How to Buy 10+ Rental Properties in the Next 5 Years

The first rental property I ever bought earned me about $250/month in cash flow after all expenses, vacancies and loan payments have been accounted for.

All things considered, it was actually a pretty good deal, but I quickly figured out that owning 2 or 3 of these properties would NOT be enough to retire on.

I did some rough estimates and came to the conclusion that it would take about 40 – 50 rental properties to generate, what I considered to be “meaningful passive income” (somewhere in the $150 – $200k a year range).

And as you can probably imagine, I was a bit depressed by those numbers.

It took me 6 months and A LOT of effort just to buy one single property, so how in the world was I going to get 49 more?

Where the Challenge Comes From

Early on in my real estate investing career, one of my mentors gave me this bit of wisdom:

The growth of your real estate portfolio will always be limited by two primary factors:

  1. Availability of cash required to fund more deals

  2. Your ability to get additional financing

This realization really clicked with me at the time and I spent the next 4 years doing my best to overcome both challenges.

I think I was pretty successful. My wife and I now own a portfolio of 35 rental units spread out across California, Georgia, Alabama and Missouri.

To get there, I didn’t use creative financing, I didn’t have any partners or syndicates (besides my wife), and I didn’t do any of those “no-money down” deals.

All I really did was focus on maximizing the cash I had available to invest, and I looked for additional sources of financing beyond conventional mortgages.

As a disclaimer, I don’t have anything against putting together more creative real estate deals. I just want to share some tips that helped me grow my portfolio without them.

I think they can be effectively used by pretty much anybody to buy 10 (or even more) rental properties in a timespan of 5 years.

How to Maximize Your Available Cash

Most conventional financing arrangements will require you to put down at least some of your own cash into each real estate transaction.

So the cash you have available to invest will effectively limit how many rental properties you can buy and how often.

This is what I did to maximize the cash I had available:

  • I focused on growing my primary income. I’m not into flipping houses or wholesaling deals (nothing against this, just not my thing). Instead, I focused on maximizing my income from my full-time job and my various business endeavors. Any additional income I received was channeled directly into buying more real estate.
  • I lived a frugal lifestyle. I’m not into flashy homes, cars, exotic vacations or other expensive habits. Don’t get me wrong, I like to indulge every once in a while, but throughout the years, I’ve maintained a consistent savings rate of over 70%. Combined with maximizing my income, this resulted in significant savings.
  • I re-invested 100% of my rental income. Since buying my first investment property, I have not touched $1 of the rental income it generates. I saved it all, combined it with my personal savings and used it to fund more property purchases.
  • I focused on buying cheaper properties. As I was growing my portfolio, I focused on buying properties in the $65k – $85k per unit range. This was not possible in my local market (San Diego), so I started investing in the mid-west instead.

At first, my personal savings were the biggest contributor to how quickly I was able to save for the next property purchase.

RELATED: The Surprisingly Simple Math to Retiring On Real Estate

Over time, however, the passive income generated from my rental portfolio caught up and eventually became responsible for the bulk of the growth.

As a bonus, once I owned a few properties for a number of years and their prices had appreciated, I started re-financing them to withdraw the additional equity I now have.

Any equity in my existing properties is basically “dead money” that I can’t use to buy more properties, so I have not need for it at this point.

How to Get Continuous Financing

The second limiting factor to growing your real estate portfolio will always be financing. It’s quite simple – if you can’t get a loan, you can’t buy the property (unless you buy it cash, which will actually slow down your growth).

New investors naturally rely on conventional, 30-year loans to buy rental properties. Which is perfectly fine, since these government-backed mortgages often have the best rates and the longest terms/amortization periods of anything you’ll find elsewhere.

The problem is that due to their rather strict debt-to-income requirements and other regulations, you’ll effectively max out at around 10 loans. After that, the vast majority of banks will simply refuse to give you a new mortgage (I’ve heard people disagree on the actual number, but I think around 10 is a good guess).

How do you go around this limitation? One thing that helped my wife and I is to buy our rental properties separately, under our own personal names, instead of under a joint title.

As far as I’m aware, this is possible in most states (or at least where we invest). What this effectively does, is double your conventional mortgage limit, as compared to you buying everything as a couple or alone.

After a while, you’ll still max out and won't be able to get any additional conventional financing… so when you feel you’re approaching this point, it’s time to look for alternative solutions.

