The 7-Property Retirement Plan ($80,000/Year)

0:00If you can save one down payment, you can buy seven properties in 10 years. Most people think real estate investing is only for the wealthy because they assume you need to save up 20 % for every new property. But that assumption is wrong. And today on the show, I'm going to show you how. If you can buy your first rental, you can have a portfolio of seven cash flowing properties that completely replace your income in only 10 years. That's right, financial freedom in just 10 years. With only a single property, you can build equity and then tap into that equity to fund future deals. So you're not starting from zero over and over, you're recycling the same small initial investment into bigger and bigger assets.

0:44And today in the shop, I'm gonna show you step-by-step and with a real property example, how repeating this one strategy seven times over 10 years can build you a retirement most people only dream about.

1:02Hey everyone, welcome to the BiggerPockets podcast. I'm Dave Meyer, happy to have you all here today. Recently, I've been thinking a lot about what is enough properties. What is sufficient to actually achieve financial freedom without adding additional complexity in my life? And although the exact number you need is going to be slightly different for everyone, I came up with the number seven. And it wasn't just random guessing. I built an actual financial model and found that for a relatively quote-unquote normal American, this is the number of properties you need to acquire to completely replace your income within 10 years.

1:44So that's pretty exciting. And today on the show, I'm going to show you exactly how you can do this, what strategy to use, what kind of deals to buy, and I'll walk you through the math that shows that you can replace your income in 10 years or less, whether you're starting with a$50 ,000 income or an$150 ,000 income. So let's do it. First things first, big picture here, why I'm proposing the strategy I'm about to talk about is that almost everyone who wants to invest in real estate gets stuck on the same question. Where do I get the money for the next property? because maybe you save up for that first one, but every subsequent deal is gonna require a new down payment, right?

2:22So that can be a major blocker. But the answer to this question is that for most people, if you're buying that first deal right, you already have at least part of your down payment, if not most of your down payment, maybe even all of your down payment sitting in your first deal. And this is the magic of the strategy that we call the BRRR. The BRRR is B-R-R-R-R, stands for buy, rehab, rent, refinance, repeat. And the magic in this deal strategy is in the refinance step, because if you build enough equity through the rehab and rent stage, you can then pull out the equity that you've built as cash through a refinance and use it to fund your next purchase.

3:05Let's just talk a little bit about how that works. So first thing you do is you go out and buy this property. That's the first B. The R is rehab, and that's where you renovate a property. You make it worth more than it was before, and you need to do that by spending less than the value you're creating, right? So you need to generate$50 ,000 in new value from the property by investing$20 ,000 as a simple example. And if you do that, you can actually pull that$30 ,000 out and use it for your next deal. Any investor I know who scales does this at some part of their investing career because it just works so well.

3:45And you can find these deals on the market today. And you don't need to do heavy rehabs. You can just do a cosmetic burr and make this work and repeat deals over and over and over again. So if you want financial freedom in a short timeline, this is what I recommend you do, the cosmetic burr. So let's talk about the steps you need to follow to actually do this. First thing you got to do, define your buy box. So you should spend a little bit of time doing what I call a resource audit, which is just figuring out what resources you can bring to your first deal. Because every portfolio is comprised of basically three things, time, money, and skill.

4:25And so if you have a lot of time, great, you can do more of a rehab, you can spend more time finding a great deal. If you have more money, that gives you a lot of flexibility. If you have more skill, you can do the renovation yourself. So just figure out what you have and what you can contribute to that first deal. And once you've done that, go out and figure out what are the right kind of deals and if they exist in your market. Because in this episode, what I'm talking about is going out and buying a cosmetic bird. You got to go check if this is possible where you live. Just going to tell you right now, you live in LA or New York, this isn't happening for you, right?

5:00That's okay. You can go long distance. You can do this somewhere in the Southeast or the Midwest or in Texas or in Oklahoma, whatever. There are great places where you can absolutely do that. But all things being equal, if you can do it in your own backyard, I would. So check that out and figure that out. If you can't, go out and find a market. We have tons of different episodes on the show about going out and finding a market, but that is a step that you'll need to take if you can't do these in your own backyard. Now, when you're defining a buy box, you need to figure out what the right property is in top of just the market.

5:34And here's what I want you to focus on. This whole strategy, what I'm talking to you through today, sort of the premise is that you should go out and buy a deal roughly every 18 months. So it needs to be affordable, right? You can't go out and buy million dollar homes and do this. So I would focus on affordability. Now the BRRRR is magical because you don't need to do down payment every time. We're hopefully going to be getting like 50, 75, maybe even more percent of the next down payment from our BRRRR, but you're still going to need to save up a little bit. So affordability is going to help you scale.

