How did you get your first 10 rental properties?

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How did you get your first 10 rental properties?

Tiana O.
Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes

Hey BP Fam, do you remember your first 10 rental properties?

As a newbie REI, I would love to hear more about your experiences starting out. I've set a 10 year goal for myself to acquire 50 rental units. As a shorter term goal, I want to get at least 10 rental units in the next 3 years (maybe a couple of SFHs and a couple of duplexes or 4-plexes). I've heard for new investors many banks require at least 2 years of rental income on your tax returns before they will allow only the rental unit by itself (not your debt-to-income ratio) to qualify for the investment mortgage. (Side note: has anyone been able to get around that 2 year requirement).

I'm looking for some anecdotal evidence on how realistic is my goal of 10 units in 3 years and 50 units in 10 years. Can anyone tell me how long it took for them to get their 10th deal, or 10th unit? Also, what did your first 10 deals or 10 units compose of (ex. Single family homes, duplexes, 4-plexes, larger multifamilies, apartments)?

Additionally, what strategies did you use to finance your first 10? (BRRR, hard money lenders, conventional mortgages, house-hacking, saving for 20-25% down each time, helocs, private equity firms, syndication, private lenders or investors, etc.)

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Jim C.
Investor · IN · Member since 2012 · 263 posts · 168 votes
9y

@Tiana O.- One at a time. Only concentrate on one at a time so you don't get frustrated or discouraged. Alot of newbies get overwhelmed and burnt out since they set lofty goals. When I started out, I didn't have a "number" but as the years went by they accumulated like rabbits. I look back now and say "Wow! How did I do that???" 

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  • Nick Watkins
    Investor · Jenison, MI · Member since 2016 · 158 posts · 79 votes
    9y

    Hi, my suggestion is listen to the podcast alot of older ones talk about this, and go to forums and read the success stories! 

    3Reply
  • Kyle McCorkel
    Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    9y

    @Tiana O.

    I have 8 units right now, acquired in the last 2 years.  Your goals are totally realistic.

    I think most people start by buying conventional on the first few deals.  Then they realize their money is running out, and they start looking for more creative strategies.

    If you are at the right time in life I think house hacking is by far the best way to get started. House hack a 4-plex with an FHA loan, it is probably the best thing you could do for your finances.

    My first 4 properties were financed through conventional loans with 20%-25% down payments. Now I am doing BRRRR financed with cash and HELOC's (from primary and 2 rental properties). I will be using a little bit of private money on the next deal, most likely.

    5Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y
    Originally posted by @Nick Watkins:

    Hi, my suggestion is listen to the podcast alot of older ones talk about this, and go to forums and read the success stories! 

     Thanks Nick. I listen to podcasts for hours every day. I think I can officially claim a BP podcast addiction. But, for me, it's also inspiring to hear more about people's first deals and how long it took them to scale to a larger portfolio. I like that BP has some newbie shows, but I would also love to hear directly from the BP Fam.

    0Reply
  • Jim C.
    Investor · IN · Member since 2012 · 263 posts · 168 votes
    9y

    @Tiana O.- One at a time. Only concentrate on one at a time so you don't get frustrated or discouraged. Alot of newbies get overwhelmed and burnt out since they set lofty goals. When I started out, I didn't have a "number" but as the years went by they accumulated like rabbits. I look back now and say "Wow! How did I do that???" 

    9Reply
  • Linda S.
    Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
    9y

    Hi @Tiana O.,

    We have 5 units right now, but we're only 9 months into the real estate, so I think 10 units sounds reasonable-- as long as you have the hustle, determination, patience and most importantly-- financing.

    We started out buying 2 duplexes in cash(personal loan and equity loan), did full renovations with credit cards, refinanced to buy the next (large SFH) one with home equity loan on the renovated duplex-- and finance the renovations with credit cards. Soon, we'll be getting a home equity loan on the house we're renovating to consolidate and pay off all the cards. Our strategy is only possible if you have a great credit score/excellent limits on the cards, and also-- my partner and I do 90% of the renovations ourselves. Once our units are rented-- we start looking for the next. Our strategy is VERY high risk/reward, and definitely not for the faint at heart.. I say from 1-10 skill level, we are a level 9. Once you get the ball rolling, each renovation gets easier and you learn from your mistakes, and you learn what works.

    Considering we'll be on our 6th rental this summer, and probably 7th in the winter, your strategy is possible, but just don't forget the insane amount of sacrifices you have to do.      I didn't go to the beach last year, I didn't go to any wineries, I missed out of birthday parties,  sleeping in is merely a dream.. it's a lot of sacrifices.

    Definitely agree with Kyle-- house hacking a fourplex is the smartest,easiest and fastest way to get there!! 

    4Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y
    Tiana O. Personally, I don't like a lot of "properties" but rather a lot of units. At least with commercial (5+ units) you have shared roofs, can market a little easier (create a "wait list"), less exterior maintenance per unit, etc. There are cons, don't get me wrong. But I also find the goal of "___ units" to be a bad one. You can probably get 10 units in a Detroit war zone tomorrow, you just won't make any money. Focus on getting free cash-flow, that way when you're doing pro-formas you can take into account things like depreciation, etc. when looking for after-tax income production. But to give you a general answer, it's using "regular" income for down payments and then "reloading" for the subsequent downpayment. No crazy newfangled plan here...
    3Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y
    Originally posted by @Kyle McCorkel:

    @Tiana O.

