What it takes to scale a real estate portfolio

Tim Milazzo
December 11, 2020

Want to scale your real estate empire?

Buy more properties.

That’s obvious. But how?


The first thing that an investor needs to understand to scale is this: use other people’s money.

Starting out in real estate investment, most investors use their own money to purchase properties and take home all the cash flow. But all the largest real estate owners in the world use other people’s money to close. They may contribute some of their own capital, yes, but the bigger value is taking home an out-sized return for setting up a great deal, and allowing others to participate passively. That takes both credibility and salesmanship.

Non-recourse financing

Real estate investors starting out often receive their first loans from local banks or local private lenders. Categorically, these lenders offer “Full Recourse” loans. This means that if you default on the property, your personal finances are pledged as well.

Non-recourse loans do not access your personal funds upon default. This provides the borrower with two advantages:

  1. Obviously, your finances are protected if a deal goes South. Think of all the hotels and retail centers that are bankrupting this year due to the pandemic. Unexpected things happen in life, and they happen in real estate. If the deal goes bad, you’ll lose your equity, but with a non-recourse loan the losses stop there.
  2. If you want to scale your portfolio, you’ll be using a lot of debt. The lender on your next deal will analyze not only the property, but your global debt-to-income ratio and all of your global liabilities. If all of your loans are Recourse, you’ll be stopped from taking on more debt since your personal finances are more at risk.

So to scale past a certain point according to your net worth and liquidity, you need non-recourse debt.


Billionaires don’t work alone.

They recognize what they are uniquely suited to do to create the most value, and then they surround themselves with people whose time they can leverage.

At the early stages of building out a real estate portfolio, you will likely not be able to hire analysts, associates, accountants, and everyone else that makes a large real estate shop work efficiently. So think of your Team as the people who do not work “for” you, but would be happy to work with you.

Relationships with investment sales brokers, finance people, and everyone else that can help you either gain opportunities or more easily execute deals should be developed and honored if you intend to scale quickly.

Data & Analysis

To succeed in real estate requires a lot of information, and the ability to analyze it. Research and analysis are absolutely critical to understanding good opportunities, and convincing others that they are worthwhile. There is a lot of information on the internet today that can be taken advantage of. This isn’t an industry that relies solely on broker phone calls to find out what’s happening in the market (though you should do that too).

Underwriting shouldn’t be taken lightly. Underwriting is understanding.

Not only does quality data and analysis help you execute on a deal, but it also ensures that you’re using your limited resources on only the highest-performing opportunities. Maximizing each investment helps scale your portfolio faster, because you have more gains to re-invest.


Lastly, scale cannot happen without repeatability in your process. And when your process is repeatable, it can be streamlined.

A system doesn’t necessarily have to mean software automation, though it can very much mean that. You may have a system where you outsource repetitive tasks to a virtual assistant. You may have a system that combines three different pieces of software to accomplish a project.

But you have to have a system of some sort for those tasks and projects that would otherwise take more time in the day than you have available.

When you are trying to analyze a large amount of properties, and quickly come to an understanding about an opportunity, you’ll want to have a way to see if a deeper underwriting effort is even worthwhile for a given property. We’re developing a new tool for exactly that — something to replace the “napkin analysis” many investors employ:

Find the right commercial real estate financing with StackSource by getting instantly matched to the best debt and equity options for your project from our nationwide network of capital sources. 

Our expert Capital Advisors help you secure your ideal capital stack, resulting in a lower cost of capital for your investments in less time and with more transparency than a traditional commercial mortgage brokerage. Learn more at StackSource.com.