What is the fastest way to scale up as a real estate investor

Question

What is the fastest way to scale up as a real estate investor and create life changing passive/active income?

1) Was it investing into several single family homes, building up a successful track record and presenting similar opportunities to other seasonal and new 1st time investors?

2) Was it investing into 2-4 unit multi-family properties, while residing in one unit and financing with a FHA loan? Did that house hacking method allow you to build skills in property management/property maintenance and set you up for bigger multi-family investments down the road?

3) Did you start out with investing into a $1m to $10 m self-storage facility or 50+ unit multi-family with other entrepreneurs/business owners? Did you have wealthy people believe in you before or after college and finance your business like billionaire Ken Griffin?

Chris Seveney · Answer

@Robert Ruschak

Fastest way is not always the best way. Real estate is the long game not the short game.

There are people who get into real estate with buying rentals and 25 years later they have 100 doors and have a $10M portfolio and there are people who worked in real estate for 25 years and started their own portfolio five years ago and now manage $75M funds.

It’s not how fast or slow but doing it right or wrong. You can ask ten hypotheticals and ten people can say why one answer is better than the other but at end of day what it comes down to is understanding the risk and managing it.

The faster you learn that the better off you will be

Taylor Dasch · Answer

The fastest way to scale up would be to leverage other peoples money - banks, syndications, PML/HML and market to distressed sellers while keeping your profits competitive with other investors that you are competing against.  If you offer too low on every property you wont get as many deals as you could. Continue this and target bigger and better properties (MFH) add value / increase rents, then sell and scale and repeat.

I dont think that is very realistic unless you came into REI with knowledge on how to do these things. But I do think it would be the fastest way to create wealth.

I am purchasing SFH because it is helping me learn the market, ARV/adding value, Property Management, etc. Also This is less risky IMO because I am not leveraging as much $ ( Although I am a bit over leveraged currently). I do know that to reach my goal of FI, it would benefit me to scale up into MFH.  My plan is to use the 5 properties that I currently own to replace my W-2 income, then begin flipping SFRs with the goal of using Brandon Turners doubling method, The first year I'll buy a duplex, then quadplex, then 8plex or something similar.  Then, with experience in both SFH and MFH, I can make the decision to sell all of my SFHs and 1031 into an apartment complex which has been the goal since I began investing.

The biggest obstacle for me is that I am not exactly sure how to get market cap rates for a certain area as there is no data on sold apartment complexes that I can find, along with not having the funds and not knowing enough to bring a deal to someone who can provide the funds. I still have a lot to learn in the small multi family realm but after that I will dig deep into learning about apartment complexes for about 6 months then force myself to jump in!

Bruce Lynn · Answer

I would say for most people, but a single family and house hack....4 or 5 bedroom if you can....and if possible be willing to give up your bedroom for the couch or garage or a camper or something else if the right situation comes along.   If you can do this with zero down USDA loans, thats great, or potentially VA or FHA loans...and move every year.

Keep your W2 income coming in to scale faster and get better loans.

Steven Foster Wilson · Answer

The best thing for me has been writing down my goals and sticking to them. I have seen deals that would be good but not great, they did not aline with my goals. I started BRRRRing and have just continued to grow. When finances got hard, my wife and I just started to hustle even more. I think you got to see where you are at, what resources you have, and how can you use them.

Douglas Gratz · Answer

@Robert Ruschak

First off I do not think there is a quick way to scale unless your sitting on a big pile of cash, syndicate large deals, or find a grand slam deal which are few and far between

I was able to go from zero doors to 20 doors in 5 years by doing the following:

1. Buying duplex's and higher at auction, but first I got to know my marker so I can figure out the ARV's of the multi-fams I wanted to buy and rent out.

