Money gurus say all the money is made on big deals.
While you do receive economies of scale, you don’t need to go buy 100 units as your first deal.
If you’re an investor who is just starting out, there are plenty of opportunities with smaller properties.
For instance, back in 2012, you could own a house for less than the cost to rent. At the time, I saw the long-term value and, while the market was in a deep recession, I took the opportunity to get into the market.
Here’s a more specific example — I recently purchased two single-family houses on one lot in Arlington, WA:
Purchase price: $120,000
New ARV: $230,000
I returned 100% of my initial investment on the refinance. Then, the next year, I took $55,000 out on a HELOC to purchase a triplex.
Just a few months ago, these two houses appraised for $600,000 and I took out an additional $231,000 to buy 23 units in Tennessee – and kept the LTV below 60%.
Check out the full breakdown of how I used the equity on this one property (two single-family houses) to fund additional deals.
Cash flow: $90,000
Cash out refinance: $231,000
Remaining equity: $270,000
Here’s the thing… I’m still using this same strategy today but in different markets, and you can too!
Money is made on buying the right deal regardless of size. It’s important to buy in areas where you will get long-term appreciation and cash flow. The longer you own real estate the better value and deals you will get.
There are markets in different states where you can buy homes for less than the rebuild cost. They can ride the appreciation wave, building cash flow along the way.