Best way to grow your portfolio of properties? Am I going about it wrong?

[Felipe A.]

Hello!  I'm a new RE investor and my strategy is buy/hold specifically in single and small multi family.  I'm working on business plan and long term strategy (1 year, 2 year, 5 year, 10 year out) and after using a cash flow calculator (Excel) in working out some scenarios, I'm wondering if I'm on the right track.  What is the best way to grow your portfolio assuming going the standard way of financing (20-25% down)?  

To keep things simple, let's say I'm considering 2 similar small single family units that cost $100k each.  Certain assumptions I'm making ...1.3% rent to purchase price rule, 50% operating expense.  In this scenario, cap rate in the 2-3% range and cash on cash return is in the 10-12% range.

Based on this scenario, I plan to take the cash flow proceeds from both properties into property 1's note to pay it down and my payment calculator calculates note fully paid in about 6 years.  Then, I'd take all the proceeds from property 1 and property 2 and apply to property 2's note.  The calculator says I'd pay #2 off in about 10 years.  So, 2 properties owned free and clear in 10 years.  After that, wash and rinse with 2 more properties.

Sounds great?  Sure, but all that time, my cash was tied up in these 2 properties and I'm not taking into account anything out of the ordinary like capex repairs, etc.  Is this the strategy for growth in a portfolio?  Or is the answer, "Felipe, you gotta use other people's money to buy more properties - economies of scale"?  Looking for guidance on this!

Thanks in advance!