6:06And it's relative, right? If you have a super high income, maybe you could buy more, but for the average income, which is the examples I'm gonna be using today, if you could buy properties under 400 grand, I think that's probably ideal. The next thing you need to look for is cashflow because the whole goal of this is financial freedom and these deals need to cashflow once you've done the refinance. That is really, really important here. I would target at least a 3 % cash on cash return after the rehab and refinance. Because you might be able to get decent cash flow today on the property depending on the condition, but you need to drive up equity and get cash flow once you've done the refi.

6:47When you go out and talk to an agent, these are the things you need to tell them. It needs to cash flow after. It needs to be able to build significant amount of equity so that I can get 50 % of my equity out to put towards my next deal. So you gotta get that affordability. Those are the metrics you need to hit. But like whether it's a two bed, one bath, what location, you need to work on that with your agent and figure that out. But I trust that all of you can do that. So once you have a buy box, time to get deal number one. And your goal here for deal number one is to just get on the board, right?

7:19You need to build equity, get some money out for that next dam payment and learn the system. Because this is the most important one, right? If you can do it the first time, If you've done the hard work doing the only deal that requires you to save up 100 % of that down payment, deals two through seven are going to be a lot easier for you. So what to focus on in this first deal is, number one, don't lose your shirt. Don't do something overly risky. Don't bite off more than you can chew. Do a manageable rehab with a high probability of success. So that's number one. Number two here, focus on building your systems for the next six deals, right?

8:01Building your team is going to be the most important thing. Find a great agent. Find a great lender. Find great contractors. If the contractor doesn't work out, replace them. Get rid of them. Find a great source for materials. Get good at budgeting. Track expenses, et cetera. Like this is what you need to do. Build the foundation. You do not need to hit a home run here. Set your foundation and get on base. So I'm going to actually walk you through an example. I found a real deal online that we're going to walk through to show you exactly the numbers of how this will work. We're going to do that, but we do have to take a quick break.

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11:56Welcome back to the Bigger Pockets podcast. I'm Dave Meyer. Today, I'm walking you step-by-step through how you can get seven properties in 10 years and replace your income. The strategy we're using is the cosmetic burr. And before I just kind of talked about how your first deal should just be to get on base, to try and do the minimum here, which is getting a cash flowing rental property and building enough equity that you can pull 50 % out. So let me just walk you through sort of how this works from a financial perspective, and then I'm actually gonna show you a real deal. So let's just imagine you buy a duplex for 240 ,000.

12:32Say it can't be done, can. I've done it recently, right? This happens all the time. So we're buying for$240 ,000. My rehab budget's gonna be$60 ,000. So I'm gonna be all in for about$300 ,000. And after that, my ARV, I'm gonna make this property worth$380 ,000 by doing this rehab. Now is time to refinance this, right? Because we've built all that equity. It's now worth$380 ,000. We gotta tap that equity for the next deal. A refinance is essentially getting a new mortgage. So you're gonna need to put a down payment on that new mortgage. And if you're putting 25 % down because you're an investor, that means you're going to need to keep$95 ,000 in this deal in equity.

13:09Next, you have to pay off your old mortgage, right? Which is$178 ,000. And so if you take those two things out, right? You're starting with$380 ,000. You subtract the old mortgage, it's just$178 ,000, $178 ,000, take out that$95 ,000 for your down payment. That means you can refinance out about$107 ,000. That's incredible, right? That is money you can go use for your next deal. Now, I'm using really simple math here. There's going to be sales expenses. Refinances do cost money. So let's just call it 90 grand. You're going to be able to take out 90 grand and do your next deal. Now, this is a made-up example, but it is a real-life example.

13:51These are mimic deals that I have done and other people do. So this is how you think about it. You drive up the value. You take out the money and do it on the next one. And before I show you the deal, which I will in a second, I just want to show you like what I am talking about here is not a perfect burr. People always talk about the perfect burr where you can take out 100 % of your capital. I don't really care. Honestly, I think if you're getting 50, 60 % of your capital out, that is enough in today's market. If you can get 100, fantastic. Do that. Go do that. But if you can get 50, 60, that's still amazing.

14:25Like, I really hate seeing people not doing the burst strategy because we're like, I can't recycle 100 % of my capital. This is still a magic trick that is going to supercharge your investing career. So if you're getting 50, 75 % out, that is incredible. All right, enough of my rant about that. Let's look at this property. I went on the MLS. So I just pulled this up on Zillow. So what I found is a three-unit property in Louisville, Kentucky, four bed, three baths. So one of them's a two bed. It's about 2 ,300 square feet, old property built in 1900. But let's just, I like this one because when I looked at the photos, it looked pretty good.

15:03It's brick build, which is good, especially on an older property. And the brick actually looks good. The roof actually looks pretty nice. And the interiors are solid. They're not super updated or modern, which is exactly what we want to see, right? As a value-add investor, we're looking for opportunities to improve the property. But you don't really want to spend your money tuck pointing brick, which can be expensive, or replacing a roof. What you want to spend money is where you're going to get it back in rent and write it back in equity. And so when I'm looking at this property, and if you're watching on YouTube, I'm showing it right now, but you can see this kitchen that I'm pulling up right now is actually like a good space.

