A 26-year-old explains how he came to own almost 1,300 rental units in 7 years — and shares the type of loans he used, and the strategy that allowed him to scale fast (2024)

Anderson's units are a mixture of apartments, single-family homes, and a lot that have mobile homes on them, with the exception of a few empty ones. He owns some of the properties outright and is the part owner of others.

He is also not some real-estate guru, and he doesn't have a college degree. He began selling insurance when he was 18 years old. He worked for commissions, something that many would shy away from. But to him, it meant there wasn't an hourly limit on his income or on how much he could make relative to his age.

In his first year, he earned $143,000 as an insurance agent, according to a 2014 tax return viewed by Insider. And he was very frugal, living at home and saving every penny.

When traveling a distance to close a deal, he told Insider he'd sleep in his car, rather than get a hotel. A loaf of bread from the local Walmart would be his breakfast. Yes, the sacrifice wasn't pretty, but the payout was worth it for Anderson.

The saved-up income would change his life and set him on a path that he said made him financially free in a matter of a few years. He would use it to buy a piece of land that he'd build four units on — the first in a portfolio that would eventually scale to more than 1,000, thanks to cultivated relationships and a careful loan-application strategy.

The first deal

Anderson said he had $56,000 ready to put toward a piece of land he had zeroed in on in Cleveland, Tennessee. But it would need to be built upon — something his friend's dad was able to handle because he was a contractor.

To fund the project, Anderson applied for a construction loan from a small local bank. Normally, it wouldn't be easy to get a loan at such a young age and with barely a year's worth of income.

But he had a few ways to get around this. First, he went to a bank that the building contractor recommended. The contractor had a relationship with the bank because he had done deals for other construction projects.

"I would highly recommend people just talk to local banks, not even regional or national ones," Anderson said, adding that the latter had nearly no authority.

"It always goes up to somebody else. Local banks, you can talk to people who can make decisions, and they know the community, and they're just a lot easier to work with," he said.

Second, he submitted a credibility book, a folder with different items to help prove his ability to pay back the loan. Since he didn't have a tax return at the time, he said he put in awards he received for being a top salesperson, a copy of his bank statement to show his savings, a printout of his credit score, and a blueprint of his plan.

"One thing I've learned is banks are actually pretty flexible on what they're able to do, especially on commercial," Anderson said. "Residential is a lot different. They're a lot more regulated. For commercial loans, they have a lot of flexibility. So if they believe in you, if you can show them you have a good business plan and/or you have experience, they can really work with you."

Anderson applied for $300,000 but didn't get the entire amount at once. Instead, every expense would need to be cleared by the bank. Once he was approved, it would release the funds, and 5% interest would be applied to that amount. When construction was complete, the terms switched to principal and interest payments.

The first deal was a buy and sell. By the time he got out, he told Insider he netted a profit of $74,000.

In hindsight, it was a process he wouldn't recommend for a first-time investor. First, it didn't net him much more than if he had flipped a property that just needed an upgrade. And second, it was a lot more work. But it was an accessible avenue for him at the time because the loan was more attainable than a mortgage.

Scaling his portfolio

While he was building the first property, he kept his job and his aggressive saving strategy. This meant he saved up another $150,000 that year. And he put it toward a multipurpose property in Sevierville, Tennessee, that he used as an office and living space, he said.

It wasn't a cash-flowing property, but he was able to use it as collateral on his next purchase, he said, which would be the property that would set him up for financial freedom.

Anderson's next purchase, for two reasons, would be something over five units so that it would be considered a commercial property. The first reason was that it was easier to get a loan. The second was it gave him more control over its appreciation potential.

"If you increase the net income on the property, then the value goes up with it. If it's one to four units, then it's residential," and net income doesn't matter because the value is based on similar homes in the area, Anderson said.

That property was a 20-unit apartment building whose owner had a personal event and needed to sell. It was going for $1.3 million. Anderson needed to put 10% down, or $130,000, which he had from the sale of his first property. The bank loan covered the remainder, he said. He added that his multipurpose property was also used as a lien against the loan.

He made a few upgrades, such as minor landscaping adjustments for aesthetic purposes and necessary repairs. These allowed him to increase the rent or net income and request a commercial cash-out refinance at its appreciated value of about $1.6 million.

Anderson would use that money as a down payment toward the next property. He recycled this process many times over.

He now loves to teach others how to invest in commercial real estate, he said. His website Capital Cashflow and YouTube channel are free resources that teach people how to find and vet properties and pick tenants.