    I have 8 units right now, acquired in the last 2 years.  Your goals are totally realistic.

    I think most people start by buying conventional on the first few deals.  Then they realize their money is running out, and they start looking for more creative strategies.

    If you are at the right time in life I think house hacking is by far the best way to get started. House hack a 4-plex with an FHA loan, it is probably the best thing you could do for your finances.

    My first 4 properties were financed through conventional loans with 20%-25% down payments. Now I am doing BRRRR financed with cash and HELOC's (from primary and 2 rental properties). I will be using a little bit of private money on the next deal, most likely.

     Hey Kyle, it’s good to hear that you have been able to acquire so many properties in a short amount of time. That definitely gives me hope. I think I’m going to have to start searching some different rental markets. Where I am in the DC area, it’s hard to find properties low enough to acquire multiple. Baltimore on the other hand, has a ton (along with its own problems).

    I’m not sure the extent to which I can house hack. I’m already renting out rooms in my current home to some friends. If I can find a duplex or multifamily in DC to house hack, I’ll jump on it. But right now, I’m priced out of the DC market, and I’m not quite ready to move out of the city. I think I’m going to start looking at the Homepath or Homestyle loans pretty soon. Those seem like good options for buying fixers.

    1Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y
    Originally posted by @Jim C.:

    @Tiana O.- One at a time. Only concentrate on one at a time so you don't get frustrated or discouraged. Alot of newbies get overwhelmed and burnt out since they set lofty goals. When I started out, I didn't have a "number" but as the years went by they accumulated like rabbits. I look back now and say "Wow! How did I do that???" 

     That's good advice. I'm big on goal setting. I think it keeps me focused, but I definitely understand how that can lead to burn out.

    0Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    Hey @Linda S., 

    Wow. It seems like you all having been making great strides over the past year. I'm definitely not as hands on and skill savvy when it comes to renovations. I think my next move might be to look for some good contractors and possibly property managers that have good contacts, because that's not something I can do on my own. However, your story does give me some context on what's possible, and what my limitations might be in terms of scaling. Good luck with your 6th and 7th rental. I'm sure your sacrifice is going to pay off.

    1Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    @Andrew Johnson funny you mentioned Detroit, because I'm playing with the idea of moving my target rental market from the DC area (which is highly saturated, and has already appreciated) to Baltimore City (which probably has more C and D class neighborhoods, but with the right property manager can cash flow). I'm definitely open to the idea of house hacking 4 units, but I have no interest in leaving DC to owner-occupy a property in Baltimore. It's just too far from my work, friends, and family. In the up-and-coming parts of DC, 4 units go for $475 and still need $50k+ to get it up to code. For my first rental, I think I might be priced out.

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    9y

    @Tiana O. why 50 units? The quality an profitability of a deal are as important as the number of deals.

    5Reply
  • Account Closed
    Investor · Leander, TX · Member since 2016 · 296 posts · 402 votes
    9y

    Almost halfway there, so I'll let you know.

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Tiana O. I purchased 1 property in 2010 as a rental (93k 20% down taken from a HELOC and 80% loan from a bank). I didn't do any more real estate investing until 2014 when I purchased a commercial building with 12 offices (515k 20% loan from a family member and 80% small business loan from a bank). Since then we have secured more lines of credit and used them to acquire 3 duplexes and 6 SFRs. We have financing on each of these in one way or another.

    It is possible to reach your goals. Surrounding yourself with people who have high goals and constantly listening to positive podcasts and books will help you get there faster. At first my goal was just to flip 4 houses a year to make an additional 40k a year and then I went to a training with Robert Sheman and he talked about making a quantum goal (taking your goal and multiplying it exponentially). This is the same concept that Grant Cardon talks about in his book The 10X Rule. After that training we made the goal to flip 20 houses a year and acquire 4 rentals a year. Since then we expanded the rental goal to 10 rentals a year.

    So what I am saying is it is possible. It takes putting a system together and working hard. You got this.

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  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    9y

    Definitely following this as the stories should be pretty good.

    For me I'm only 3 units in right now.

    However starting this year I'm working with a partner now and we're looking at an 8 unit building and a 4 house portfolio right now as well as bringing more private lenders on board, so we are anticipating our growth over the next few years to be greatly increased.

