Mindset. I grew up just above the poverty line and didn't have a lot. College was for rich kids. My parents and all our relatives lived in mobile homes, drove beaters, and many of them never graduated high school. Owning my own home and a rental felt like I had achieved far more than I deserved. I couldn't imagine owning a ton of rentals or making $500,000 a year from rental income. I kept reading, listening to podcasts, networking, and one day it just hit me: I'm the one holding me back!
2. I worked hard to increase earnings, I told everyone and their brother that I was in the market for investment property, and I put every extra dime I could find into real estate.The DIY Landlord Book4.7248 Reviews - 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
Getting started is the key to successful investing. Start saving as much of your active income as possible and avoid using it on personal purchases. If needed, you can use your passive income for that. An excellent way to get some extra capital is to try a side hustle such as selling real estate or flipping a house or two. Real estate can be an incredibly lucrative option if done right, so take some time to research the market before getting started. Investing in real estate may not be easy, but with proper planning and hard work, it can bring great rewards. Good luck!
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes3y
@Ashwin C. The way I have seen it done and the way I recommend is through the 1031 exchange and multifamily investing. You do have to hold the property for a year and take rental income. I suggest investing in a cash flow market for reasonable prices like Kansas City, buy a fourplex for $400,000, then 1031 exchange in a year or so to 6-10 units depending on appreciation and what improvements you have done to the property. I have a case study of a gentlemen who owned 16 units and in less than 18 months turned it into a 95 unit apartment complex here in Kansas City.
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