How to Go From 1 to 10 Rentals with “The Stack” Method

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

Ashley:
For those who’re a brand new investor, monetary freedom can appear so distant, however you might go from a single rental property to 10 leases in just some years, and that’s through the use of the stack technique. That is in all probability one of many best methods to construct a rental portfolio in 2026.

Tony:
And the perfect half is you don’t want a whole bunch of hundreds of {dollars} to do that. If it can save you up for a modest down cost for one single household residence, you’ll have every little thing it’s essential to set the technique in movement. And earlier than you realize it, you’ll have your personal 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 speak concerning the stack technique. So let’s clarify what it’s and the way it works. So the thought of the stack technique, 30,000 foot view, is that you simply begin with a small property, single household residence, 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 previous single household residence in 12 months one. Then in 12 months two, as a substitute of shopping for one other single household residence, you purchase a duplex. After which in 12 months three, as a substitute of shopping for a duplex, you purchase a fourplex. After which in 12 months 4, as a substitute 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 instances two, however you get the purpose there, proper?
It’s like each time we’re doubling and in just some years, you may really construct a decently sized actual property portfolio.

Ashley:
Typically that is additionally finished by promoting a property too. So you purchase one property and you then do a 1031 alternate right into a duplex, you then do it once more into an even bigger property. So as a substitute of protecting all these properties, you may simply alternate into greater and greater. However I believe right this moment 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 will have a very nice nest egg that you simply’ve constructed for your self over time. And I believe one factor folks get actually caught up on is the the best way to get wealthy fast. And in actual property, there are methods you might 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 technique. It’s a confirmed technique that may construct you wealth, builds you money movement.
It’ll create all of those monetary alternatives for you, however it is going to take time. However it is a confirmed path that works that you would be able to take if you wish to be an actual property investor and construct a pleasant portfolio.

Tony:
I believe the opposite profit too is that by stacking it up on this approach, it’s simply simpler for a rookie investor to digest and consider as potential as a result of telling somebody, “Hey, you’re going to purchase an eight unit whenever you’ve by no means bought something,” for lots of people that may really feel slightly intimidating, however telling somebody, “Hey, you’re simply going to purchase one single household residence as your start line.” It permits somebody to be taught the ropes. They achieve the vital expertise and the boldness to then go on and purchase the following deal. And Ash, we see it so usually the place we interview people within the podcast and so they’ve spent years eager 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 stepping into the primary deal will assist the stack technique transfer you rapidly towards an even bigger portfolio.

Ashley:
One other benefit of that is in case you’re shopping for yearly, each couple years, you may really use main residence loans in case you’re protecting this property as your main residence for normally the mortgage product would require a 12 months. So meaning you might 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 will have your single household, dwell there for a 12 months, you progress out, you flip into rental, and you then’re shifting 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 way in which as much as 4 items. So 5 unit, it turns into business and also you wouldn’t be capable to get a residential mortgage on that product anymore. I imply, you might nonetheless in all probability… Truly, I don’t know if a business mortgage would mean you can dwell in one of many items with a 5 unit.
Are you aware that?

Tony:
I really don’t. I’d consider so. I really feel like we’ve interviewed folks on the podcast who’ve bought bigger properties and so they’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 in all probability some place the place it is sensible to do this.

Ashley:
However yeah, that’s one other benefit as to utilizing this technique too, is the financing that you would be able to get by spreading it out over time. DSER loans have grow to be very fashionable the place they’re not you personally, they’re not your debt to earnings. 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 may 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 in case you went to a small native financial institution and simply acquired 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 got 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 complete stack playbook. Okay? So right here’s slightly facet notice. For those who can home hack whereas stacking, you’re going to have an enormous benefit. So like we talked about earlier, that down cost goes to be simpler to attain by solely having to place three to five% down in case you’re doing an FHA mortgage or in case you’re doing a main residence standard mortgage. And it is going to be simpler to avoid wasting up for these down funds since you’re not placing down 20% for every property. However you don’t have to do this for the stack technique. For those who solely need these as funding properties and also you don’t need to home hack, this will occur for you too in case you don’t need to dwell in any of the properties. And I assume I ought to make clear on that.
Once I say home hack, you don’t must dwell with different folks in that first unit since you’re shopping for a single household residence. However in case you’re going to stack the tactic right into a duplex, a triplex, you’re most definitely going to need to hire out the opposite items not less than. So simply maintain that in thoughts as you resolve which path you need to take as to how a lot you really need to home hack and be concerned. However you might all the time home hack the primary one, single household residence, after which going ahead, you might all the time simply purchase these as funding properties and never home hack them.

