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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  • David Zheng
    Investor · Saint Louis, MO · Member since 2016 · 970 posts · 1k+ votes
    9y

    I have a 70k salary and started investing in Dec. 2015. when I first started, I thought I might be able to buy one property a year and hoped to get 10 by year 10 based on DTI, income, etc.

    Fast forward 1 year and 3 months later and I own over 14 units.

    Its crazy what you can get if you put the time and energy into it. Do a TON of reading. pitch pitch pitch. tenants, lenders, sellers, agents, everyone

    and in terms of qualifying rental income. call around I usually call 20-30 banks/lenders per property before one bites. they will usually take 75% of gross income to offset your DITI if you are under 2 years

    7Reply
  • Scott F.
    Rental Property Investor · Grand Rapids, MI · Member since 2017 · 113 posts · 91 votes
    9y

    @Tina O.

    Great goal for certain, however if cash flow is your ultimate goal, perhaps you should approach it a bit slower.

    Live on nothing, pay down your debt, and in a short time it will start to snowball. At first it will be like watching paint dry – slow and boring, but for every free and clear property it will be like having two or three with mortgages.

    I grew very fast years ago and I can still remember saying I’d rather have 10 free and clear properties than all of the ones that I owed money on. Well I got there (F&C), now we pay cash grow slower but sleep better. Don’t feel bad I’ve been on both sides of the coin.

    Good luck!

    2Reply
  • Anastasia Jordan
    Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes
    9y

    How are we defining the number 10? Is a duplex considered 1 unit or 2? And if you are living in one of your rentals does that count?

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y

    @Tiana O. it is important to quantify your goals in money terms rather than units, so focusing on your $300 per door is important. Often newbies think of units (doors) as meaning money or status. I call it the more doors is better mentality. I started out like this too. In my first year, I purchased a duplex, single family home and 6 unit apartment with two commercial spaces. I had lots of doors and that means lots of tenants. Over time I changed my focus and I now have 8 nice single family homes. Today I have less units, but my total cash flow and net value is considerably higher. 

    I am not suggesting my path is the right one for you, but rather pointing out that quantity of doors is not as important as cash flow. I like your detailed plan minus the house warranties!

    My best advice to you is purchase one property as soon as possible. So many people spend years planning their goals and never buy a single property. Even if the first deal isn't perfect, it will have the psychological effect of jump starting your investing career.

    3Reply
  • Brandon Brown
    Rental Property Investor · Nashville, TN · Member since 2015 · 102 posts · 129 votes
    9y

    @Tiana O.  

    I currently have 2 units in the hot Nashville market. I acquired an excellent deal (house hacked a duplex using FHA) and added value. After improvements these units cash flow very well (~$400/door). Before my first deal the goal was ____ units/year (fill in the blank). With the Nashville market appreciating rapidly, I was priced out of some so called "deals". During this time I have had time to assess and clarify my investment strategy. Now my goals are in terms of money and time. I am now strictly focused on value add opportunities in places where people want to live, deals that have a higher intrinsic value.  Since I'm not jumping on every "deal" available I have been able to save a good 20% down payment.  My market is pretty high right now but I live here and this where I feel comfortable investing.  Hope this helps.

    0Reply
  • Michael Henry
    Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
    9y

    When starting off people don't take you seriously, so it is harder to find good deals but as you become known as a closer people call you to close deals. The normal cycle of becoming an established investor. 

    1Reply
  • Rolanda Eldridge
    Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
    9y

    @Tiana O...I purchased the first 3 move in Ready(ouch) the first year.  After, only fixxer uppers, right when the market crashed..Great deals with less competition, YAAASSS!  Find ways to keep doing deals...GL

    0Reply
  • Amit Kal
    Investor · Sunnyside, Queens, NY · Member since 2015 · 213 posts · 159 votes
    9y

    @Tiana O. It took me 5 years to get to 10 units. 

    Year 1 I purchased a 6 unit building in Queens, NYC for 850k. 250k cash (from savings) down + a 15-year conventional fixed-rate loan against my primary residence to purchase it in cash - it was bringing in $6900 in rents at the time. Spent the next two years plus another 200k cash (from savings) re-positioning the building (moving out low paying tenants, renovating, etc.) and have gotten the rents now up to $10,500. Value of the building (six years since purchase) is conservatively now $1.4m

    Year 5 - with the 6 unit under my belt and saving, saving, saving from my W2 day job, I partnered up with a buddy and went halfsies on two duplexes out of state (Nashville, TN); 25% down on each, conventional fixed-rate 30 year loans on each. That kind brought me to ten units.

