In the world of real estate investing, the narrative often revolves around amassing a large portfolio of properties. However, Dave Meyer, chief investment officer at Bigger Pocketschallenges this notion with a compelling alternative: buying just one rental property every two years.
This approach, Meyer argues, can lead to financial freedom without the need for a massive portfolio. By adopting a sustainable and low-risk strategy, investors can build wealth over time, regardless of their starting point or income level.
Why One Property Every Two Years?
Meyer’s strategy is rooted in the principle of dollar-cost averaginga concept familiar to stock market investors. By purchasing a property at regular intervals, investors can take advantage of the long-term average performance of the housing market.
This approach is not only achievable but also sustainable. It doesn’t require investors to quit their jobs or give up other parts of their lives. Moreover, it doesn’t rely on market timing or perfect investing conditions. Instead, it ensures that investors capture all the benefits of real estate, both in the short and long term.
Meyer’s financial model demonstrates how this strategy can grow a $2.5 million portfolio with over $200,000 in annual cash flow. This is the power of investing in the U.S. housing market.
The Two Key Strategies
The major barrier for most people is capital. Real estate is a capital-intensive industry, and saving up for a down payment can be challenging. However, Meyer outlines two strategies to make this approach possible.
Saving Money
The first strategy is straightforward: save money. Investors can set aside a portion of their income each month towards the next down payment. Meyer recommends house hacking as a way to reduce the amount needed for a down payment. By living in one unit and renting out the others, investors can put as little as 3.5% down.
Recycling Capital
The second strategy involves recycling capital. After purchasing and renovating a property, investors can force appreciation and take the capital out of the deal using different financing options. This allows them to reinvest the money into their next property.
Meyer emphasizes the importance of finding properties that have the potential for value addition. This could involve renovating a rundown property or adding a unit to an existing structure. The goal is to increase the property’s value by more than the cost of the renovation.
The Benefits of This Approach
Meyer’s strategy offers several benefits. It is achievable for most people, regardless of their starting point or income level. It is sustainableallowing investors to build wealth without giving up other parts of their lives. It is reliableproviding a proven path to financial freedom. And it is flexibleallowing investors to adjust the pace of their acquisitions as needed.
By adopting this approach, investors can build a sustainable real estate portfolio that provides passive income and long-term wealth. It’s a strategy that works with any kind of investment, whether it’s stocks, bonds, or real estate.
