Buy 1 Rental Every 2 Years and Watch What Happens

0:00You want financial freedom, but the real estate influencers posting on social media all own dozens or even hundreds of units. Is that really what it takes to live on passive real estate income? No, you don't need to scale a giant portfolio. You don't even need 20 properties. If you can just buy one property every two years, you will be completely set financially. And that doesn't even mean you have to save up an entire down payment every two years. Today, I am going to explain how you can buy a property every other year. And to prove it, I built a financial model demonstrating how much you need to save, when to buy your next property, and how to recycle your capital over and over.

0:46I'm going to show you an example with real math of how you can grow a$2.5 million portfolio with over$200 ,000 in annual cashflow by just buying one deal every two years. That is the power of investing in the US housing market. So forget the massive scale. Forget the bigger is better mentality. If you want to embrace a sustainable, low-risk path to building wealth, this approach is for you.

1:19What's up, everyone? I'm Dave Meyer, Chief Investment Officer at BiggerPockets and real estate investor myself for 16 years now. Today on the show, we are cutting through all that noise out there. And I'm just going to say the point of this episode up front. You do not need to own dozens of properties or hundreds of properties to achieve financial freedom. You only need to buy one property every two years. And that is easier than you think or than it might sound. And in today's episode, I'm going to give you a framework that I personally use myself and I've seen thousands of others use to successfully build long-term wealth in a sustainable, manageable way.

2:02The reason I use it and like it so much is because it is first and foremost, it's just achievable for most people, regardless of where you start. If you're starting at 25 years old or 55 years old, it works. If you're starting with 50K in income or 250K in income, it works. That's the thing I just love about it most. Second, it is sustainable. It is not so much work or so much effort that you have to quit your job or you have to give up other parts of your life. This is an approach that works for people who are busy. Third, it doesn't rely on market timing or perfect investing conditions. Fourth, it ensures that you capture all the benefits of real estate, both in the short and long term.

2:48And fifth, it is just reliable. This is a reliable, proven way to get you to financial freedom. It's an approach that works with really any kind of investment, whether you're investing in stocks or bonds, or in our case, we're talking about real estate. And the number I have come out to for what the best pace is, is to try and shoot for every two years. Buy a rental property, whether it's a single family, a duplex, a triplex, every two years. I like this number because it is feasible. Almost anyone can do this, and I will explain to you exactly how you can do it. It is sustainable. Again, it works on almost anyone's schedule, and it is reliable.

3:29It can get you to financial freedom in 10 to 15 years, and I will show you the math in just a minute to prove that to you. So that's what we're talking about here. That's the goal that you should be aiming for is trying to buy a property every two years. Now, I don't want everyone to think that this has to be exactly 24 months. Like if you want to do it every year, great. If it sometimes takes you three to four years between deals, that'll happen. That's totally fine. I actually personally waited four years between my first and second deal. But the goal here, the mentality that you need to have is to keep buying and keep buying ideally on regular intervals.

4:10If you keep buying on regular intervals, that's the key to attaching yourself to that long-term average performance of the housing market and the rental market. But now we're going to talk about how you actually go out and do this. What are the steps that you need to take to make this happen? Because it's natural and it is true that for most people who are just getting into real estate or maybe done one or two deals, just getting that next deal, one more deal can be intimidating, let alone buying every two years. So let's talk about how you can pull this off. This is probably obvious, but the major barrier for most people is going to be capital, money to go out and buy these things.

4:49Real estate is a very capital intensive industry. And honestly, that's a legitimate barrier. We're going to talk about how you can get around that. You have two great strategies that I'm going to show you, but if you're worried about the other stuff, like managing the properties, I promise you, you can do that. It's really just not that hard. I think people really exaggerate how difficult it is to be a property manager. We're not going to get into that today. We have other stuff to talk about, but trust me, you can do the property management part. That should not be a barrier. We have other episodes of the podcast that you can listen to about being a great property manager.

5:22Today, we're going to talk instead about these two strategies, these two levers you can pull to make this buying a property every two years possible. Now, the first is probably a little bit more obvious. That's just saving money, right? You set aside X dollars a month from your W-2 income toward the next down payment. If you can save enough money to buy every two years just from your lifestyle and income, that's amazing. It is huge and it is going to help. As an investor, you're gonna need to put usually 25 % down unless you're doing an owner occupied, like a house hack, which I highly recommend, because if you do those, if you do a house hack where you live in one unit, rent out the second, rent out, you can actually buy up to four units at a time.

6:07So you can live in one unit, rent out three. You can put as little as three and a half percent down. So that is a great way to do this. That's gonna lessen the amount you need to save up between deals. That means you can maybe go faster or it's just not gonna be as hard to save up and buy a property every two years. So that is one pretty critical decision to think about. Are you up for house hacking? I hope so. I've done it. It's a great way to get into the game and to scale up, and it really makes everything easier, right? Just think about it this way. If you want to buy, let's call it a$400 ,000 duplex, investors are going to need something like $110 ,000 saved up.

