Equity First Real Estate Strategy

Written by Jorge Vazquez

When I started in real estate, I had limited cash but a clear strategy in mind. I knew that to build a solid investment portfolio, I had to pick between cash flow and equity — two distinct paths. To maximize the velocity of my plan, I chose to focus on equity first. This allowed me to purchase 30 properties with very little cash upfront by leveraging the power of appreciation and refinancing. Eventually, I transitioned to focusing on cash flow, but only after I had built a solid equity foundation. Let me walk you through how I did it and how you can apply the same strategy to your journey.

Cash Flow vs. Equity: Understanding the Difference

Before diving into the details, it’s important to understand the difference between these two real estate strategies.

• Cash Flow: This strategy focuses on generating rental income that exceeds your expenses each month. It’s ideal for those looking for immediate, steady income but might result in slower overall wealth growth.

• Equity: This is about building wealth through property value appreciation over time. You might not see as much income upfront, but you gain long-term wealth as your properties increase in value. This was my choice for scaling fast.

Why I Chose Equity First

As a full-time worker who loved my job, I wasn’t in a rush to generate quick cash from real estate. Instead, I knew that by focusing on equity, I could grow my portfolio faster and eventually benefit from cash flow. My end goal was to create a large enough portfolio that would produce steady cash flow, but I understood that I had to build equity first to make that happen.

Here’s how I did it:

1. Maximize the Velocity of Your Plan

I didn’t want my investment strategy to be slow and steady — I wanted to grow quickly. That’s why I focused on buying properties that would appreciate in value. This allowed me to build equity fast and leverage it to buy even more properties. By refinancing the properties as their values increased, I pulled out equity to fund future purchases. This allowed me to buy 20-30 properties with minimal upfront cash.

2. Use the BRRRR Strategy

A critical part of my strategy was using the BRRRR method: Buy, Rehab, Rent, Refinance, and Repeat. This process allowed me to buy properties, fix them up to increase their value, rent them out, and then refinance them to pull out the equity I had gained. With this extra cash, I was able to move on to the next property, repeating the cycle over and over again.

• Buy: I focused on undervalued properties in growing neighborhoods around Tampa.
• Rehab: Improving these properties increased their value, boosting my equity.
• Rent: Renting the properties covered my holding costs while building equity.
• Refinance: After the properties appreciated, I pulled out the equity to invest in new deals.
• Repeat: This cycle allowed me to build a portfolio quickly.

3. Transition to Cash Flow

Once I had built a strong portfolio of properties that had appreciated in value, I shifted my focus to cash flow. At this point, I was able to start collecting monthly rental income from my properties. This became my primary source of passive income, and it provided the financial freedom I had been aiming for.

The key takeaway here is that you don’t have to choose one strategy forever. By focusing on equity first, I was able to build a portfolio that eventually generated the cash flow I needed to achieve my long-term goals.

How You Can Start

So, how does this apply to you? If you’re just getting started in real estate with about $20,000 and maybe not the best credit, you can still use a similar strategy to mine. Here’s what you can do:

1. Start with Equity Properties

Look for undervalued properties in Tampa or surrounding areas. Focus on neighborhoods with potential for growth, even if the property doesn’t provide immediate cash flow. The goal here is to build equity quickly through appreciation.

2. Consider House Hacking or “Subject To” Deals

If your credit isn’t great, consider strategies like house hacking (buying a duplex, living in one unit, and renting out the other) or subject to deals, where you take over a seller’s mortgage. This allows you to invest with minimal upfront cash and grow your equity over time.

3. Use the BRRRR Method

Once you’ve bought your first property, use the BRRRR strategy to increase its value and pull out the equity for your next investment. By repeating this process, you can quickly scale your portfolio without having to save up for each new property.

4. Transition to Cash Flow Later

Once you’ve built up enough equity, you can start focusing on properties that generate cash flow. This can provide you with a steady, passive income stream to supplement your full-time job or even replace it eventually.

Educate Yourself and Build Your Network

No matter which path you choose, you’ll need to constantly educate yourself and build a strong network of real estate professionals. Connect with local investors, attend meetups, and don’t be afraid to ask for advice. Having a mentor or a reliable group of investors will help you avoid mistakes and grow faster.

Summary: Choose a Strategy, Maximize Your Plan’s Velocity

To succeed in real estate, you must choose a strategy that fits your long-term goals. Focusing on equity first allowed me to build a portfolio of 20-30 properties and eventually transition to generating cash flow. By using methods like house hacking, subject to deals, and the BRRRR strategy, you can maximize the velocity of your plan, scale quickly, and achieve financial freedom.

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Vanessa has over 23 years of business management experience and has been in the real estate industry since 2018. She and her team prioritize serving clients and finding the right financing options. Schedule a meeting with Vanessa: https://graystoneig.com/vanessa

My team and I have over 20 years of experience in real estate. We have strong relationships with wholesalers, probate lawyers, sellers, and others in Florida. I aim to align your investments with your vision and deliver exceptional results. Contact Vanessa to schedule a meeting: https://graystoneig.com/cody

Hello, I’m Marylyn Patankar, the Field Manager and New Client Ambassador at Graystone Property Management. I educate investors about our perks, onboard new landlord investors, and manage on-site operations. Schedule a meeting with me here: https://graystoneig.com/marylyn