Easy methods to Go From 1 to 10 Leases with “The Stack” Methodology

Tony:
Ever puzzled how traders purchase dozens of rental properties? The reality is most of them didn’t begin with massive belief funds or nest eggs and even a whole lot of money. They only used a model of a quite simple however confirmed technique.

Ashley:
Should you’re a brand new investor, monetary freedom can appear so far-off, however you possibly can go from a single rental property to 10 leases in only a few years, and that’s by utilizing the stack methodology. That is most likely one of many best methods to construct a rental portfolio in 2026.

Tony:
And the perfect half is you don’t want tons of of hundreds of {dollars} to do that. If it can save you up for a modest down fee for one single household house, you’ll have every little thing you must set the technique in movement. And earlier than you recognize it, you’ll have your individual rental portfolio and most significantly, a confirmed blueprint for scaling so far as you need to go.

Ashley:
That is the Actual Property Rookie Podcast. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson. And with that, let’s discuss concerning the stack methodology. So let’s clarify what it’s and the way it works. So the concept of the stack methodology, 30,000 foot view, is that you simply begin with a small property, single household house, and also you mainly with each acquisition, purchase a barely bigger property. So for instance, let’s say the very first thing you purchase is only a common outdated single household house in 12 months one. Then in 12 months two, as an alternative of shopping for one other single household house, you purchase a duplex. After which in 12 months three, as an alternative of shopping for a duplex, you purchase a fourplex. After which in 12 months 4, as an alternative of shopping for one other fourplex, you purchase an eighplex and so forth. So that you go one, two, 4, eight, six, 32, 64, 128. I don’t know what comes after 128 occasions two, however you get the purpose there, proper?
It’s like each time we’re doubling and in only a few years, you possibly can really construct a decently sized actual property portfolio.

Ashley:
Typically that is additionally completed by promoting a property too. So you purchase one property and you then do a 1031 trade right into a duplex, you then do it once more into an even bigger property. So as an alternative of preserving all these properties, you possibly can simply trade into greater and greater. However I feel as we speak we’re going to focus extra on you’re really going to maintain these properties in your portfolio in order that on the finish of those years, you have got a very nice nest egg that you simply’ve constructed for your self over time. And I feel one factor individuals get actually caught up on is the the best way to get wealthy fast. And in actual property, there are methods you possibly can flip a home and make some huge cash in that one transaction. However one of many most secure bets is to make use of the stack methodology. It’s a confirmed methodology that can construct you wealth, builds you money circulate.
It should create all of those monetary alternatives for you, however it should take time. However this can be a confirmed path that works which you could take if you wish to be an actual property investor and construct a pleasant portfolio.

Tony:
I feel the opposite profit too is that by stacking it up on this means, it’s simply simpler for a rookie investor to digest and imagine as doable as a result of telling somebody, “Hey, you’re going to purchase an eight unit if you’ve by no means bought something,” for lots of people which may really feel just a little intimidating, however telling somebody, “Hey, you’re simply going to purchase one single household house as your place to begin.” It permits somebody to be taught the ropes. They achieve the vital abilities and the boldness to then go on and purchase the following deal. And Ash, we see it so usually the place we interview of us within the podcast they usually’ve spent years desirous about shopping for that first property. After which after they lastly get the primary one, they get the second tremendous, tremendous quick proper afterwards. It’s like, “Hey, I’ve been listening to the podcast for 5 years.
Didn’t do something. Purchased my first one and 6 months later I used to be underneath contract on my second one.” So even simply that momentum of moving into the primary deal will assist the stack methodology transfer you shortly towards an even bigger portfolio.

Ashley:
One other benefit of that is should you’re shopping for yearly, each couple years, you possibly can really use main residence loans should you’re preserving this property as your main residence for normally the mortgage product would require a 12 months. So meaning you possibly can be placing down as little as three to five% on the property. And you then dwell in there for a 12 months. First 12 months you have got your single household, dwell there for a 12 months, you progress out, you flip into rental, and you then’re transferring on to a duplex and also you’re dwelling in a single unit renting out the opposite unit. And you are able to do this all the best way as much as 4 models. So 5 unit, it turns into industrial and also you wouldn’t be capable of get a residential mortgage on that product anymore. I imply, you possibly can nonetheless most likely… Truly, I don’t know if a industrial mortgage would will let you dwell in one of many models with a 5 unit.
Have you learnt that?

