What's the best way to snow ball your REI portfolio? (Rental REI)

[Brian Dudash]

I've had a few discussions about the best way to create a plan in order to "snow ball" your way to owning many REI properties (buy and hold for rent).

After Googling around and even reading blogs on this site, I've thought about doing something like the following:

• Buy my first rental property (SFH) with cash (around $60-70k) where I'd expect about $500 cashflow per month
  • Currently I have about $105-110k available (after taking out an emergency fund)
• Then shortly after, buy my second rental property (SFH) but take out a mortgage and put down around 25% on a $60-70k house
  • The cash flow on this property specifically would likely break even (at or near 0) but this would be on a 15 year mortgage and I can use some (or most) of the cash flow from the first to help pay down that mortgage faster, along with my corporate job monthly savings too
  • I feel I could pay it off anywhere from 5 - 10 years depending on the exact strategy 
• If/When I get the 2nd one, then shortly after that, try and get a 3rd SFH rental property and continue this snow ball effect to build up by rental portfolio

Obviously this is easier said than done, along with risks and I honestly do not have any real experience with rental properties as this is my first time diving into this type of investing.

My main questions would be -- 

• Has anyone done a similar strategy to help build their portfolio quicker?
• What are some of the major pros / cons of this type of strategy?
• Has anyone taken the risk of buying a rental property with a mortgage (like 15 year), where your cash flow is at or close to break even?
• Any other tips / tricks / experiences are appreciated!

Thanks!

-Brian

[Anthony Gayden]

Originally posted by @Brian Dudash:

I've had a few discussions about the best way to create a plan in order to "snow ball" your way to owning many REI properties (buy and hold for rent).

After Googling around and even reading blogs on this site, I've thought about doing something like the following:

• Buy my first rental property (SFH) with cash (around $60-70k) where I'd expect about $500 cashflow per month
  • Currently I have about $105-110k available (after taking out an emergency fund)
• Then shortly after, buy my second rental property (SFH) but take out a mortgage and put down around 25% on a $60-70k house
  • The cash flow on this property specifically would likely break even (at or near 0) but this would be on a 15 year mortgage and I can use some (or most) of the cash flow from the first to help pay down that mortgage faster, along with my corporate job monthly savings too
  • I feel I could pay it off anywhere from 5 - 10 years depending on the exact strategy 
• If/When I get the 2nd one, then shortly after that, try and get a 3rd SFH rental property and continue this snow ball effect to build up by rental portfolio

Obviously this is easier said than done, along with risks and I honestly do not have any real experience with rental properties as this is my first time diving into this type of investing.

My main questions would be -- 

• Has anyone done a similar strategy to help build their portfolio quicker?
• What are some of the major pros / cons of this type of strategy?
• Has anyone taken the risk of buying a rental property with a mortgage (like 15 year), where your cash flow is at or close to break even?
• Any other tips / tricks / experiences are appreciated!

Thanks!

-Brian

 There are a ton of great ways to make your portfolio grow. 

I personally have been buying one property a year for the last 5 years. In order to do that without having access to huge sums of cash I had to use some more creative methods. While I do live in a lower cost real estate market, none of my properties is valued under $100,000. I invest both locally and long distance. I both self manage and use property management. 

Methods I have used include:

- House hacking - I lived in one unit of a 4 plex I bought using an FHA mortgage and 3.5% down payment

- BRRRR investing - I bought a house in rough shape, rehabbed it, did a cash out refinance, and rented it out, and repeated

- I bought a single family home, lived in it for 2 years then turned it into a rental

- I took three loans over the years from my 401K for the down payments on 3 of my houses

- I bought a 4 plex non-owner occupied using a conventional mortgage with 25% down, but over the course of 5 years it doubled in appraised value

I have one property with a 15 year mortgage and I break even every month with rent. The property is in a popular location so I have experienced significant appreciation since buying it and the debt pay down is great, but it will be the only property I buy with a 15 year mortgage. 

Paying off my properties to get cash flow is not my strategy. Instead I am looking to get cash flow immediately as well as appreciation long term.