Tony:
Now, considered one of my favourite methods to additionally form of leverage, particularly in a single household residence, the home hack known as the Craig Kurlap technique the place our pal 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 kind of 4 bedrooms and he slept on the sofa. So that’s like home hacking to the intense, however it labored out rather well for him and he sacrificed for just a few properties and he was in a position to construct a reasonably significant portfolio. So if potential, hire out the opposite rooms within the single household after which simply attempt to save as a lot of that additional money as you probably can so that after 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 in the marketplace that you simply’re in, in case you’re not spending something in your first mortgage since you’ve rented out all the additional area, your skill 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 might resolve to deal with hack this once more the place you’re placing three to five% down or you might simply have this as funding property and put 20% down. So your timeframe goes to be how lengthy it takes you to truly save up the down cost for this subsequent property plus having the cash in reserves and cash for closing prices. One factor that it is best to do, which Tony simply did this, and it is 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 in case you’ve solely lived there a 12 months, there’s in all probability not a ton of fairness out there in that property, however some is healthier than none.
Even in case you’re taking a $20,000 line of credit score, that’s $20,000 that you should 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 acquired on your main residence, what was the introductory fee? What was the discounted fee they gave you for six months or no matter it’s?

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

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

Tony:
However even at 8%, you evaluate that to different varieties of credit score, like inform me a bank card that’s going to offer you 8%. So even on the elevated charges, it’s entry to essentially, actually strong phrases to then be capable to 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 cost on our second one. And the rents from the property we’re shifting out of will cowl the preliminary mortgage cost and the HELOC cost. So we’re not out of pocket something for this HELOC, so it labored out rather 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. If you’re not shifting 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 may go forward and shut in your subsequent property and transfer into it and you may nonetheless maintain that HELOC. You don’t want to shut the HELOC whether it is now not your main residence. You continue to can maintain 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, in case 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 residence, your first property.
For those who’re not going to maneuver into your subsequent funding, you then’re going to need to get each of these items rented out.

Tony:
So then the following step is to, once more, barely scale up the dimensions, 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 will have your single household residence, which perhaps you’re nonetheless renting by the room to essentially juice the money movement. You’ve acquired 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 either 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. For those who’re somebody who may even do it, hire out the extra rooms in your third of the property as effectively. 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 area contained in the triplex and repeat that very same course of. And guys, within the span of just some years, you’ve acquired a 10-unit portfolio. Now, simply the factor that I’d add to, as a result of somebody could be considering, “Nicely, Tony, Ashley, certain, this sounds nice, however am I actually going to have the ability to make sufficient in 12 months to then come up with the money for for a down cost?” Possibly not.
Even when it takes you two years, three years to avoid wasting 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 assume by means of the methods that you would be able to juice extra cashflow out of the properties. So once more, we already talked about renting by the room within the single household residence. Nicely, are you able to broaden that very same technique to the duplex and the triplex? As an alternative 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 are able to pull inside these leases to extra rapidly get you to the purpose of with 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 practical for me.”

Ashley:
And a pair notes too, as you’re going from property to property, don’t neglect that you are able to do that HELOC on every one if it’s your main residence. So on the duplex, the triplex, you may go earlier than you progress on to the following one is to tug extra strains of credit score. And even that’s the nicest factor a few line of credit score. For those who’re not utilizing them, you’re not paying something. To allow them to simply sit there and you could by no means use it, however not less than you realize you will have that cash to faucet into if you wish to. And I believe too is plenty of line of credit, particularly in case 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 believe 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 form of situation right here, you’re going to have the property, you’re not going to promote them immediately, in order that shouldn’t be a difficulty. 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 earnings. With the mortgages on these properties, they are going to be trying on the debt to earnings. Typically when you’re home hacking a property too, they’re solely going to think about a proportion of the rental earnings 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, typically they received’t keep in mind the complete thousand {dollars}. Typically it might solely be like 70% of the hire they’re really going to incorporate and rely in direction of your earnings to offset the mortgage cost too.
So on this situation, in case you are doing home hacking, you’ll have to watch out of the strains of credit and the mortgages along with your debt to earnings as you go alongside. So don’t give up your W2 job on the triplex in 12 months three. Preserve it till you end the stack technique to essentially assist you qualify for these loans to have the ability to get these properties too.

