Step 1 of Scaling: The Power of Education
In my previous article, I discuss the powerful concept of purchasing smaller rental properties (single family homes, small 2-4 unit plexes), growing equity over time, and then selling or refinancing the equity out to purchase larger cash-flowing properties. Again, this is a fantastic way to scale your portfolio to freedom, but can take many years. Using this strategy, I grew from a few rentals to 39 units in almost 19 years when we purchased our first mobile home park in 2019 (I purchased my first home in 2000 and rented out rooms. This was house hacking before there was a name for that).
That said, how can you scale even faster? After all isn't your time and freedom important to you and your family? I'm not talking about getting rich quick. I'm talking about reaching 100 units and beyond in a few years or even months. After we purchased our first mobile home park in 2019, I've since grown my portfolio to over 400 units! I'll repeat that. I grew 1 unit to 39 units in 19 years and then 39 units to 400 units in two years. That's extremely powerful!
What's the first step? The most important first step is to educate yourself, hands-down. Education and knowledge is the most important asset you can attain for almost no financial investment. In many cases, it's free! You must understand concepts like Net Operating Income (NOI), collection loss, vacancy, expense ratios, cap rates, debt coverage ratios, cash-on-cash, and other important financial data points. You must understand the macro and micro characteristics of your chosen geography (hello red states and market rents). And above all else, you must understand the concept of forced appreciation. Once you become comfortable knowing and applying these concepts to multifamily investing, the country (or world) can be your investing oyster. What’s the best way to do this? Well for starters, consume as much information as you possibly can. These days, there are no excuses for not educating yourself. There is an abundance of books, blog posts, forums, master mind groups, cases studies, etc. Go get your knowledge! Oh, and by the way, you’re never done learning. It’s a life-long endeavor. Our society would like you to think getting an education and then letting your brain atrophy until you retire or die is a good idea. It is not. If you want to be exceptional and escape mediocrity, keep learning. Then what? Go do something! Get busy! Action generates results. If you’re not at the plate swinging, you’re not winning. You’re not learning. Applying theory and knowledge to “doing” is the magic sauce.
Never before has there been an abundance of cash and a scarcity of good deals. The person that knows how to educate themselves and connect the two will become financially free. It might as well be you.