Tony:
I really don’t. I’d imagine so. I really feel like we’ve interviewed individuals on the podcast who’ve bought bigger properties they usually’re like, “Yeah, I dwell there to assist save on prices.” I even take into consideration Heather Blankenship when she purchased her first RV park. She was like, “I used to be actually dwelling within the again workplace.” So I’d assume that there’s most likely some place the place it is smart to try this.

Ashley:
However yeah, that’s one other benefit as to utilizing this methodology too, is the financing which you could get by spreading it out over time. DSER loans have turn out to be highly regarded the place they’re not you personally, they’re not your debt to revenue. They’re trying on the precise property and the income it generates and what its bills are and ensuring that the property can really cowl the mortgage and the bills. And with that, you possibly can go forward and get much more loans as a result of they’re not you personally, however you’re additionally paying far more in closing prices. There’s much more charges related to get this mortgage product and also you’re additionally paying the next rate of interest than you’d if it was your main residence or should you went to a small native financial institution and simply obtained a traditional mortgage for an funding property too.
Okay, so the stack is sounding fairly good. This can be a path perhaps you need to take and we’re going to indicate you the best way to do it. We’ve to take a fast break, however once we come again, we’re going to provide the full playbook. So proper after a phrase from our present sponsors.
Okay, welcome again. Now let’s get stacking. Sorry guys, Tony made me say that to be corny, however right here’s the total stack playbook. Okay? So right here’s just a little facet notice. Should you can home hack whereas stacking, you’re going to have an enormous benefit. So like we talked about earlier, that down fee goes to be simpler to attain by solely having to place three to five% down should you’re doing an FHA mortgage or should you’re doing a main residence standard mortgage. And it is going to be simpler to save lots of up for these down funds since you’re not placing down 20% for every property. However you don’t have to try this for the stack methodology. Should you solely need these as funding properties and also you don’t need to home hack, this may occur for you too should you don’t need to dwell in any of the properties. And I assume I ought to make clear on that.
After I say home hack, you don’t must dwell with different individuals in that first unit since you’re shopping for a single household house. However should you’re going to stack the tactic right into a duplex, a triplex, you’re almost certainly going to need to hire out the opposite models no less than. So simply preserve that in thoughts as you determine which path you need to take as to how a lot you really need to home hack and be concerned. However you possibly can all the time home hack the primary one, single household house, after which going ahead, you possibly can all the time simply purchase these as funding properties and never home hack them.

Tony:
Now, one among my favourite methods to additionally type of leverage, particularly in a single household house, the home hack is known as the Craig Kurlap methodology the place our good friend Craig who wrote the BiggerPockets e book on home hacking, he talked concerning the first time that he home hacked. He purchased, I don’t know, a 4 bed room home as a single man and he rents out each single a type of 4 bedrooms and he slept on the sofa. So that’s like home hacking to the intense, but it surely labored out very well for him and he sacrificed for just a few properties and he was in a position to construct a fairly significant portfolio. So if doable, hire out the opposite rooms within the single household after which simply try to save as a lot of that further money as you probably can so that when your occupancy interval does finish, you now have the flexibility to hopefully have some money form to then step into that subsequent one.
And once more, at three and a half p.c down, relying available on the market that you simply’re in, should you’re not spending something in your first mortgage since you’ve rented out all the additional house, your potential to speed up this turns into loads simpler. So renting out the room, tremendous useful.

Ashley:
So now we’re going to enter step two, and that’s you’re going to purchase a duplex subsequent. So you possibly can determine to deal with hack this once more the place you’re placing three to five% down or you possibly can simply have this as funding property and put 20% down. So your timeframe goes to be how lengthy it takes you to really save up the down fee for this subsequent property plus having the cash in reserves and cash for closing prices. One factor that you need to do, which Tony simply did this, and this can be a very good transfer to do earlier than you purchase and transfer to the following property, is get a HELOC, a house fairness line of credit score in your present main residence. So should you’ve solely lived there a 12 months, there’s most likely not a ton of fairness out there in that property, however some is best than none.
Even should you’re taking a $20,000 line of credit score, that’s $20,000 that you need to use on your subsequent deal. That’s $20,000 that may assist cowl a rehab that you simply’re going to repay. So get your line of credit score as a result of it’s a lot tougher to get a line of credit score on an funding property and also you’re not going to get as nice of phrases. Tony, in your line of credit score that you simply simply obtained on your main residence, what was the introductory price? What was the discounted price they gave you for six months or no matter it’s?