Tony:
So guys, that’s how the stack technique works and the way we’ve tailored it for the rookie viewers. However subsequent, we’re going to dig into some numbers so you may see the true energy of the technique. So stick round. We’ll be proper again. All proper guys, how does the stack technique evaluate to only shopping for a bunch of single household properties? Let’s do the maths. So we’re going to speak about scaling with the stack technique that we simply walked by means of versus simply shopping for extra single household leases. So for the only households, let’s assume that it’s a $300,000 single household residence 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 movement in plenty of markets with simply form of just like the vanilla technique on this approach. There are additionally plenty of markets the place it is going to work.
So there’s 20,000 cities in the US.This isn’t us saying that there aren’t any markets within the nation the place conventional single household properties don’t work, however there are additionally plenty of markets the place the numbers are fairly tight given the place costs and rates of interest are right this moment. And even when placing down 20%, it’s simply typically powerful to search out properties that’ll money movement. So that you would possibly want 20 or 30 of them to truly obtain monetary freedom. So only a a lot greater portfolio and perhaps some extra complications round managing it as effectively.

Ashley:
So let’s undergo an instance of the stack from 12 months to 12 months. And we’re going to start out off shopping for 300,000 single household residence, making 1,800, 2,200 in hire, and say we would have liked 10,000 to fifteen,000 for a down cost if we’re considering of three and a half to five%. So this won’t money movement at first, however when 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 in case you’re simply going to have it as an funding property and that may be unlikely to money movement in lots of markets. However then we’re going to skip to the duplex. We’re going to avoid wasting 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 on 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 keen to sacrifice by home hacking. For instance, as a way to get a duplex sooner, are you keen to deal with hack to spend $60,000 much less in your down cost? So how lengthy will it take you to avoid wasting that $60,000? For those who’re saying it can save you $20,000 a 12 months, you might 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 whenever you’re placing down the 20% down funds, the property is extra possible going to money movement as a result of your mortgage cost goes to be much less since you’re placing more cash down. So additionally your danger ought to play a consider tier too. As we’re evaluating these numbers, sure, it sounds nice to place much less cash down, but in addition you will have much less danger in case you’re placing more cash down. So simply one thing to consider too as to what your danger tolerance can also 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 in case you’re doing three and a half to five% down, that’s 20,000 to 27,000. And this can most definitely money movement in plenty of markets at this value, and you might doubtlessly dwell rent-free for right here when 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 keep in mind, when you have these different properties stacking over time, it is best to have money movement from them, not less than one thing, and you may be utilizing that money movement to avoid wasting for every further funding that you simply’re shopping for for every down cost going ahead too on these properties. All

Tony:
Proper. So let’s speak a bit about which markets this technique will work finest 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 positioned in Southern California, we simply merely don’t have plenty of small multifamily properties, plenty of giant multifamily, large house complexes, however the duplexes, the triplexes, these simply aren’t tremendous widespread. We’re very form of suburban sprawl sort space the place there’s extra single household properties or giant house complexes. But when your market does, I imply, you might give your self a giant benefit by means of 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 inexpensive residence costs and actually the place the value to hire ratio is powerful. So if I have a look at what the properties can hire for and I evaluate that to the acquisition value, is there a robust ratio there?
Day one money movement, can we really get in right this moment and make some significant money movement? After which additionally perhaps to a lesser extent is the appreciation potential. As a result of if the stacking technique of the purpose right here is like, hey, can we rapidly construct up money movement? Then perhaps appreciation’s a lesser vital metric, however nonetheless one thing to not less than have a look at. After which when it comes to the markets that we’d need to think about, really BiggerPockets guys, they simply put out a form of summer time 2026 hire to cost report. And these are markets throughout the nation the place you may nonetheless promote money movement. So in case you simply search hire to cost report BiggerPockets, I’m certain it’ll pop up for you for summer time 2026. However in there, we’ve acquired cities like Indianapolis, Cleveland, Memphis, Kansas Metropolis, Missouri, Birmingham, Pittsburgh, St. Louis, Columbus, Oklahoma Metropolis, Cincinnati, Louisville, Detroit, Milwaukee. So all in an identical 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 form of up and down in that Midwest hall there. These markets are usually slightly 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 anyone that’s not beginning, even in case 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 accumulate my properties, however in a single 12 months I acquired eight properties, I believe. I believe 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 typically 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 form of timeline, that you need to meet any expectation for this to work, that that is by yourself timeline.
That is whenever you’re able to execute on the following deal, when you will have that down cost saved, when you will have reserves, whenever you’re prepared to maneuver. After which additionally, even when it takes time to search out higher offers, that’s higher than speeding into a nasty deal. So even in case you’ve acquired the down cost, you’re prepared to maneuver, you’ve acquired somebody that wishes to hire your home, don’t rush into the following deal. Ensure it’s a whole lot earlier than you go and buy that property. Nicely, thanks guys a lot for becoming a member of us right this moment on this episode of Actual Property Rookie. I’m Ashley, he’s Tony, and we’ll see you guys within the subsequent episode.