Hi, I'm not a seasoned investor, but I'm curious to understand how the portfolio scales. I assume you use your equity that has built up in one property to buy the next. But math would tell me that unless my house price appreciates, the equity being built per year isn't that much, if I get 500 let us say in cashflow and 10k in debt paydown. I don't have an infinite pool of money for downpayments either. So I can buy maybe 3 more properties before I spread myself too thin.
so is passive or active appreciation required for scaling a real estate portfolio? Hence limiting the places you can invest in?
@Shrey A. I don't believe appreciation is required, though both active and passive appreciation will help out. In my opinion, your savings rate will have a big influence on your ability to scale. I like how Brandon Turner explains the stack method. Start with a single family, the following year get a bigger SFH or a duplex, then the next year a triplex or even bigger SFH. Now you have 3 cash flowing assets and can afford even bigger investments. The idea is to also not let income creep get in the way and live a frugal lifestyle. If you work a day job, save as much as possible from that income source as well, so it is easier to afford the down payment. Just keep stacking and you'll be scaling. Even if it takes longer than a year for each property, you will eventually get there by being persistent and saving consistently. You can do it!!