Tony:
I need to say it was like 4.99% was the introductory price. It was a fairly affordable price. And after that it’s variable based mostly on one of many index charges, I can’t bear in mind which one, however 4.99 for the preliminary time period, which I feel was like six months.

Ashley:
Yeah. And on my industrial loans, I feel my strains of credit score, one is at 7.75% proper now and the opposite one’s at 8%. In order you possibly can see, a giant distinction proper there that he’s getting that introductory price on these strains.

Tony:
However even at 8%, you examine that to different sorts of credit score, like inform me a bank card that’s going to provide you 8%. So even on the elevated charges, it’s entry to actually, actually stable phrases to then be capable of exit and fund your subsequent acquisition. And that’s precisely what we did. We pulled the HELOC on our first main and we simply took that cash and use that as a down fee on our second one. And the rents from the property we’re transferring out of will cowl the preliminary mortgage fee and the HELOC fee. So we’re not out of pocket something for this HELOC, so it labored out very well.

Ashley:
So in step two, you’re going to get your HELOC in your property earlier than you shut in your subsequent one or transfer into your subsequent one. In case you are not transferring to the duplex, then not a rush as a result of this different property will keep your main, however you need to do it whereas it’s your main. Then after that, you possibly can go forward and shut in your subsequent property and transfer into it and you may nonetheless preserve that HELOC. You don’t want to shut the HELOC whether it is not your main residence. You continue to can preserve the HELOC open for the lifetime of the HELOC, regardless of the time period is and your mortgage acts there, their line of credit score docs. So subsequent, should you’re going to proceed to deal with hack, you’re going to maneuver into the duplex, hire the opposite facet out, and just remember to hire out your single household house, your first property.
Should you’re not going to maneuver into your subsequent funding, you then’re going to need to get each of these models rented out.

Tony:
So then the following step is to, once more, barely scale up the scale, go from a duplex to a triplex. And we don’t must belabor this, however mainly you’re going to maneuver out, hire out the entire duplex. Now you have got your single household house, which perhaps you’re nonetheless renting by the room to actually juice the money circulate. You’ve obtained your duplex, however now you’re renting out.

Ashley:
So you then solely must hire out your room.

Tony:
Yeah, that’s what I’m saying. It’s simply your room you bought to hire out. So that you hire out your room, you then hire out each side of the duplex, and you then transfer into the triplex and repeat that very same course of. 3.5% down, 5% down. You hire out the opposite two sides. Should you’re somebody who may even do it, hire out the extra rooms in your third of the property as properly. And we simply repeat, hire and repeat. After which step 4 turns into the identical factor the place you purchase a fourplex, hire out your house contained in the triplex and repeat that very same course of. And guys, within the span of only a few years, you’ve obtained a 10-unit portfolio. Now, simply the factor that I’d add to, as a result of somebody is likely to be considering, “Nicely, Tony, Ashley, positive, this sounds nice, however am I actually going to have the ability to make sufficient in 12 months to then find the money for for a down fee?” Possibly not.
Even when it takes you two years, three years to save lots of one other three and a half p.c, the method remains to be the identical. However the factor that I’d problem you on is suppose via the methods which you could juice extra cashflow out of the properties. So once more, we already talked about renting by the room within the single household house. Nicely, are you able to develop that very same technique to the duplex and the triplex? As a substitute of doing a conventional long-term rental, are you able to do a furnished midterm rental in your market? Are you able to do a short-term rental in your market? There are different cashflow levers we will pull inside these leases to extra shortly get you to the purpose of having the ability to have one other three and a half to five% down. So deal with that versus, “Hey, this doesn’t really feel tremendous lifelike for me.”