6:46That is a lot of cash, right? You're putting 25 % down, that's 100 grand, and you need five grand for closing costs, cash reserve, something like 110. House hackers need 15 to 20 grand, right? If you're putting three and a half percent down. So there's a huge difference in scalability and it's an important one if you're just going to save up money for those deals. Because again, it's gonna be a lot harder to save 110 grand every two years than it is to save 20 grand. So hopefully this makes sense to you why this works financially. But I'm sure you probably have questions about how this works for you.

7:19Like, how do you actually go out and buy all these deals as you're probably figuring out just how to save up for one property? How do you do it every two years? Well, I am going to explain that to you, but first we have to take a quick break. Finding great real estate deals is harder than ever. The investors winning today aren't working harder though. They're working smarter with AI. And that's where PropStream comes in. PropStream gives you access to over 160 million properties nationwide. Plus, they give you AI-powered tools that help you find the best opportunities faster. Use predictive AI to uncover motivated sellers before the competition.

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11:26For launch, you can get founding member pricing at just$8.99 a month. Claim your access at Revalo.io. Welcome back to the BiggerPockets podcast. I'm Dave Meyer. Today, talking about how a simple formula of buying one rental property every two years can help you achieve financial freedom in less time than you think. Before the break, we talked about why every two years and why dollar cost averaging. This idea of buying assets at a regular interval over a long period of time is such an effective strategy. But there is that second way to access capital, which is really just recycling the money that you've put in, plus taking advantage of the effort that you put in as a real estate investor by forcing appreciation, by doing renovations, by doing value-add projects.

12:18This is a key way that pretty much every single investor I know uses to keep buying at a regular interval. Here's kind of how it works, right? So you save up for that first property, right? You maybe do a house hack, or maybe you can save up$100 ,000 for that $400 ,000 house. I should mention, you don't need to buy a$400 ,000 house. You could buy a$250 ,000 duplex somewhere in the Midwest. You can partner with someone, but you find a way to get that first one. Then what you do is often called the BRRRR strategy. And I'll just talk about it step-by-step. You buy the property, then you got to renovate it.

12:55The object here, the goal here is to do a project, a renovation to increase the value of the property. And this should hopefully make sense. you want to increase the value of that property by more than it costs you to do that renovation, right? If you spend 50 grand on that renovation, you want it to increase the value of that property by 100 grand or 150 grand ideally, right? So that's a key thing here. You need to look for properties that have that opportunity. You can't go out and buy a perfectly polished thing in the nicest neighborhood. You're not going to be able to add value to that. That's already at its highest and best value.

13:33You got to go out and buy something a little rundown. You got to find something you can add a unit to. You could find something you could do a gut rehab. There are lots of ways to do it, but what you got to do is force the value of that property up through your own effort and renovation. Once you do that, you have built equity and you can take the capital out of that deal using different financing options. You can do it through a refinance. You could do it through a home equity line of credit. But let's just talk about how this works in the BRRRR strategy using a refinance. Refinance is just another word for getting a new mortgage.

14:10You're paying off the old mortgage with the new mortgage, and you're going to pull out some equity. Here's a simple example. Let's just assume that you go out and buy a$300 ,000 duplex. You're doing full investor thing, right? You're putting 25 % down, which comes out to 75K. Now, I know not in every market, you're not going to be able to go out and buy this. Personally, one of the reasons I like to buy and invest in the Midwest and the Southeast is you absolutely can find duplexes that need renovations at this price point. You can actually find them cheaper than that. I buy properties that are cheaper than that.

14:45So it's absolutely possible. I invest out of state. So I just want to call out that you absolutely can do this regardless of where you live if you just build the right systems. So you go out there, buy a property,$300 ,000, down payment is 25%. So you're putting in$75 ,000. That means that your mortgage is$225 ,000, right? But then you do need to actually do the renovation, right? So I'm going to assume, and I'm trying to make this example simple here, but I'm going to assume that the renovation that you're going to do on this$300 ,000 property is$50 ,000. That is a good size rehab for a property that costs that much.

15:25And just for simplicity sake, I am including the soft costs in that cost of the renovation, right? So I am saying that this is$50 ,000, which we are going to borrow. We're going to use, let's call it a hard money or private loan to get this. And I'm including the interest costs in that$50 ,000. So let's just say for simplicity here, labor and materials are 40 ,000 or soft costs. How much it takes to borrow that 40 ,000 is another$10 ,000. So we're all in for 50 grand of cost on this renovation. That, in this hypothetical scenario, brings the value of the property up to$450 ,000. That is not made up, right?

