Financially speaking, what is a realistic rate of pyramidization?

[Gary Dezoysa]

Hi, I'm planning on moving to Akron or Cleveland to begin my REI journey late this year. The plan is to focus on $40,000 homes in working class neighborhoods for Section 8 rentals.

I'm curious, on a pure financial basis, what is a realistic rate of pyramiding for homes in this range? I have about $10,000 saved and can save another $15,000 per year. I am interested in what the whole picture would look like, especially after the 1st house and before the 10th (because after that I will have a good list of private lenders and a system in place). 

Getting from house 1 to 2 and 3 is where I have the least clarity, since I hear you must wait 1 year before refinancing the 1st house. This seems to be a potential bottleneck.

Thanks

[Paul Choate]

I was able to buy one house per year for the first 4 years. After the 4th house, I was able to use the cash flow off the properties to accelerate my growth. The fifth year was 4 units because I was out there in the market and people knew I was an investor. I get deals now because of what I have done.

If you are going to be in the $40k market with light rehabs and your goal is growth, make sure your cash flow is high and you will need the BRRRR strategy to keep your cash moving on to the next one. I have also found commercial financing has different rules on seasoning. I have also found it is hard to get 100% back out. I think that is related to my market with little appreciation.

I chose to focus on fixers and forcing the appreciation. Even with that, I was not able to get much traction until I found private money. Last year was my 10th year and I added 30 properties with equity partners.

I found my growth to be the hockey stick type and not really an inverted pyramid. It takes time to build your base and gain the experience so don't get frustrated when it has been a few years and you are still so far from your goals. It can change quickly.