    Now in Year 6 I've kept it going and picked up another four units out there with my buddy (14 units), and a duplex on my own (16 units). Definitely feeling the snowball affect with the rental income now - we have enough in the bank account to put down 25% and move on another duplex with maybe only 5-10k each out of pocket to close/renovate. 

    Goal now is to pick up 6-10 units a year for the next few years. 

    4Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    Great thread and a lot of very useful information and perspectives here. It seems there are a lot of people with 10, 20, 30, 50, 100 properties. I'm assuming once you reach a certain level you have to hire an outside company to manage and oversee your whole portfolio? I can't imagine someone managing that those types of quantities of properties single handed.

    0Reply
  • Remus Phillips
    Investor · Bowie, MD · Member since 2017 · 47 posts · 8 votes
    9y

    so I'm new to BP.  What does house hack mean?

    0Reply
  • Remus Phillips
    Investor · Bowie, MD · Member since 2017 · 47 posts · 8 votes
    9y

    @Amit Kal that's a lot of cash you got saved up. 250k cash??

    0Reply
  • Amit Kal
    Investor · Sunnyside, Queens, NY · Member since 2015 · 213 posts · 159 votes
    9y

    @Remus Phillips yes. Been working in corporate america for 18 years. Compounding is amazing 

    1Reply
  • Joshua D.
    Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
    9y

    @Joe Splitrock

    I am so with you on this one! When I started 4 years ago the goal was doors, I felt like it meant I had status.

    In Montana the big thing is Cows... How many cows do you have???  One guy might have 800 and barely making the payments... other guy has 150 and is doing just fine. Not to mention the workload.

    I keep seeing new folks on BP setting crazy goals like owning 100 units or even 1000. I love that they set big goals, but come on set cash-flow and equity goals not unit goals. You get what you aim at. 

    Last fall I had the option to break the 10 unit threshold. After a few weeks of hard thinking during this time caused me to reconsider, my whole goals in real-estate shifted.  Its not about units its about cash-flow and equity gain. 

    I would do rather have 1 unit that creates $5000 a month income than 15 units that create the exact same amount. WAY less work, for the same reward (assuming all things are equal) 

    As s result we have shifted our portfolio around so that we have less units now, more cash and cash flow, and are in a much better place to be in the path of appreciation. (3bed 2 bath homes) rather than ODD non conforming triplexes)  In our area a GREAT deal on a house cash-flows just as good as the triplex with way less work. 

    rant over

    3Reply
  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Joshua D.:

    @Joe Splitrock

    I am so with you on this one! When I started 4 years ago the goal was doors, I felt like it meant I had status.

    In Montana the big thing is Cows... How many cows do you have???  One guy might have 800 and barely making the payments... other guy has 150 and is doing just fine. Not to mention the workload.

    I keep seeing new folks on BP setting crazy goals like owning 100 units or even 1000. I love that they set big goals, but come on set cash-flow and equity goals not unit goals. You get what you aim at. 

    Last fall I had the option to break the 10 unit threshold. After a few weeks of hard thinking during this time caused me to reconsider, my whole goals in real-estate shifted.  Its not about units its about cash-flow and equity gain. 

    I would do rather have 1 unit that creates $5000 a month income than 15 units that create the exact same amount. WAY less work, for the same reward (assuming all things are equal) 

    As s result we have shifted our portfolio around so that we have less units now, more cash and cash flow, and are in a much better place to be in the path of appreciation. (3bed 2 bath homes) rather than ODD non conforming triplexes)  In our area a GREAT deal on a house cash-flows just as good as the triplex with way less work. 

    rant over

     And way more appreciation too!

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

    When starting off people don't take you seriously, so it is harder to find good deals but as you become known as a closer people call you to close deals. The normal cycle of becoming an established investor. 

     Too true! Can't wait to close my next few deals. The banks are really beating me up on rate and term due to how small my portfolio is right now.

    Podcast Guest on Show #312
    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Brian Garrett:
    Originally posted by @Joshua D.:

    @Joe Splitrock

    I am so with you on this one! When I started 4 years ago the goal was doors, I felt like it meant I had status.

    In Montana the big thing is Cows... How many cows do you have???  One guy might have 800 and barely making the payments... other guy has 150 and is doing just fine. Not to mention the workload.

    I keep seeing new folks on BP setting crazy goals like owning 100 units or even 1000. I love that they set big goals, but come on set cash-flow and equity goals not unit goals. You get what you aim at. 

