After falling behind on retirement savings, a Gen-Xer turned to real estate. He explains how he built a 7-figure portfolio starting with $15,000.

• Brannon Potts uses a build-to-rent strategy to create cash flow from rental properties.
• He got started in 2020 with $15,000, enough for the down payment and closing costs on three lots.
• Today, he estimates his 14 properties are worth about $3.5 million based on appraisals.

In his late 40s, Brannon Potts realized he was behind on retirement savings. Looking for another source of income, he turned to something he already enjoyed: building from scratch.

"I love building — to be able to put my fingerprint on a property," Potts, who grew up in a home his parents built in Fort Worth, Texas, told Business Insider.

In 2020, he started using what he calls a "build-to-rent" strategy: buying land, constructing rental properties, and holding them for cash flow.

Potts said he started with about $15,000 of his own money, which covered the down payment and closing costs on three lots. Today, he owns 14 rental units across eight properties, which he estimates are worth about $3.5 million based on appraisals.

That growth didn't happen without debt. Potts financed construction, and the $3.5 million figure represents the estimated value of the properties, not his equity — though he said the portfolio currently has more than $1 million in equity.

The key, he said, was creating equity during construction by building properties that appraised for more than they cost him to complete.

He used construction to create equity

Potts' first project was a fourplex. He said it cost about $447,000 to build and was appraised for $595,000 after completion. Because the finished property was worth substantially more than what it cost him to construct, he said he didn't have to contribute additional cash when the construction loan converted into longer-term financing.

That spread gave him equity from the start.

"Because I'm doing builds, all of these builds had instant equity that ranged between 20% and 25%," he said. "So I built wealth without money coming out of my pocket."

The fourplex also generated positive cash flow, which Potts saved and used toward future land purchases and projects. He then built a triplex on another of the original lots, followed by additional single-family and multifamily rentals.

"Once I got these started, the cash flow funded the purchases of all the other dirt," he said.

He builds with renters in mind

As Potts repeated the process, he refined his builds. He's now constructed five versions of the same rental property and said each iteration has helped him figure out which features tenants value — and which upgrades aren't worth the cost.

"I think I've got it pretty optimized," he said.

He's found that people prefer a split-bedroom floor plan, with bedrooms separated by an open kitchen and living area. He also began adding extra workspace and storage to the garage after thinking more deliberately about the tenants in his market.

"I looked at the area and said, 'What do people want?'" Potts said, noting that the area has a lot of tradespeople. With that in mind, he started incorporating built-in workbenches and enough room for a tool chest or extra refrigerator in the garage.

Other features didn't justify the added expense. On his first build, for example, Potts used more decorative trim and shiplap than he now believes was necessary.

Another rule he lives by: Build a space he'd be comfortable living in himself.

"We build these as if my wife and I, if we had to, we'd live in them," he said.

He looks for small ways to improve returns

Potts has also focused on improving his existing portfolio, especially as rents have softened somewhat in his market over the past few years.

He said operating expenses once consumed a little over 30% of his rental revenue, but now account for about 26% after he focused on costs such as financing, property taxes, and insurance.

Even construction decisions can affect those expenses. On his two most recent builds, Potts said he spent about $600 extra per house to upgrade to higher-rated, impact-resistant shingles after asking his insurer whether the change could reduce his premiums.

The upgrade saved him about $275 on insurance in the first year, he said: "You apply that over two or three years, you've already recouped all your money. Plus, those roofs last so much longer."

For Potts, that's part of the advantage of repeatedly building and holding his own rentals: each project gives him another chance to refine the economics.

He keeps a growing cash reserve

Potts automatically sets aside about 8% of his rental revenue for vacancies, repairs, and larger future expenses. He said the reserve has grown to about $60,000, and his goal is eventually to hold enough cash to cover six months of his portfolio's total expenses.

Thanks to what he calls his "sleep well at night" account, "I can weather a lot of storms, and I don't make bad decisions because I'm in panic," he said.

The reserve gives him time to handle vacancies without rushing to accept a tenant, make repairs properly rather than opting for the cheapest short-term fix, and occasionally fund projects that could add value to a property.

"It actually protects your wealth," he said. "It gives you that time to protect your wealth and make good decisions."