15:43It's super outdated. There's no stainless. You know, the cabinets are pretty old. It just can use a lot of work. This is a good opportunity to replace a kitchen, drive up the rents. Same thing with some of these bedrooms. They're not the best layout. So you can think about maybe taking out a wall. The bathroom is very dated and can use an improvement. But overall, the house is in pretty good shape. It just needs the kind of stuff that is perfect for a cosmetic burr. Can you make the kitchens nicer? Can you make the bedrooms a little nicer? Could you improve the floors? Floors in this one are actually pretty nice.

16:18But like, could you spend 60 grand and drive up the value of this property? Absolutely. I think this is a realistic case for the kind of example I showed you before. So I'm actually just going to run this through now, the BiggerPockets calculator, and we can look at if it's going to cash flow when it's done. And if you're a BiggerPockets pro member, you can use these calculators as much as possible. It's the best possible way to figure out if a deal is good or not. If you want to follow along or do this, go to biggerpockets.com slash calculator, and you can do this for yourself. So I'm just going to copy and paste in our address here, and then we'll put in the purchase price.

16:59We're going to say that we're buying this for$220. I actually think we could probably get it for cheaper. Purchase closing costs on a deal like this. I'm going to put$5 ,000, which might be higher. But the key thing I want to do here in the calculator is click this little tab that says I will be rehabbing this property because we are. I think we could drive the value of this deal up to$300 ,000. I looked at some of the comps. We're going to say it's$300 ,000. You know, in my example earlier, I said$60 ,000 budget. But this place, the floors are pretty good. The outside's pretty good. I think we could probably renovate this place for like$25 ,000.

17:32But let's just call it$30 ,000 and see how that does. So we're going to do that. Then we got to put in our financing details. We're going to put 25 % down on this because we are investors. And you can occupy this, which is good. You don't need to use a hard money loan on this. I really like that. So I'm going to put 6.7 % about interest rate. And then the rents on this are actually going to be pretty good. I think it's getting close to the 1 % rule now. I think it's probably like$2 ,100 is what my estimate for rents are. But I think we can get this up to$2 ,700 if we fix this baby up. For taxes, it's right there in the listing,$2 ,300 a year.

18:10Insurance is going to be about$1 ,400 a year. repairs and maintenance. I'm going to put 5 % down, 5 % for CapEx, 5 % for vacancy and 8 % for management fees. If I'm doing this as a long distance investor, then because this house is metered separately, I'm doing nothing for our utilities. Just going to hit finish analysis here. So I can see that this is a huge cash flowing deal before my refinance. So if we just did the rehab and didn't refinance, we'd be making$700 a month. That's a nine and a half percent cash on cash return. That is excellent. But like I said, we need to check that it's going to cash flow after the refinance because we're still paying our loan on that$220 ,000 acquisition.

18:56But when we refinance it, it's going to be valued at 300 ,000, right? So we need to adjust for that. So I'm going to go back and edit this and just look at what happens if we put 20 % down on a$300 ,000 property. I'm going to turn off the rehab property calculation because we've already done that. And we're just going to update this again. So once we hit update this analysis now, oh, perfect. This is great. Okay. So our cash flow here at 320 a month. Awesome. So you're already making 320 a month and you are getting a three and a half percent cash on cash return, which is great. I know a lot of people target 78 percent cash on cash return.

19:38If you're doing a traditional rental, I kind of agree with that. But with a burr, if you were able to earn three hundred twenty dollars a month and take out some equity, that's absolutely unbelievable. So once you understand what kind of deal to buy, and this is just one example, there are other examples, but this is a great example of a good deal to buy. Once you can do that, you move on and start to stack that snowball and get to your next six deals. And I'm going to show you how to do that. And I will prove to you with my financial model how this can completely replace your income. But we've got to take one more quick break.

20:13We'll be right back. Finding a strong rental property usually takes time, research, and calculated risk. Lennar Investor Marketplace helps simplify all of that. With a free account, investors can browse new construction homes built for rental potential alongside real-time data showing estimated returns, expenses, and local market insights. It's all in one dashboard, making it easier to compare opportunities and move when the right deal shows up. Go to biggerpockets.com slash Lennar to create a free account and take a look. That's biggerpockets.com slash L-E-N-N-A-R. Sign up for free and start exploring this smart investing opportunity today.

20:52Please consult your own legal and tax advisors to help evaluate the risks of any real estate transaction. Lenar is an equal housing opportunity builder. A couple of weeks ago, I traveled to the East Coast for my dad's wedding. It was quite the trip. I had the honor of walking my 71-year-old father down the aisle, which is something I never imagined I would get to do. I spent time with family and friends I hadn't seen in years, soaked in the East Coast charm, and of course, enjoyed a lobster roll, which always makes a trip out there even better. But while I was there, I was thinking that while I'm on the East Coast, my home was sitting completely empty the entire time I was away.

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