Think big! Accumulate hundreds or even thousands of units. Use economies of scale. Syndicate. Benefit from maximum leverage. In other words: go big or go home.
Aren’t these the messages we hear so often on sites like BiggerPockets.com? Aren’t the biggest and the best the ones with the most cash flow, the most flips, and the most rental units?
Well, I’m here to tell you that bigger is not always better. In fact, I plan to show you that smaller and simpler is actually better for many of you.
I’m trying to start a new movement. I hope some of you will join me. The motto is “go small or go home.”
Big Isn’t Bad
Life is too complex to say big is bad and small is good. We all have different motivations, don’t we? You aren’t wrong if you have big, large-scale real estate aspirations.
I would say it’s only wrong if you think big is the only way to live a rich, amazing life. There are other simpler investing options that don’t get enough publicity because, well, they’re too simple.
You don’t have to get big to accomplish incredible financial and life goals. Small-scale real estate investing with even a few properties can do that, too. These mini real estate models can give you plenty of money, plenty of free time, and plenty of flexibility. And they can help you avoid a lot of hassle and risk that comes with growing a big business.
Isn’t that what most of us wanted in the first place?
Unfortunately, smaller real estate investing does have its downsides. You may not get famous with a best-selling book. And I’m sorry to tell you that you probably won’t get an HGTV show contract. But as a consolation prize, you CAN get a life of financial security, simplicity, and freedom that most people only dream of.
To begin exploring my point, let’s look at an interesting story of three BiggerPockets investors**.
A Story of 3 Real Estate Investors
One summer, three real estate investing couples travel together to Europe. These investors originally met as beginner investors on the BiggerPockets Forums. They liked each other and helped each other grow. Along the way, they became friends. Fifteen years later, they each have experienced success with their real estate, and they want to enjoy the fruits of their efforts.
They spend 14 days visiting the Mediterranean coast. First, they explore ancient sites in Italy while enjoying amazing food and wine. Then, they continue with a high quality, Mediterranean cruise to explore stops in Croatia, Greece, and even BiggerPockets author Erion Shehaj’s beautiful native country of Albania.
Could these investors afford a nice trip like this? Let’s see.
The Financial Scoreboard
Couple #1, Liz and Tom, are in their 50s. They live, invest, and self-manage their properties in Missouri. Over the last 15 years, they’ve bought 10 single family houses, one-by-one, in good neighborhoods.
Liz and Tom searched hard to buy these houses as fixer-uppers below value, and they used the BRRRR technique to recoup most of their cash on each deal. Then they used the debt snowball technique to pay off their mortgages early. Their houses now produce $7,000 per month, or $84,000 per year, in positive cash flow.
Couple #2, Tiffany and Darius, are in their early 40s. They live in New York, and they invest in North Carolina using a property manager. Fifteen years after starting, they now own one 50-unit apartment building.
Tiffany and Darius began with smaller properties and then used 1031 tax-free exchanges to trade up to bigger units until they had enough equity for a down payment on the 50-unit building. They have a solid, fixed-interest, 25-year mortgage on the building, and the property produces $10,000 per month, or $120,000 per year, in positive cash flow.
Couple #3, Mike and Lauren, are in their late 40s. They live in Nevada and own properties all over the country. Fifteen years after starting, they now own 500 units!
Mike and Lauren began with their own rentals, but because of their ability to put together great deals, they also began syndicating deals by pooling money from others. Their portion of the rental income equals over $30,000 per month, or over $360,000 per year! Their portfolio produces the most money out of the three couples.
It’s clear to see that all three couples can easily afford to pay for this nice European vacation. This is exactly why all of them began investing in the first place.
But the story gets a little more interesting as they approach the end of the trip.
Read the full article on in my column at the BiggerPockets.com blog:
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