    Last fall I had the option to break the 10 unit threshold. After a few weeks of hard thinking during this time caused me to reconsider, my whole goals in real-estate shifted.  Its not about units its about cash-flow and equity gain. 

    I would do rather have 1 unit that creates $5000 a month income than 15 units that create the exact same amount. WAY less work, for the same reward (assuming all things are equal) 

    As s result we have shifted our portfolio around so that we have less units now, more cash and cash flow, and are in a much better place to be in the path of appreciation. (3bed 2 bath homes) rather than ODD non conforming triplexes)  In our area a GREAT deal on a house cash-flows just as good as the triplex with way less work. 

    rant over

     And way more appreciation too!

    You guys are both spot on. Sometimes I see investors from California buying 10 cheap houses half way across the country and wonder why they don't just buy a nice duplex close to home. If they think that those cheap houses will appreciate the same way California real estate does, then they forgot the first rule of real estate. Location, location, location.

    2Reply
  • Scott F.
    Rental Property Investor · Grand Rapids, MI · Member since 2017 · 113 posts · 91 votes
    9y

    @Tina O,

    @Joe Splitrock and I have the same thought process – common sense: based on years of learning from mistakes and then correcting the process!

    1Reply
  • David Sidharta
    Rochester, MI · Member since 2017 · 7 posts · 0 votes
    9y
    Great discussion. I am newbie & would like to invest my first rental property (5+ units?). Anyone can help how to start? Still not understand a thing including how to calculate cash flow. Thx
    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    9y

    @Tiana O. it sounds like you have a well thought out plan. Good luck to you.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Remus Phillips:

    so I'm new to BP.  What does house hack mean?

    It would take you about 5 minutes to search and find an answer to this question. If you are not resourceful enough to answer this question, then real estate is far too complicated for you. I am not trying to sound cruel, but rather saving you from getting in over your head.

    1Reply
  • Remus Phillips
    Investor · Bowie, MD · Member since 2017 · 47 posts · 8 votes
    9y

    @Joe Splitrock seriously????  Oh....you're from SD...never mind.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @David Sidharta:

    Great discussion. I am newbie & would like to invest my first rental property (5+ units?). Anyone can help how to start? Still not understand a thing including how to calculate cash flow. Thx

    There are free forms on this website that show you how to calculate cash flow. You will need to spend time educating yourself. As far as buying a 5+ unit, my recommendation is to start with a 4 plex or smaller. You can get conventional financing on a 4 plex which means longer term and lower interest rate.

    1Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    9y
    Originally posted by @Remus Phillips:

    @Joe Splitrock seriously????  Oh....you're from SD...never mind.

    I see the level of maturity we are dealing with. I will hold your hand on this one. Go to the little box in the upper right hand corner of the page that says Search BiggerPockets. Type house hacking and there is pages of results. You can read for hours on this one subject. It works a lot like the web page called Google. Google is also a search tool but it searches the entire internet.

    2Reply
  • Scott F.
    Rental Property Investor · Grand Rapids, MI · Member since 2017 · 113 posts · 91 votes
    9y

    @Remus Phillips

    Ok guys, everyone started with their first property and didn’t know squat on what to do (unless you had a mentor, a friend that had a property or were self-confident).

    Remus, read many, many BP posts, watch the BP videos, use the BP forms and calculators. Pick up and read 5-10 books on the subject and then you should have the confidence and knowledge to move forward. If not, then as @Joe Splitrock said you may want to look at an alternative investment. Or spend time tagging along with a local LL working for free to learn the business.

    After many years in the residential side, I worked for free with a LL to learn the Industrial Properties side of the business. I ended up with 490,000 sq. ft. of commercial and industrial, working for free paid off for me!

    2Reply
  • Remus Phillips
    Investor · Bowie, MD · Member since 2017 · 47 posts · 8 votes
    9y

    @Joe Splitrock not to be rude, but your assumption that just because I thought it easier to ask rather than search myself I must be in over my head is ridiculous and judgmental.  You have no idea what I have done, was doing at the time I posted that, what I do for a living---to reach the asinine assumption you have reached.  This is the type of thinking that birth prejudices.  In the time you have typed these two messages you could have easily gave a quick answer then refer me to where I could get the answer myself.  That would have been kind.  That would have been friendly.  That would have been helpful.  But no. What did you do?  You revert to assuming the worst--and even more, you revert to posting an offensive post.

    0Reply
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