16:06I have done projects that do this. I see people who do these kinds of projects, right? You can put 50 grand in and get the ARV up to, the ARV means after repair value. that's what the property's worth after you've done the renovation, you can put in 50 and raise the value of it by 150. Now you gotta find a good deal, you gotta do it right, but that is absolutely possible. And once you've done that, this is the real key to being able to buy every two years, to scale your portfolio. Because now you've invested$75 ,000, right? But you actually have$175 ,000 in equity. Your property is worth$450 ,000 now, but your remaining loan, that mortgage that you took out is$225 ,000, right?

16:52So now you have equity that is worth$175 ,000 because now instead of a property worth$300 ,000, it's worth$450 ,000. You still have that mortgage of$225 ,000. That's a liability that you have to pay back. You have$50 ,000 that you have to pay back to the hard money lender. That's another liability, right? But once you've paid those back, you have$175 ,000 in equity. You put in 75 of that, so you've made$100 ,000 in profit so far. And this is where you do the refinance. And basically what you do is you go out and take out a new mortgage. So you're going to go to a new bank. You can go to the same bank and say, I want to do a cash-out refinance.

17:32This is not magic. This is something people do literally every single day. I've done dozens of them in my career. They are very, very common. So what you do is say, I want to cash out refinance. And what they're going to say is, okay, great. You're an investor. You're basically, it's like buying the property. Again, you got to put 25 % down. Now you got to put 25 % down of that new value, which is$450 ,000. So your new down payment, rather than being$75 ,000 is going to be$112 ,500. and that means you had$175 in equity. You're going to have to use$112.5 of that for your new down payment, which leaves you$62 ,500 that you can refinance out of this deal.

18:19Now think about that for a second. Remember how much we put into this deal in the first place,$75 ,000. And I'm saying that if you do this right, you can pull out$62 ,500. Now, some people talk about the perfect burr. That would be pulling out$75 ,000, but you don't need a perfect burr. As just this example shows, you are going to be able to pull out about 80 % of what you put into it on a very good burr, and you should be able to do a very good burr. Now, on top of that, you have to assume if you're buying a good deal, you're also getting cash flow from this deal. Even if it just cash flows$500 a month, which is a reasonable amount, that's not crazy.

19:07It's absolutely achievable. That means you're making$6 ,000 a year in cash flow. And if you're waiting and buying every two years, like I'm recommending, that's another $12 ,000 that you're going to be able to put to your next deal, right? So between your refi and two years of just collecting cash flow, you're back at$75 ,000 that you can invest into your next deal and you own a cash flowing rental. Now, using this example and extrapolating, you are going to need to put in a little bit of extra money because you're going to need closing costs. You're going to need cash reserves. That's probably another$10 ,000.

19:49Maybe appreciation takes your acquisition costs from 300 ,000 to 305 to 310 or something like that. But you could probably put in 10 to$20 ,000 in new capital every two years, or just use the$74 ,000 this first property has made you. Now, hopefully you can see how powerful this is. You save up for that first deal, which is a big deal, right? It is hard to do to figure out how to do that. But once you do it, the momentum starts to build. The snowball starts to roll downhill. And you can recycle this capital as many times as you want. And this is a proven way for you to be able to buy deals every two years, even if you're not house hacking.

20:36Now, if you put those two things together, that is probably the most powerful, fastest way to achieve this. But as you can see, even if you don't want to do owner-occupied, If you want to invest out of state like I do, you can use this approach to recycle your capital and build that portfolio. Now, this is obviously just the example of one property. But what does this look like over the long term? If you keep doing this just once every two years, does it really amount to that much? Yes. The answer is absolutely yes. And I will show you how much it amounts to right after this quick break. If you've been listening to the show for a while, you've heard us talk about Lightstone Direct, the direct-to-investor platform from Lightstone, a$12 billion real estate firm that invests 20 % plus of the equity in each investment right alongside accredited investors.

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25:29Welcome back to the BiggerPockets podcast. I'm Dave Meyer. Today, we're talking about how all you gotta do is buy one property every two years and you can become financially free. Before the break, I walked you through an example. something that would work in the Midwest or the Southeast using a$300 ,000 property. But even if you invest somewhere else, you want to do house hacking, the same principles apply, right? You can recycle your capital and you can buy every two years. Now, in that example, you could pull out 62 ,000, you could get annual cash flow of about six grand, but let's talk about the big picture.

26:03Like what does this actually amount to if you did this for 30 years? And I'm going to show you a model that I created. Basically what I do is take that one deal that I gave you an example, and I buy that deal almost exactly the same every two years for 30 years. And I decided not to get bogged down in a super complicated spreadsheet. I hit all of those lines for you if you're watching this on YouTube. So here's how the model works over 30 years. So you put in$75 ,000. That is the hardest part. It is the hardest part by far. And then the assumptions that I make is that for every new deal that you do, you need to bring$20 ,000 of new capital, right?