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    1Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    Hey @Ned Carey, after doing some calculations I've found that a minimum of 50 units helps me reach my freedom number (if they cash flow like I want them to). Also, as you alluded to, it's not just 50 units in general, I'm looking for a bare minimum cash flow of at least $300 per door (of course, looking for higher returns) but at the very least to get out of the rat race that's the goal I'm shooting for. Although I'm really interested in getting my first rental to start my 2 year seasoning period as a landlord, I'm definitely running the numbers every time I come across a property. For my initial analysis I use tool created by Emily Du Plessis, which helps me figure out what I need in order to move forward. So I'm looking for a minimum 12%-15% ROI, and bare minimum $300 cash flow (although I'm way more comfortable with at least $400-$500). That final cash flow number for me takes into account most expenses that I can think of: PITI, 10% mgmt fees, Umbrella insurance, Home Warranty, and 10% Cap Ex savings, estimate 2 month vacancy rate for each unit each year, and it also assumes that tenants are paying the utilities (although there is a line for utilities in the property analysis tool that I use). I don't want to settle for quantity over quality, or even quality over quantity. Since I'm goal setting, I kind of want both; and I'm willing to put the time, effort, and analysis in to get to it.

    2Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    Good Luck @Account Closed looking forward to hearing your story soon!

    0Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    Hey @Shiloh Lundahl, when you use your HELOC, are you refinancing the rental to pay the HELOC off quickly, or just paying it down gradually.

    Also, I love this idea of the 10X Rule, I'm gonna have to grab that book when I get a chance. I've always lived by the notion, if you reach for the stars and don't make it, you'll at least be among the clouds. So that idea of multiplying your goal, to me, means that you'll easily hit your original goal en route to your BHAG (Big Hairy Audacious Goal). Also, if you dream big, you always have something to work towards. That's originally how I got to my first goal of 50 units. Originally, I just wanted enough units to replace my current income, but then I thought, why don't I double that just to be safe. And once I doubled that goal, I began to wonder if it can be done (hence this thread).

    0Reply
  • Tiana O.
    OP
    Real Estate Consultant · Washington, DC · Member since 2017 · 34 posts · 27 votes
    9y

    Hey @James Masotti, congrats on your first 3 out of many. How did you find your partner? Was it someone you already knew?

    0Reply
  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Tiana O.Either way works. I believe I refinanced the properties but not to pay off the HELOC. I continue to use the HELOC money to flip properties and I just pay the monthly payment out of the profits from flipping. I don't know if my goal is ever to pay it off because it is one of my lowest interest rate loans. I like to use the lowest rate loans before I get to higher rate loans.

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    9y

    @Tiana O. Also, The 10X Rule is great as an audio such as on audible because the author, Grant Cardon, reads it in the way he wants you to hear it. So I would recommend the audiobook.

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  • Lee S.
    Northern, CA · Member since 2014 · 674 posts · 444 votes
    9y

    It's great to set a goal but like mentioned above be careful not to let it discourage you if you feel like you're falling behind schedule.  I did my first two in the past 12 months but there is more to making progress than just the units.  I spent a lot of time lining up as many financing options as I could so when the deals show up I'm ready to go.  I also established relationships with contractors etc.

    I've got my own number and I know as long as I keep working every day I'll get there as quickly as I can.  At the same time I'm patient, I'm not going to buy just to buy, I want deals and will only buy at a discount.  I believe this strategy will get you there much quicker than doing the conventional loans with the 25% down payment that is then stuck in the property for years.

    One pet peeve of mine however is discussing REI in terms of units instead of $ value. I have 2, but had I been doing the same thing in most other parts of the country I would have 5-10 units for same value.

    3Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    9y

    My 2nd purchase yr 1 was a 10 unit mixed-use from a bank.  Some say I was lucky - right place, right time.  If you are out there in the market all the time, guess what happens to your odds of being in the right place at the right time?   That's not me anymore, but it sure used to be.

    REI ebbs and flows. It comes in waves, followed by droughts. I may acquire 8 solids in one year, followed by nada for 3 years. Stick to your numbers and never force a deal just to hit a goal.

    Be careful not to give up right at 10, or at only 2.  The next wave may come unexpectedly. If I had stopped yr 1 after the 10 unit, I would have missed 23 more solids over the next 3 years. Then a 4 year drought. Now I'm more on the sell side.

    Like @Lee S. mentions, have lenders, contractors and other vendors in place, ready to go.  Be in the market always. It's quite a ride!

    1Reply
  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    9y
    Originally posted by @Tiana O.:

    Hey @James Masotti, congrats on your first 3 out of many. How did you find your partner? Was it someone you already knew?

     Correct. A friend of 20 years who started out as a private lender. We've got bigger plans for the business that we feel partnering will better enable us to achieve. 

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  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    9y
    Originally posted by @Shiloh Lundahl:

    @Tiana O. Also, The 10X Rule is great as an audio such as on audible because the author, Grant Cardon, reads it in the way he wants you to hear it. So I would recommend the audiobook.

     Couldn't agree more. I did 10X on Audible and listening to Grant read it definitely adds a lot to the experience. 

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  • Justin B.
    Investor · Gaithersburg, MD · Member since 2013 · 659 posts · 441 votes
    9y

    It took my about 4 years to get my first 10 units (all SFR's). The first 2 years of that was just 2 properties. I had to look for those first ~5, after that, from various points, they kind of just came to me. Referrals, REO lists, etc. Everything I've bought since about unit 5 or 6, I haven't had to "look" for them.

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