These two options are the easiest to find, in my opinion:

  • Commercial Loans. Although we started with buying single-family homes, we ultimately transitioned to buying residential multi-family buildings (2-4 units) and are now looking into larger 15-20+ unit complexes. Because of that, we switched to commercial financing. There are hundreds of banks that offer it across the country with different rates, terms and requirements. I was even able to find a lender who finances 2-4 units with a 25-year amortization period – all you have to do is look and ask around.
  • Portfolio Loans. Similar to conventional loans, portfolio loans are much more flexible than conventional mortgages and the terms will depend on the lender. You can often use these to finance single family homes or entire “packages” of properties. You’ll have to do some online searching or networking with other investors to find these, but once you establish a relationship with a portfolio lender, it will open up almost unlimited financing options.

There are definitely other financing options out there, like seller financing or private money. I don’t have experience with them, so I can’t comment on their effectiveness, but your overall strategy will usually remain the same:

Stick with conventional mortgages as long as you can, then start looking for alternative financing options.

Wrapping Up

Is buying 10+ rentals in 5 years really possible? I definitely think so. It does require work on your part, maybe even some sacrifices to live a more frugal lifestyle, but it’s achievable if you put your mind to it.

For example, you can buy a single rental property in the first year, another in the second, then 2, 3, and finally 3 more in the last year.

RELATED: Rich Carey Owns 20 Rental Properties DEBT FREE. Here's How He Did It…

How fast you can grow your portfolio will always hinge on your ability to maximize your available cash (or minimize the cash needed for each deal) and securing additional sources of financing.

Your turn – what tips or strategies were the most helpful to you in buying additional properties quickly?

Anton Ivanov is a real estate investor and entrepreneur with a 35 unit rental portfolio spread out across 4 states. He is the founder of DealCheck – the leading real estate analysis software used by 28,000+ investors and agents to quickly analyze and compare investment properties.

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  • Ken says:

    Curious what your thoughts are on working with wholesalers to find off market deals that you can be all in for <70% and there are a few good lending companies that will now do up to %80 LTV. This seems like a great way to use leverage but you want to make sure your #s truly add up. Using this strategy could get you in to properties with very little money out of pocket. What do you think??

    • Anton Ivanov says:

      I have nothing against working with wholesalers. I’m a regular on a few buyer’s lists and occasionally get decent deals from them. I’ve never closed on anything I got from a wholesaler and for the most part most ones I’ve met have been on-and-off kind of guys (send a few deals a month, then you don’t hear from them for 6 months). But I think the more sources you have for finding leads, the better, so I’m all for it.

  • shohan says:

    nice post.Really helpful for me.

  • Nice Blog.
    Very Informative.
    Thanks for useful info.

  • Leonid says:

    Hi, Anton thanks for this article, I have a question which of the two loans would be best for this kind of investment?

    • Anton Ivanov says:

      Not sure which types of loans you’re referring to exactly? In my experience, if you’re talking about buy and hold investing, conventional mortgages will always have the best terms and the lowest rates.

      At some point, however, you’ll max out on those and that would be a good time to switch to portfolio or commercial financing (commercial most useful if you’re buying multi-family properties).

      I hope this is what you were looking for!

  • Geoffrey says:

    Great article, appreciate your work.I would say that every single person who is going to invest in a property should must read this blog before investing in any project.The ways you have shown will definitely work and are quite genuine.

  • Very interesting and a good read article! I must admit that it’s admirable that you’ve had a savings rate of over 70%. It would be wise to do the same thing like you did especially on re-investing the generated rental revenue you got on buying cheap properties. All the best.

    • Anton Ivanov says:

      I think a high savings rate is absolutely crucial in building wealth and growing your investment portfolio, no matter if you invest in equities, real estate or other mediums. Far too many people live paycheck to paycheck, even if their income is high…

  • Cody says:

    Not trying to knock it, but honestly wondering the pros to doing this. If you are only getting a 250$ return on an 85,000$ property each month, isn’t that 1.5% ROI annually? Seems pretty low to me so I figured I must be missing something here. Thanks!

    • Anton Ivanov says:

      Hi Cody,

      I think you’re missing one very important piece here – leverage. Simplified, the numbers for a deal like this would look something like:

      Purchase Price: $85,000
      Down Payment (Cash Invested): $17,000
      Monthly Cash Flow: $250
      Yearly Cash Flow: $3,000

      Cash on Cash Return: $3,000 / $17,000 = ~17.6%
      Cap Rate: ~8.7%

      So if you’re only looking at cash flow, the ROI in year 1 will be the same as the cash on cash return above, or 17.6%. In reality, your long-term ROI will also include price appreciation, so if the home value increases, the overall return will be even higher.

      Also, most of the units I’ve been purchasing recently are priced below $85k, usually around $55k – $65k per unit, so their return is higher still.

  • Anton Ivanov says:

    Thanks for the opportunity to write this post for your blog, Seth!

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