From 0 to 10 Rentals in 5 Years: How To Quickly Scale Your Real Estate Portfolio

The first rental property I ever bought earned me about $50 a month in cash flow. This is after all expenses, vacancies, and loan payments had been accounted for–not exactly something to brag about. And with that, came tenants from hell and all kinds of horror stories.

But I believed in the power of real estate for wealth-building, appreciation, and long-term cash flow. So, I carried on. Looking back, all things considered, it was actually a pretty good deal—maybe one of the best I’ve ever done!

Still, I quickly figured out that owning two or three of these properties would NOT allow me to retire anytime soon. A rough estimate indicated it would take about 90–100 similar rental properties to generate what I considered to be “meaningful passive income.”

As you can probably imagine, I was a bit depressed by those numbers. It had taken me six months and a lot of effort just to buy the property. How in the world was I going to get 99 more?

Not to mention, did I even want 99 more?! Certainly not. So far, real estate hadn’t treated me well. But here I am today—a full-time real estate investor, who wouldn’t trade it for the world. The learning curve was tough. However, by sharing my lessons learned, I can make it much less tough on you.

Here’s what you need to know to fast-track your real estate acquisitions and achieve success as a real estate investor sooner rather than later.

The Challenges of Buying Rental Properties

Early on in my real estate investing career, I realized that there were two primary factors that were
limiting the growth of my real estate portfolio:

  • The cash I had available to fund more deals, and
  • My ability to get additional financing.

Thanks to this realization, I spent the next four years doing my best to overcome both challenges. Fifteen years later, I was able to achieve my primary goal of having my rental income equal the salary I was earning at my previous full-time job.

To get there, I didn’t use creative financing, I didn’t have any partners or syndicates, and I did just one “no-money-down” deal, which was my first purchase. Instead, all I did was focus on maximizing the cash I had available to invest. I also looked for additional sources of financing beyond conventional mortgages.

(As a disclaimer, I don’t have anything against putting together creative real estate deals. I do think they can be used by pretty much anybody to buy 10 (or more) rental properties in a span of five years. I just want to share some tips that helped me grow my portfolio without them.)

How Much Cash Do You Need to Buy Rental Properties?

Most conventional financing arrangements will require putting down at least some of your own cash up front. So, the money you have available to invest will limit how many rental properties you can buy, as well as when you are able to buy them.

To maximize the cash I had available, I focused on growing my primary income. Here’s how.

  • I maximized my income from my full-time job.
  • I took on any side-hustles that came my way.
  • I channeled any additional income directly into buying more real estate.
  • I lived a frugal lifestyle—no luxury homes, flashy cars, exotic vacations, or other expensive habits.
  • I house hacked for over 12 years, thus reducing my housing and living costs.

Throughout the years, I’ve maintained a consistent savings rate of 20–30%. Combined with maximizing my income, this resulted in significant savings. And whenever possible, I re-invested most of my rental income.

Since buying my first investment property, I have tried to be incredibly careful how I deployed the income my rental properties generated. While I was working my day job, I saved most of my rental income and lived off my salary. I combined my rental profits with my personal savings and used it to fund intelligent property purchases.

By intelligent, I mean I focused on buying reasonably priced properties in the path of growth. I also aimed to purchase homes where I could add value. In that, I forced equity. This largely entailed increasing bedroom counts to increase cash flow potential.

I also bought properties that had appreciation potential. This is not possible everywhere, of course. But I was able to do so by knowing my numbers, developing buying criteria, and being very strategic about what I bought and where.

At first, my personal savings were the biggest contributor to how quickly I was able to save for the next property purchase. Over time, however, the passive income generated from my rental portfolio caught up. Then, I used it to fast-track the bulk of my portfolio growth.

As a bonus, if I owned a few properties for a number of years and their prices had appreciated, I started re-financing them to withdraw the additional equity. I also obtained HELOCs to fund acquisitions. From my perspective, any equity in my existing properties is basically “dead money.” If I’m not able to use it to buy more property, what’s the point?

Rental Property Financing 101: How To Finance Real Estate Investments

Another limiting factor in growing your real estate portfolio will always be financing. It’s simple: If you can’t get a loan, you can’t buy property. (Well, you can buy it with cash, but it will slow down your wealth generation.)

New investors naturally rely on conventional, 30-year loans to buy rental properties. These are perfectly fine since government-backed mortgages often have the best rates and the longest terms (aka amortization periods) of anything you’ll find elsewhere.

The problem is that due to their rather strict debt-to-income requirements and other regulations, you will (in many cases) max out at around 10 loans. After that, most banks will simply refuse to give you a new mortgage. So, what then?

What If You Max Out Your Financing?

One thing that helped my wife and me is to buy our rental properties separately, under our own personal names, instead of under a joint title. This is possible where we live; consult the appropriate parties in your state to learn more about the rules where you live or invest.

By investing in rental properties separately, my wife and I were able to double our conventional mortgage limit compared to if we were buying together. Of course, we will still max out at some point—but not until much later. When we’re approaching this point, it will be time to look for alternative solutions.

Other options I recommend looking into include:

  • Commercial loans: There are hundreds of banks across the country that offer commercial loans. Rates, terms, and requirements vary. Ask questions and develop relationships.
  • Portfolio loans: Portfolio loans are much more flexible than conventional mortgages and the terms depend on the lender. You can often use these to finance single-family homes or entire “packages” of properties. To find these, do research online or network with other investors. But once you establish a relationship with a portfolio lender, it will open up nearly unlimited financing options.

Still more methods of financing property purchases include seller financing and private money. However, I suggest sticking with conventional mortgages as long as you can before looking for alternative financing options.

Is It Actually Possible To Scale Your Investment Portfolio Quickly?

Is buying 10-plus rentals in five years even possible? Yes! Many investors have done so. But it’s unlikely many of them would tell you it was easy.

It requires work. Often, it also takes sacrifice, such as living a more frugal lifestyle. The fact is, it’s achievable if you put your mind to it. Your trajectory might look something like this.

  • To start: You buy a single rental property.
  • After 1 year: You buy a second.
  • Years 2, 3 & 4: You buy two more each year.
  • Year 5: You buy three more. Boom!

The Bottom Line

How fast you can grow your portfolio will hinge on two things. First, it will depend on your ability to maximize your available cash while minimizing the cash needed for each deal. And second, it will depend on securing additional sources of financing. Master these elements, and you’ll be well on your way.

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