2. I would do my best to see how much work will need to be done on a house at auction that I am looking to buy so that I could know how high I could bid. For example in the market area I like, duplex's get appraised for 250-275k. So I would only buy properties where , I would be all in for $100,000. I would buy cash, rent it, and depending on the institution you use (mine required me to have the home for 6 months before I could refinance) and 6 months later, it would appraise for 250-275k and the bank would give me 175k cash and I would have a 1200 dollar mortgage. So with this strategy, in the end, I would end up with 75k in net profit, 75k in equity, and a rental property netting around 12-15k a year. RINSE, WASH, REPEAT! Once you are generating enough yearly income from your rentals, it will become easier to get loans.

3. With the 100k I just got back, I would use that to buy another rental, and hold onto the 75k net profit to try and grow my capital so that I could eventually afford quadplex's and higher that I would have to buy rather than get at auction. With the quadplex, I would fix it up, add coin operated washer/dryer and in doing so increase its value and then refi.  Most institutions only allow you to have 10 mortgages before you have to get a portfolio loan which is a loan that the lender keeps on their balance sheet as opposed to a regular mortgage where the issuing institution usually sells it on the secondary market. Another Pro to a portfolio loan is that the lender is making the general requirements, so they could be okay with a less than favorable debt/income ration, could be okay with lower credit scores, etc etc...In return you will probably have higher interest rates which is one the cons but by the time you have to get a portfolio loan in order to scale, you should be making enough to afford it.

Rates are around 6% give or take right now, so when they go down, if it makes sense , you can refi at a lower rate. 15 years down the road, 30 years down the road, these mortgages will be paid off and not only will you be generating profits from rent, but you will no longer owe money on the homes and have 100% equity in them. If you start young enough, by age 55-60 you will be making double net profits than you were when you had mortgages on the homes or you can refi them again and get alot of cash in your pocket to reinvest to retire and be set!

Leo R. · Answer

@Robert Ruschak as others have mentioned, scaling up quickly is not necessarily the best approach for a beginner (and in fact, it can come with some serious risks).

RE is just like anything else in the sense that you usually want to start off with the simplest, lowest-risk, easiest to learn strategy (like house hacking).  If you have no experience and you try to start off with a complicated, high risk, difficult to learn strategy (like syndicating a 300 unit portfolio), you'll probably crash and burn.

...sure, a strategy like syndication could allow some to scale up quickly (if they're a master syndicator), but if you're a beginning investor, you're probably not prepared to take on something like that.

Similarly, starting off with a $10 million self storage facility or 50+ unit multifam portfolio probably has a high likelihood of failure for an inexperienced investor (and the consequences of failing at that scale are pretty serious--e.g.; bankruptcy, and potentially losing a lot of other people's money and thereby ruining relationships in the process).

Beginning skiers should start off on beginner terrain. Beginning drivers should start off in an empty parking lot. Learn to walk before you try to win a gold medal in gymnastics. House hack a single fam house before you try to syndicate rehab flip a 500 unit portfolio.

House hacking single fam or small multi fam properties is an excellent, relatively simple strategy to get started in RE investing--and it will teach you some invaluable lessons that you can use in the future if you ever work your way up to more advanced strategies (like BRRR'ing). Moreover, there's a ton of good info and resources available to help you successfully house hack your first property (e.g.; BP podcasts, books, forum threads, etc.)

Good luck out there!

Bryan Devitt · Answer

Well, you start off with hitting the lottery. Then you buy a lot of apartment buildings that are value add. Take the biggest loans possible on them and just keep doing that until you have a jet. I don't know why everyone here hasn't done it yet. It is by far the best fast track to just being rich with minimal work and effort

Nicholas L. · Answer

@Robert Ruschak

you have some great responses in this thread.  After a few years of investing I've found that building equity is powerful, as David Greene has been pivoting to saying on some of the recent BP podcasts.

so whatever you're investing in - make sure you're building equity. this could be through value add, or mortgage paydown, or rent increases, or a combination.

Eliott Elias · Answer

The fastest way to scale up is finding GOOD DEALS! Nothing more nothing less

What is the fastest way to scale up as a real estate investor

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