Buying a new owner occupied rental every year?

[Sean Gammons]

Is buying a new owner occupied 2-4 unit multifamily property every year using 3-5% down payments a good strategy to scale?

[Steve K.]

This is a great strategy and our former primaries have become the best performing rentals in our portfolio. It's nice getting a better interest rate than an investment property, and putting less down. I also like how I know these properties much better than our properties that I've never lived in, making them easier for me to maintain, and while we're living there I can "tenant-proof" them. It's true that it's harder to find properties that will cash flow once you move out in higher cost of living areas, but overall returns make that a moot point in my opinion because appreciation is also much higher in these better locations. Rent appreciation also tends to be higher and cash flow tends to be much better over time as rents increase more steeply, but it may take several years to spin off positive cash flow as opposed to right away. Some of our properties that were cash flow negative initially now have the best cash flow thanks to rents going up in these great locations, and very little turnover, vacancy loss or tenant damage, etc. I'm not opposed to putting more down to increase cash flow also (COC return suffers of course and there's an opportunity cost to having that trapped equity but it can make sense in certain scenarios).