At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
Sounds like you can’t see the forest for all the trees!
I’ll try and keep this short… in the past 5 years my wife and I have been able to buy 46 unit (starting at age 47) mostly single family, but a mix of duplexes, and triplexes as well. All but 2 were bought using leverage. At our high point we had 19 loans and had about $1.1 million of our own money into those properties. We worked corporate jobs until we had 20 units and then both switched to real estate full time.
5 of those properties ended up being flips… we netted just under $100,000 each before capital gains on most of those. We have sold 4 other properties and through market appreciation we were able to pay off many of our first properties. We also cash out refinanced other properties that had significant appreciation and paid off additional properties.
5 years later our remaining portfolio is worth over $6 million and we have gone from 19 loans to 7. Minus out the remaining loans we would be at over $4 million in equity. While you never realize it at the moment, our timing was pretty perfect with the market run-up. Our per door cash flow is now over $600 per month after all those pay downs.
Anyone would be hard pressed to duplicate that in today’s market. But real estate is cyclical, and it will come back around.
What really motivated us was the futileness of the 4% withdrawal rule (you can only w/d 4% of your investments per year to be sure you won’t run out of money in retirement). The thought of living on $40,000 /year coming from a dual income a lot higher wasn’t going to work for us.
It starts out as a leap of faith. But real estate is SO SO powerful as a generator of wealth. The best thing is that you are pretty much in complete control of your destiny. You aren’t subject to the random swings of stock market like a passenger on a bus! Sure, you exist in the real estate market with its own ups and downs, but you choose when to buy and sell and the in between if you bought well is a pretty smooth ride!
It’s not without its excitement though on occasion… but I don’t regret one moment of the trip so far. When the markets settle back down I would encourage you to hop on and enjoy the ride!
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
You're missing nothing. Everyone talks about becoming financially "free", then happens to invest with leverage. You're financially free when you have no debt and make cash. You owe nobody anything.
With that said, in real estate, you're betting the leveraged interest will appreciate and in the mean time you are able to offset debt obligations. Scaling is highly leveraged based but you're hoping with more on, you'll get more reward. Of course, it's more risk too.
You won't always be in the red. It's almost impossible to not be right now. The math on it may still be worth it. It's just your view of how to allocate capital. Do you think real estate is worth it more than the next opportunity? In my view, the next era of REI is less cash flow, significantly more appreciation. But everybody has their own view.
The idea is to get a property that will cash flow AFTER paying the debt, taxes, insurance, property management, vacancy, and maintenance. If the rent you charge can cover those expenses and have money left over for you, you are not operating in the red. You are cash flow positive.
Having debt on a property is not necessarily being in the red either. If the value of your property is more than the debt, you are not in the red, you have equity.
To your point though, real estate is not easy money. You have to find deals that cash flow. Major maintenance issues, long term vacancies, and tenants who don't pay can all put you in the red. In the long run, with good deals, you can do very well investing in real estate.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
Sounds like you can’t see the forest for all the trees!
I’ll try and keep this short… in the past 5 years my wife and I have been able to buy 46 unit (starting at age 47) mostly single family, but a mix of duplexes, and triplexes as well. All but 2 were bought using leverage. At our high point we had 19 loans and had about $1.1 million of our own money into those properties. We worked corporate jobs until we had 20 units and then both switched to real estate full time.
5 of those properties ended up being flips… we netted just under $100,000 each before capital gains on most of those. We have sold 4 other properties and through market appreciation we were able to pay off many of our first properties. We also cash out refinanced other properties that had significant appreciation and paid off additional properties.
5 years later our remaining portfolio is worth over $6 million and we have gone from 19 loans to 7. Minus out the remaining loans we would be at over $4 million in equity. While you never realize it at the moment, our timing was pretty perfect with the market run-up. Our per door cash flow is now over $600 per month after all those pay downs.
Anyone would be hard pressed to duplicate that in today’s market. But real estate is cyclical, and it will come back around.
What really motivated us was the futileness of the 4% withdrawal rule (you can only w/d 4% of your investments per year to be sure you won’t run out of money in retirement). The thought of living on $40,000 /year coming from a dual income a lot higher wasn’t going to work for us.
