The Repeatable “Stack” Method to Buy Rentals Faster (and with Less Money)

Mon Feb 03 2025

One of the most repeatable, scalable ways to build a real estate portfolio is using “The Stack” method. This investing strategy allows you to slowly scale your real estate using low-money-down loans, turning one down payment into multiple properties. It’s one of the smartest, safest ways to build wealth, but it’s almost been forgotten. Today, we’re talking to an investor reviving “The Stack,” using it to build an eight-rental real estate portfolio starting with just $15,000. Like most investors, Connor Anderson had barely enough money to close on his first house, a condo. He scrounged together just $15,000 to buy his first property and immediately began to rent out the other rooms. But this was just the beginning for Connor. Over the next few years, Connor slowly turned the rent savings from that one condo into a single-family house, a duplex, and now a fourplex, which he is still house hacking in. The best part? Those properties he used to live in are now cash-flowing rentals WI...

Summary

Summary of "BiggerPockets Real Estate Podcast" Episode: "The Repeatable 'Stack' Method to Buy Rentals Faster (and with Less Money)"

Release Date: February 3, 2025

Introduction

In this episode of the BiggerPockets Real Estate Podcast, host Dave Meyer welcomes Connor Andersen, a former BiggerPockets employee turned successful real estate investor. Andersen shares his journey of building a robust rental portfolio in Michigan using the repeatable "Stack" method, demonstrating how to acquire properties efficiently with minimal initial investment.

Connor Andersen's Entry into Real Estate Investing

Motivation to Invest

Connor Andersen's interest in real estate began during his college years. Reflecting on his time as a tenant, he was inspired to emulate his landlord's model of collecting rent to build wealth.

Connor Andersen [02:04]: "I want to be doing that someday and, you know, just padding my pattern, my wealth that way."

Initial Steps and Sacrifices

Post-graduation, Andersen moved to Denver and secured a job at BiggerPockets. Determined to invest, he adopted stringent saving strategies, including renting out his car and minimizing living expenses, to accumulate the necessary funds for his first property purchase.

Connor Andersen [03:32]: "I did everything that is advised for new investors to get started, and I cut my expenses to as low as I possibly could to save as much money."

First Investment: House Hacking a Townhouse in Denver

Acquiring the Property

With an FHA mortgage pre-approval of around $250,000 to $280,000, Andersen purchased a two-bedroom townhouse in Denver for $250,000. He lived in the basement while renting out the upstairs bedrooms, effectively living rent-free.

Connor Andersen [07:18]: "I was living for free."

Renovations and Tenant Management

Andersen undertook minor renovations, handling tasks like painting and trim while outsourcing more complex work. This balance allowed him to create a comfortable living space while maintaining his investment.

Connor Andersen [07:53]: "I handled, you know, some of the paint and the trim, but I hired out the drywall and the electrical and the carpet."

Transition to Michigan: Expanding the Portfolio

Move Back and First Michigan Property

After a year in Denver, Andersen relocated to Grand Rapids, Michigan, motivated by the city's growth and affordability. In May 2020, amidst the COVID-19 pandemic, he purchased a single-family home without physically touring it, relying on online research and intuition.

Connor Andersen [09:00]: "I just knew that's where I want to be."

Becoming a Real Estate Agent

To further his investment goals, Andersen became a real estate agent in Grand Rapids. This dual role not only provided him with additional income but also deepened his market knowledge, enabling him to handle approximately 150 property transactions over five years.

Connor Andersen [10:59]: "I've sold about 150 properties since then."

Second Investment: Acquiring a Duplex

Finding the Deal

Facing low inventory in Grand Rapids, Andersen turned to off-market properties by reaching out to owners of expired or canceled listings. This proactive approach led him to purchase a duplex, subsequently building a strong relationship with the seller.

Connor Andersen [19:22]: "I created my own inventory. I went and basically scoured every single expired listing."

Renovations and Cash Flow

The duplex required significant renovations due to poor initial conditions. Andersen financed these improvements through a Home Equity Line of Credit (HELOC) and managed to rent out each side for approximately $2,000 per month, resulting in a steady cash flow.

Connor Andersen [24:52]: "The cash flow is 2 to $300 a month."

Third Investment: Purchasing a Four-Unit Property

Strategic Acquisition

In December 2024, Andersen expanded his portfolio by acquiring a four-unit property listed at $630,000. Recognizing the inflated price, he negotiated down to $580,000 using his expertise as a real estate agent.

Connor Andersen [30:32]: "I use 5% down conventional financing to buy this with the owner occupant for $580,000."

Turnkey Renovations

The property was largely turnkey, requiring only minor cosmetic updates. This streamlined the renovation process, allowing Andersen to focus on occupancy and rental management without significant additional investments.

Connor Andersen [31:12]: "It's really just going to be paint and maybe carpet whenever tenants move out."

Future Plans and Strategies

Short-Term Rentals Exploration

Looking ahead, Andersen plans to delve into the short-term rental market. This move aims to diversify his investment portfolio and capitalize on the demand for flexible living arrangements in various regions.

Connor Andersen [32:06]: "I just want to have second homes in different parts of the country that I can take advantage of."

Financial Strategies for Cash Flow

To ensure consistent cash flow, Andersen focuses on maintaining a healthy spread between rental income and mortgage payments. He employs strategies like interest rate buy-downs to optimize financing and enhance profitability.

Connor Andersen [33:54]: "I just look for is just build a nice spread between rent and the monthly payment."

Market Analysis: Why Invest in Grand Rapids and the Midwest

Affordability and Demand

Andersen emphasizes Grand Rapids' affordability compared to national averages, fostering high demand for housing. The city's average sales price of around $380,000 makes it an attractive market for both renters and investors.

Connor Andersen [36:27]: "The average price point in the city of Grand Rapids is about $380,000, which is below the average sales price in the country."

Supply Shortage

A significant shortage of housing units in Kent County, Grand Rapids' core area, drives continuous rental demand. Andersen cites a local study indicating the need for 35,000 additional housing units over the next five years against an annual addition of only 2,000 to 3,000 units.

Connor Andersen [36:27]: "There's not a ton of supply...we need 35,000 more units of housing in Kent county to meet the demand."

Long-Term Growth Potential

With strong fundamentals like increasing population, economic growth, and limited housing supply, Grand Rapids presents a promising long-term investment landscape. Andersen is confident in the area's ability to sustain rent increases and property value appreciation.

Connor Andersen [36:27]: "There's a lot of demand for housing in Grand Rapids in the Midwest because it's affordable...prices will go up, rents will go up."

Conclusion

Connor Andersen's journey exemplifies the effectiveness of the "Stack" method in real estate investing. By strategically acquiring and managing properties, leveraging his role as a real estate agent, and focusing on high-demand markets like Grand Rapids, Andersen has built a sustainable and growing rental portfolio. His insights offer valuable lessons for both novice and experienced investors aiming to achieve financial freedom through real estate.

Connor Andersen [35:52]: "I think the Midwest is a fantastic place to invest."

Key Takeaways

Start Small and Scale: Begin with affordable properties like townhouses and progressively move to multi-unit investments.
Leverage Professional Roles: Being a real estate agent can provide unique market insights and networking opportunities beneficial for investing.
Focus on Market Fundamentals: Invest in areas with high demand, affordability, and limited supply to ensure rental income and property appreciation.
Creative Financing: Utilize strategies like HELOCs and interest rate buy-downs to optimize financing and enhance cash flow.
Diversify Investments: Explore different property types, including short-term rentals, to diversify income streams and mitigate risks.

Note: All quotes are attributed to the speaker with corresponding timestamps for reference.