Ashley:
And a pair notes too, as you’re going from property to property, don’t overlook that you are able to do that HELOC on every one if it’s your main residence. So on the duplex, the triplex, you possibly can go earlier than you progress on to the following one is to drag extra strains of credit score. And even that’s the nicest factor a couple of line of credit score. Should you’re not utilizing them, you’re not paying something. To allow them to simply sit there and you might by no means use it, however no less than you recognize you have got that cash to faucet into if you wish to. And I feel too is a whole lot of line of credit, particularly should you’re going to small native banks, is that they received’t cost you for an appraisal. They received’t cost you any charges. It’s actually free so that you can go and get these strains of credit score. After which a few of them have mine has if I shut the road of credit score, so if I promote the property or I shut the road of credit score and don’t need it anymore inside, I feel it’s three years, I owe them 1200 bucks as a result of I didn’t use the road of credit score for so long as they needed me to or have it open for that lengthy.
So there are a pair issues like that, however you retain it open. And in our type of state of affairs right here, you’re going to have the property, you’re not going to promote them straight away, in order that shouldn’t be a problem. However that’s one other factor to bear in mind as you’re going step to step, you’re going to do these different little issues too. With the HELOCs, they are going to be your debt to revenue. With the mortgages on these properties, they are going to be trying on the debt to revenue. Typically when you find yourself home hacking a property too, they’re solely going to think about a share of the rental revenue that you simply’re getting. So even when the tenant is paying you $1,000 a month and say your mortgage is 2000, in order that’s half, generally they received’t consider the total thousand {dollars}. Typically it could solely be like 70% of the hire they’re really going to incorporate and rely in direction of your revenue to offset the mortgage fee too.
So on this state of affairs, if you’re doing home hacking, you’ll have to watch out of the strains of credit and the mortgages along with your debt to revenue as you go alongside. So don’t stop your W2 job on the triplex in 12 months three. Preserve it till you end the stack methodology to actually provide help to qualify for these loans to have the ability to get these properties too.

Tony:
So guys, that’s how the stack methodology works and the way we’ve tailored it for the rookie viewers. However subsequent, we’re going to dig into some numbers so you possibly can see the true energy of the technique. So stick round. We’ll be proper again. All proper guys, how does the stack methodology examine to only shopping for a bunch of single household houses? Let’s do the mathematics. So we’re going to speak about scaling with the stack methodology that we simply walked via versus simply shopping for extra single household leases. So for the only households, let’s assume that it’s a $300,000 single household house and also you’re making between 1,800 to $2,200 a month in hire at 20% down, let’s say $60,000 funding. Guys, the reality is that you simply’re unlikely to money circulate in a whole lot of markets with simply type of just like the vanilla technique on this means. There are additionally a whole lot of markets the place it should work.
So there’s 20,000 cities in america.This isn’t us saying that there aren’t any markets within the nation the place conventional single household houses don’t work, however there are additionally a whole lot of markets the place the numbers are fairly tight given the place costs and rates of interest are as we speak. And even when placing down 20%, it’s simply generally powerful to seek out properties that’ll money circulate. So that you would possibly want 20 or 30 of them to really obtain monetary freedom. So only a a lot greater portfolio and perhaps some extra complications round managing it as properly.

Ashley:
So let’s undergo an instance of the stack from 12 months to 12 months. And we’re going to begin off shopping for 300,000 single household house, making 1,800, 2,200 in hire, and say we would have liked 10,000 to fifteen,000 for a down fee if we’re considering of three and a half to five%. So this won’t money circulate at first, however whilst you’re dwelling there, it can save you some huge cash in hire, you’re getting mortgage pay down on the property. Then as soon as you progress out in a 12 months, you’re going to hire out the property. 20% down was 60,000. So we went from like 10 to fifteen,000 to 60,000 should you’re simply going to have it as an funding property and that may be unlikely to money circulate in lots of markets. However then we’re going to skip to the duplex. We’re going to save lots of 400,000 for a duplex. That is making 1,500 to $1,900 in hire per a unit.
So if we’re going to deal with hack it, we’re 14 to $20,000 down. 20% down, we’re $80,000. So once more, these numbers will rely upon how a lot you need to save or how briskly it can save you these quantities of cash and the way a lot you’re prepared to sacrifice by home hacking. For instance, with the intention to get a duplex sooner, are you prepared to deal with hack to spend $60,000 much less in your down fee? So how lengthy will it take you to save lots of that $60,000? Should you’re saying it can save you $20,000 a 12 months, you possibly can get into this duplex in a 12 months in comparison with ready three years if you need to save one other 60,000, 4 years really. So the following we’re going to the triplex 475,000. That’s saying once more, 1,500, 1,900 per a unit. 3.5 to five% down is 16,000 to 23,000. 20% down is 95,000.
And if you’re placing down the 20% down funds, the property is extra seemingly going to money circulate as a result of your mortgage fee goes to be much less since you’re placing extra money down. So additionally your threat ought to play a consider tier too. As we’re evaluating these numbers, sure, it sounds nice to place much less cash down, but additionally you have got much less threat should you’re placing extra money down. So simply one thing to consider too as to what your threat tolerance can be. After which we’re attending to the quadplex buy for 550,000, and that’s the identical 1,500, 1,900 in hire per unit. So should you’re doing three and a half to five% down, that’s 20,000 to 27,000. And it will almost certainly money circulate in a whole lot of markets at this worth, and you possibly can probably dwell rent-free for right here whilst you’re on this property. After which the following one 20% down could be 110,000 to have the ability to get into this property.
Now bear in mind, whilst you have these different properties stacking over time, you need to have money circulate from them, no less than one thing, and you may be utilizing that money circulate to save lots of for every extra funding that you simply’re shopping for for every down fee going ahead too on these properties. All

