How to Buy 8 Rental Properties in 4 Years

Building a portfolio of eight rental properties in just four years might sound ambitious, but it’s absolutely possible with the right strategy, financial discipline, and some smart decisions. In this article, we’ll outline a step-by-step approach to help you achieve this goal, from saving for down payments and using creative financing to leveraging equity and mastering the BRRRR method.

Key Points:

• Start with a realistic plan: Determine how much you need for down payments and operating costs.
• Maximize savings and income: Budget carefully and find ways to increase your cash flow.
• Use creative financing: Explore methods like seller financing or partnering with investors.
• Leverage equity: Reinvest the equity from one property into another.
• BRRRR Method: Buy, Rehab, Rent, Refinance, and Repeat to build your portfolio faster.

Why 8 Properties in 4 Years?

The reason why buying 8 rental properties in 4 years is a powerful goal is that it creates a solid stream of passive income. With each property bringing in rental income, you can gradually reduce the need for a traditional 9-to-5 job. By the time you’ve hit the 8-property mark, you could be looking at enough cash flow to cover your living expenses—and then some!

Now, let’s break down the steps to get there. It’s a journey that requires focus, but if you play your cards right, you can achieve this goal within the timeline you’re aiming for.

Step 1: Have a Clear Plan

First things first: set a clear plan. You can’t dive into buying multiple properties without knowing exactly how much cash you’ll need for each deal and how you’re going to finance it. You want to calculate not just the down payments but also account for repairs, property management fees, and ongoing maintenance.

A good rule of thumb is to aim for properties with 20% down to avoid PMI (Private Mortgage Insurance) and keep your monthly payments lower. So, if your average property price is $200,000, you’re looking at needing around $40,000 for each down payment. Multiply that by 8, and you’re looking at $320,000 total over 4 years—about $80,000 per year.

But before you panic, don’t worry—we’ll cover creative ways to stretch your dollars and finance properties without always needing a massive chunk of cash upfront.

Step 2: Maximize Your Savings and Income

The next step is finding ways to maximize your savings and boost your income. After all, you’ll need enough cash for your first couple of properties before you can start using more advanced techniques like refinancing.

Start by cutting unnecessary expenses in your budget—yes, this might mean fewer lattes or skipping that vacation to Hawaii. Trust me, future-you will thank you when you’re sipping coffee from the comfort of one of your rental properties.

Also, consider ways to increase your income:

• Side hustles: Freelancing, consulting, or driving for a rideshare service can bring in extra cash.
• High-savings rate: Aim to save 30% or more of your income by living frugally.
• Investing in stocks: Consider high-yield savings accounts or dividend stocks for your savings to grow while you work toward your real estate goals.

By saving aggressively, you’ll build the cash reserves you need to get started.

Step 3: Use Creative Financing

Saving for traditional down payments is a great strategy for the first few properties, but after that, you’ll need to start thinking creatively if you want to ramp up quickly. Here are a few ways to get more properties without draining your bank account.

1. Seller Financing

In seller financing, the property seller acts like a bank and finances the purchase for you. This means you can avoid hefty down payments or strict bank requirements. Plus, you can often negotiate favorable terms with the seller.

2. Partnering with Investors

Find people who have cash but maybe don’t want the hassle of owning rental properties themselves. You can offer to do all the work (finding the property, managing tenants, etc.) in exchange for their financial backing. This way, you leverage other people’s money (OPM) to grow your portfolio faster.

3. House Hacking

Live in a multifamily property like a duplex or triplex, rent out the other units, and use the rental income to cover your mortgage. This allows you to start building equity while minimizing your out-of-pocket expenses.

Step 4: Leverage Equity

Now, here’s where things get exciting. Once you’ve purchased one or two properties, they’ll start appreciating in value (hopefully), and you’ll build equity—the difference between the property’s current market value and the amount you owe on your mortgage.

Once you have a healthy chunk of equity in a property, you can refinance it to pull out some of that equity and use it as a down payment for your next property. This strategy allows you to use the money your properties have earned for you to keep expanding your portfolio.

For example, if a property you bought for $200,000 appreciates to $250,000 and you’ve paid off $50,000 of the mortgage, you now have $100,000 in equity. You can refinance and pull out a portion of that equity—say, $50,000—to put toward your next investment.

This process is known as “leveraging your equity”, and it’s one of the best ways to scale quickly without constantly needing new savings for down payments.

Step 5: Master the BRRRR Method

The BRRRR method is a favorite among real estate investors for rapidly expanding their portfolio. It stands for Buy, Rehab, Rent, Refinance, Repeat. Let’s break this down step-by-step:

1. Buy: Purchase a property that needs some work—this allows you to get it at a lower price.
2. Rehab: Fix up the property to increase its value. This might involve renovations like new flooring, painting, or upgrading the kitchen and bathroom.
3. Rent: Once the property is fixed up, rent it out to generate cash flow.
4. Refinance: After the property has increased in value, refinance it to pull out some equity (as explained earlier).
5. Repeat: Use the funds from your refinance to buy your next property and repeat the process.

Using the BRRRR method, it’s possible to acquire multiple properties quickly because you’re recycling the same money over and over again. You can often get your rehab costs back in the refinance, which puts you in a position to repeat the process with minimal extra cash out of pocket.

Step 6: Reinvest Profits into More Properties

Once you have a few properties generating cash flow, the best thing you can do is reinvest those profits. If each property brings in $200-$500 per month in rental income, over time, that adds up. In a year, you could have an extra $12,000-$24,000 in cash flow just sitting there.

Don’t let it sit. Use it! Reinvest your rental income into down payments for additional properties. This keeps your money working for you and helps you hit that goal of 8 properties even faster.

Real-Life Example:

Let’s say you buy your first rental property for $150,000 and rent it out for $1,500 a month. After covering the mortgage, property management fees, and maintenance, you’re left with a net profit of $400 a month. That’s $4,800 a year.

Now, you take advantage of property appreciation and refinance after a year to pull out $20,000 in equity. You use that to put down on your second property, and the process continues.

By reinvesting your profits and leveraging equity, you can see how building a portfolio of 8 properties in 4 years is within reach.

Conclusion:

Building a portfolio of 8 rental properties in 4 years might sound like a big challenge, but by breaking it down into manageable steps—saving for your first down payment, leveraging creative financing, and using strategies like the BRRRR method—it’s a realistic and attainable goal. The key is to start smart, stay disciplined, and reinvest your profits so that your money works harder for you than you work for it.

With the right approach, you can build long-term wealth and create a passive income stream that sets you up for financial freedom. Just remember, the road to real estate success isn’t always fast or easy, but with persistence and a plan, you can make it happen.

Key Points Recap:

• Create a clear plan: Know your financial needs and goals for acquiring properties.
• Maximize savings and income: Find ways to save more and generate extra income.
• Use creative financing: Explore options like seller financing or partnering with investors.
• Leverage equity: Use the appreciation and equity from one property to fund the next.
• Master the BRRRR method: This strategy allows you to scale your portfolio quickly without needing large amounts of cash.