About eight or ten years ago, a friend approached me about buying a house. He was 26 or 27 years old at the time, newly married, and very interested in owning rental property. The home he ended up buying was a perfect rental home. It was in a popular area of town, next door to an elementary school, and checked all the boxes for someone wanting to move into the area. For him to eventually be able to rent it out, I told him it was important to start saving for a down payment on his next home while he lived in the first home.
Sure enough, he and his wife were disciplined with their budget and put money away for a future down payment. After living in the first home for six or seven years, they had enough money to buy a second, larger home, and they kept their first home as a rental property.
Soon after that, my friend became very interested in getting a second rental property. After shopping around, he found a condo in horrible shape and decided to purchase it at a great price. During the weekends and evenings, he would work on the condo and make a lot of the repairs himself. For projects he wasn’t able to do, he hired someone else. Three or four months later, the condo was in rentable condition, and he had a ton of equity in it (probably 55%) because he was able to pay for a lot of the repairs out of pocket. When he got the property rented out, it was a home run! What debt he had he was able to service very easily on the property. It became a very strong rental unit for him and produced a lot of free cash flow.
18 months later, my friend used the free cash flow from the first condo to purchase another condo in need of repairs. He repeated the same process with this condo and rented it out as another great success!
Today, he has three rental properties and is looking to buy his fourth. His two condos produce great cash flow, while his first home is on its way to being paid off. Through this operation, my friend has essentially created a microbusiness for himself while he works another job for a paycheck.