Tony:
Proper. So let’s discuss a bit about which markets this technique will work greatest in as a result of not all markets are made equal. So first, and I alluded to this earlier, is that not all markets have a bunch of small household stock. Once more, the place I’m situated in Southern California, we simply merely don’t have a whole lot of small multifamily properties, a whole lot of giant multifamily, massive condominium complexes, however the duplexes, the triplexes, these simply aren’t tremendous frequent. We’re very type of suburban sprawl sort space the place there’s extra single household houses or giant condominium complexes. But when your market does, I imply, you possibly can give your self a giant benefit via home hacking. In any other case, you would possibly want to think about investing out of state. So we’re actually in search of markets the place there are reasonably priced house costs and actually the place the worth to hire ratio is robust. So if I have a look at what the properties can hire for and I examine that to the acquisition worth, is there a powerful ratio there?
Day one money circulate, can we really get in as we speak and make some significant money circulate? After which additionally perhaps to a lesser extent is the appreciation potential. As a result of if the stacking methodology of the aim right here is like, hey, can we shortly construct up money circulate? Then perhaps appreciation’s a lesser vital metric, however nonetheless one thing to no less than have a look at. After which by way of the markets that we would need to contemplate, really BiggerPockets guys, they simply put out a type of summer season 2026 hire to fee report. And these are markets throughout the nation the place you possibly can nonetheless promote money circulate. So should you simply search hire to fee report BiggerPockets, I’m positive it’ll pop up for you for summer season 2026. However in there, we’ve obtained cities like Indianapolis, Cleveland, Memphis, Kansas Metropolis, Missouri, Birmingham, Pittsburgh, St. Louis, Columbus, Oklahoma Metropolis, Cincinnati, Louisville, Detroit, Milwaukee. So all in the same a part of the nation.
We’re not seeing a complete heck of loads on the West Coast. Truly, nothing on the West Coast, nothing within the Northeast, nothing even within the Southeast actually. So we’re all type of up and down in that Midwest hall there. These markets are typically just a little bit higher because it pertains to cashflow.

Ashley:
Now, only a couple issues to recollect earlier than you begin stacking is you don’t have to purchase a property each single 12 months. Even when it takes you many years to buy that subsequent property, you’re nonetheless going to be higher off than any person that’s not beginning, even should you take longer to develop and scale. And truthfully, there are days that Tony and I each remorse rising and scaling as quick as we did. And I didn’t even develop and scale that quick. It took a few years to amass my properties, however in a single 12 months I acquired eight properties, I feel. I feel Tony did 20 in a single 12 months and that was overwhelming and that we didn’t have the techniques and processes in place. So generally the gradual and regular really could make you higher off in the long term. So don’t really feel rushed that you need to hit any type of timeline, that you need to meet any expectation for this to work, that that is by yourself timeline.
That is if you’re able to execute on the following deal, when you have got that down fee saved, when you have got reserves, if you’re prepared to maneuver. After which additionally, even when it takes time to seek out higher offers, that’s higher than speeding into a nasty deal. So even should you’ve obtained the down fee, you’re prepared to maneuver, you’ve obtained somebody that wishes to hire your own home, don’t rush into the following deal. Be certain it’s a whole lot earlier than you go and buy that property. Nicely, thanks guys a lot for becoming a member of us as we speak on this episode of Actual Property Rookie. I’m Ashley, he’s Tony, and we’ll see you guys within the subsequent episode.