Is there a better strategy than what I am currently doing?

Question

I still have a W2 income.  I use it to help with down payments along with my rental income.  I want to scale up faster even into retirement if I can handle the risk, but also want to do it alone.  It has been a slow process, but for the most part, I have properties in good locations and believe they will sell fairly fast if ever needed. I don't follow the rules like the 1% etc but made my wealth through little cash flow and appreciation over the years.  Here is what I have been doing.

Criteria/niche:  mostly turnkeys, sfh 3/2, locations in CA AZ NV. single story.  no pool, single story multiunit with minimum of 2/1 setup, near good school districts and close access to amenities, places that I will live in comfortably, and know personally, so these are a little more expensive.  I would like them as cheap as possible but the areas I buy in are around $500k to over a couple million.

What I do:  Downpayment for a property will be around 25 to 35% to make it break even or cashflow.  This can be very difficult as the houses cost more, From my last purchase, I am a few hundred negative a month with a 6.5% rate in 4/2025, but the other properties can cover the loss.  I bought this because it's in a rapidly growing area.  I always take into account property management, HOA, certain utilities, vacancy rates, possible appreciation etc towards making the purchase and if it makes sense, I'll purchase the property.

Is my investment strategy wrong?  There is no single correct answer just like "should you pay off your mortgage".  All my properties (12units) , are cash flowing except for the latest purchase, basically I am slowly snowballing.  I want to buy more, goal is over 20+ units, which is a minimum of $1.5 million in down payment.  but I am getting older, and I want to be more conservative. I have about 15years left for work should I decide to keep on working.

I can continue how I am doing it, about a new property every 2 to 3 years, appx 30% down on a $500k property, but I want to do it faster. I also I have considered doing 1031 exchanges for multiunits, but I like them in California, however the insurance situation is really preventing me from doing that.

Ultimately, they will all be paid off or close by the time I retire.  I will probably take money out of these places to reinvest, help pay for kids school loans, and of course enjoy retirement.

Thanks

Drew Sygit · Answer

Sounds like you're buying Class A properties which are low-risk, but as you are experiencing, don't cashflow without time or a large down payment.

Only ways to scale faster:1) Find partners2) Accept higher risk and invest in Class B or C3) Accept more risk by leveraging more & increasing negative cashflow

Drago Stanimirovic · Answer

Your strategy is solid—buying quality properties in strong markets with long-term appreciation is a proven path to wealth. You're not wrong at all, especially with 12 units and most cash-flowing.

That said, if you want to scale faster, consider leveraging more efficient financing. Instead of putting 30% down, DSCR or Fix & Hold loans could get you in for as little as 15–20% down, freeing up capital to buy more. Adding an occasional value-add or flip deal could also generate lump sums to reinvest.

You might also revisit 1031 exchanges, possibly into small multi-units outside of California to avoid the insurance issues and boost cash flow.

Dave Foster · Answer

@Mel Rosario, like you said, it's difficult to give a correct answer or know how local markets will perform in the future to provide further advice than whether this strategy fits your criteria and aligns with your future retirement goals.

However, there are plenty of ways you can utilize the 1031 exchange and indefinitely defer all of the tax and depreciation recapture when scaling up or down your RE portfolio. The 1031 allows you to move from any type of investment real estate anywhere in the US to any other type anywhere in the US,  and a 1031 gives you access to 100% of the equity instead of only 70-75% like a refinance.

Oftentimes, investors will do what we call a diversification exchange and sell large investment properties and reinvest the proceeds into multiple smaller investment properties tax-free, and even structure your next deal using a few of those strategies @Drew Sygit provided. Or you could go the opposite direction and sell several smaller properties and buy larger ones.

Bradley Buxton · Answer

@Mel Rosario

What do you feel like is slowing you down? Is it time, capital, risk...?  What's the rush to get more doors? If you're ready and looking for opportunity, then the deals are out there to buy until you're limited by capital or time to manage them.  Here in the Reno, NV market, there are more MF units on the market than in the last 10 years. lots of choices and deals to be made.

Is there a better strategy than what I am currently doing?

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