How to Build a Rental Portfolio That Nets $10K a Month

One of the most common questions I get is, “How can I replace my W-2 income with passive income from rental properties?”

Additionally, when I ask most investors what their goal is, 99 percent of people say they want to replace their active income from either a job or a business they own.

Up until recently, my response had been asking them about their risk tolerance, goals, timeframe, investment amount, and so on, and then making recommendations on property types, where to invest, etc.

The challenge was, I was spending a ton of time giving customized advice, and I was getting burnt out. I felt I wasn’t able to help as many people and something needed to change.

I needed a visual guide to share that allowed investors to come up with their own game plan based on some key metrics and something to reference when they were facing challenges in their journey.

Reflecting back on the investors I had helped who were netting over $10K per month, I wrote down the three most important priorities that were common themes for all:

Having the right mindset
Having a strategy for investing
Having the right connections

Nothing else mattered if those three priorities were not made a focus. For each priority, I came up with three strategies. I filled in the gaps by sharing my knowledge and experience with different investing strategies and all of my connections over the past 12 years.

Here’s the visual guide:

After putting all of this together, I presented it to a group of 70-plus investors, and their reactions blew me out of the water. A new level of clarity on where to start and what to focus on first helped many in this room take action.

I asked the group to share some of their challenges, and together we found the solutions to their roadblocks somewhere on my diagram.

Don’t have enough funds to invest? Time to get your financial house in order.

Not finding the kinds of deals that meet your criteria? Time to either rethink your investment strategy, build your deal pipeline, or go back to the drawing board on where to invest.

Having a hard time getting your spouse on board with investing? Look at attracting your tribe and spending time with other couples who have had success with investing.

I wanted to share with my community the three priorities and nine strategies in hopes that it helps you, too!

9 Strategies for Building a $10K-Per-Month Portfolio

1. Getting your financial house in order

Problem: Most investors do not get a long-term financing plan in place before they invest. They often run out of money or are unable to qualify for more properties.

Solution: By setting up the right financing strategy, you will be able to qualify and purchase multiple properties and get as many loans as you want.

2. Determine your criteria

Problem: It’s hard to identify the right properties if you don’t know what you’re looking for. A lack of clarity on criteria leads to frustration for investor-savvy agents and wastes time.

Solution: Start with your goals and work backward to arrive at your criteria. Make sure the markets you are searching in offer deals that can meet or exceed your criteria.

3. Create new habits to reach your goals

Problem: If you always do what you’ve always done, you’ll always get what you’ve always got.

Solutions: Think about the activities that need to become habits in order to build a passive income portfolio—activities such as analyzing deals every week, networking with other investors, and saving for investing are a few examples. Start scheduling those activities in your calendar.

4. Where to invest

Problem: Many people think out-of-state investing is risky, so they choose to either not invest at all or invest in their own backyard, which may not help them achieve their goals. Others are not sure where to start, what to look for, and how to pick a market.

Solution: You need to create your own criteria for where to invest. I personally use population growth, job growth, wage increases, crime rates, and price-to-rent ratio in my where to invest criteria.

5. Have multiple investing strategies

Problem: If you only have one investing strategy, you could miss out on otherwise great deals. Most people think it takes a lot of units to net $10K per month. In actuality, it doesn’t if you focus on investing strategies that generate the highest per-unit cash flow.

Solution: Having multiple investing strategies gives you an advantage over other investors. For example, the returns might not be very high on a duplex in a hot market, but if you convert the duplex to an adult family home or supported living, the returns might double.

6. Think like an asset manager

Problem: As a real estate investor, your highest and best use is finding new deals and increasing the returns on your existing portfolio. Yet many investors choose to do everything themselves—like renovate and manage—which can lead to burn out.

Solution: Put systems in place to leverage out the lowest dollar-per-hour tasks, and start thinking like an asset manager whose sole focus is to increase returns.

7. Consistent deal flow

Problem: I hear investors complain all the time: There are no good deals out there. Yet our investment-savvy agent network helped our investor community close 119 properties in 2019. The difference? We send at least 10 deals a week to our investor community.

Solution: Network, go to meetups, talk about investing with everyone you meet, build your own investor-savvy agent team, and make sure you are reviewing more than 10 deals a week.

8. Build a team of empire builders & empire protectors

Problem: No one succeeds alone, and real estate is a team sport. In addition to having people on your team who will help you build your empire, you need team members who will help protect it, like attorneys and CPAs.

Solution: The right team will help you achieve more than you can on your own.

9. Attract your tribe

Problem: As mentioned, no one succeeds alone, and there’s a chance that those closest to you may not understand your desire to invest in real estate and retire early. In fact, they may even try to talk you out of it.

Solution: If you’re serious about investing, you need to join a tribe of like-minded people on the same journey as you. They can be your sounding board, share resources and connections, and help you get where you’re trying to go.

Start building your real estate portfolio with BiggerPockets.

What roadblocks are you hitting in your investing journey? Questions for me?

Let’s talk in the comment section below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.