It starts out as a leap of faith. But real estate is SO SO powerful as a generator of wealth. The best thing is that you are pretty much in complete control of your destiny. You aren’t subject to the random swings of stock market like a passenger on a bus! Sure, you exist in the real estate market with its own ups and downs, but you choose when to buy and sell and the in between if you bought well is a pretty smooth ride!
It’s not without its excitement though on occasion… but I don’t regret one moment of the trip so far. When the markets settle back down I would encourage you to hop on and enjoy the ride!
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
You're missing nothing. Everyone talks about becoming financially "free", then happens to invest with leverage. You're financially free when you have no debt and make cash. You owe nobody anything.
With that said, in real estate, you're betting the leveraged interest will appreciate and in the mean time you are able to offset debt obligations. Scaling is highly leveraged based but you're hoping with more on, you'll get more reward. Of course, it's more risk too.
You won't always be in the red. It's almost impossible to not be right now. The math on it may still be worth it. It's just your view of how to allocate capital. Do you think real estate is worth it more than the next opportunity? In my view, the next era of REI is less cash flow, significantly more appreciation. But everybody has their own view.
********************************************
@V.G Jason My first response to the OP was going to be the word "Nothing," but then you beat me to it. :P
@David Ogas I think you are smart to realize that there are those liabilities, risks, and potential limits in this business. In my experience, within many of these forums and podcasts/blogs, there is a tendency to understate that portion of the business, or the fact that this is a business, for that matter. Generally though, it's a matter of managing those liabilities (mortgages, etc), in order to utilize reasonable leverage to acquire assets that will, hopefully, propel you toward your goals.
I'll give you the short version. The idea is that the rents will cover the expenses (mortgage, taxes, ins, capx, etc) and either have left over cash flow (net cashflow), or cover all or most of the expenses on a property with good appreciation potential. Some people are focused on cash flow properties, others are focused on appreciation potential, and some with both. If you have multiple properties providing good cash flow, they can help offset other properties with low or negative cash flow, but that may have better appreciation potential. And all the while tenants are paying for your mortgages/debt (including principal paydown), you are getting depreciation benefits to help offset other income, you benefit from leveraged appreciation (hopefully), and have other benefits with real estate investing not available elsewhere (1031 exchanges, lower taxes on passive income, etc).
So, hopefully after some appreciation, your balance sheet is swignificantly more positive, due to some of the houses appreciating. This will hopefully dwarf the mortgage balances and give you options. Like, you can sell some of your better appreciating properties and pay taxes and then pay down some other properties you own, to reduce or eliminate your mortgages.
So, yes, to your point, you do take on liabilities and responsbilities which can get you in trouble, but may also hugely benefit you, if managed properly. You can also choose to some short term "flips" and buy rentals with more or all cash, to reduce your liabilites and risk, but then you don't get the benefit of leverage. In my opinion the risks do seem to be missed or underplayed often.
With the BRRR that idea is to use the equity to build up your portfolio. I do the save 20% and then buy another property. I also don't refinance. Everyone does what works for them. For me, the plan is to have my properties paid off when I retire. I can then sell them slowly over time if I want to. In addition to the mortgages being paid for by the tenants, the houses have also appreciated (in some areas more than doubled in less than 10 years). Do what you feel comfortable doing and what works for you.
After 30 years (or when the loan full amortizes 20-30yrs on average) you will own the home free and clear, it should have 2-3x in value, and rent should have 2-3x. That is where the wealth is made.
Thank you David for your question and everyone else for their replies. This is a thought that has made me scratch my head in wonder at times too, all of your explanations have given me a much greater understanding and confidence.
I bought my first investment in 2004 for $67,000. I put $7,000 down. My mortgage, taxes, and insurance were around $400 and the rent income was only $425. According to today's standards, it was a stinker. However, I put that $25 in an account every month. Eight years later I sold that property for over $80,000 in profit. Except for the initial downpayment, everything was paid for by the renters. I turned $7,000 into $80,000 with very little effort.
In 2016 I bought my next investment property. Five years later I had 33 rentals, 135 storage units, over $2 million in net worth, and my annual cashflow (money in my pocket after all expenses) is over $150,000.
On top of all that, I get incredible tax write-offs. My income is high enough that I should be paying 35% of my income in taxes, but I have so many deductions from investments that I pay 12%.
All you have to do is read a couple books on real estate investing and the picture becomes crystal clear. There's no better investment. My favorite book is "Unofficial Beginner's Guide to Real Estate Investing" by Spencer Strauss, but there are many others out there.
@David Ogas the simple goal is to make more money (income) than you have expenses (debt, taxes, insurance, repairs, etc). The debt is a tool to help you buy properties that can achieve this equation. The REAL skill is to be able to find these deals. If you can learn this skill, you can buy all the properties you want and carry debt on all of them if needed. Then, it’s not YOUR income that pays down the debt, it’s your TENANTS.
@David Ogas leverage is a very important tool depending on your goals. Let’s say you were a contractor and you wanted to build a house. You think to yourself, screw hiring employees they cost too much. I can build this myself and keep all my money. Is it possible , sure. Is it the best use of your time and resources, probably not. It will take you two years to build the home. Or you can leverage other peoples time and talents and hire contractors and get it done way more efficiently.
When investing, Instead of building your buying . Your leverage isn’t contractors , it’s debt. Can you go it alone and use all cash, sure. Buts it’s super slow. It’s very safe, but slow. Only you know what your real estate goals and needs are.
Your growth in real estate will only be governed by two things, the quality of deals , and the quality and amount of debt you can manage.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
Here's the algo:
1. PSF.today > PSF.yesterday --> aka price.increase. 2. Debt is acceptable, as long as DSCR > 1.01 3. Appreciation is going up between January to June 4. cash flow is up as well if DSCR is > 1.0 5. when you sell, make sure you ovesell 6. when you buy, you buy at discount 7. as liquidity is low, price keeps going up. This is not even can be matched with stock equity investment.
Leverage allows you to plant more trees. Why plant one tree when you could plant 10 and watch them grow?
If you buy right, manage property, learn to screen tenants (or PM companies), and hold long enough you'll be vastly ahead a person growing one tree. Not only that but our government votes for and creates laws that favor leveraged assets (trees?). There are tax advantages when you leverage and plant multiple trees. As soon as one is paid off you loose some tax advantages. If you're playing the game (like most of us here) you never pay off all your trees. You sell, redeploy, and plant a new one.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
Sounds like you can’t see the forest for all the trees!
I’ll try and keep this short… in the past 5 years my wife and I have been able to buy 46 unit (starting at age 47) mostly single family, but a mix of duplexes, and triplexes as well. All but 2 were bought using leverage. At our high point we had 19 loans and had about $1.1 million of our own money into those properties. We worked corporate jobs until we had 20 units and then both switched to real estate full time.
5 of those properties ended up being flips… we netted just under $100,000 each before capital gains on most of those. We have sold 4 other properties and through market appreciation we were able to pay off many of our first properties. We also cash out refinanced other properties that had significant appreciation and paid off additional properties.
5 years later our remaining portfolio is worth over $6 million and we have gone from 19 loans to 7. Minus out the remaining loans we would be at over $4 million in equity. While you never realize it at the moment, our timing was pretty perfect with the market run-up. Our per door cash flow is now over $600 per month after all those pay downs.
Anyone would be hard pressed to duplicate that in today’s market. But real estate is cyclical, and it will come back around.
What really motivated us was the futileness of the 4% withdrawal rule (you can only w/d 4% of your investments per year to be sure you won’t run out of money in retirement). The thought of living on $40,000 /year coming from a dual income a lot higher wasn’t going to work for us.
It starts out as a leap of faith. But real estate is SO SO powerful as a generator of wealth. The best thing is that you are pretty much in complete control of your destiny. You aren’t subject to the random swings of stock market like a passenger on a bus! Sure, you exist in the real estate market with its own ups and downs, but you choose when to buy and sell and the in between if you bought well is a pretty smooth ride!
It’s not without its excitement though on occasion… but I don’t regret one moment of the trip so far. When the markets settle back down I would encourage you to hop on and enjoy the ride!
all the best!
Randy
Hi, Randy. This is a very informative and motivational post. My wife and I are in a similar starting point(ages 46 and 47; working corporate and university jobs as we begin this venture). I initially wanted to flip properties but have become more excited about buying and holding cash flowing multi-family properties to help meet our retirement goals. I tapped into Bigger Pockets some years ago but allowed analysis paralysis to take hold for too long. I'm doing the research now to buy our first property by our anniversary in July.
one thing to add, is when you say debt is actually not a debt but more like capital cost that's borrowed by a lender. Now, if that debt has low-interest rate that's even lower than inflation, then that's free money, especially if that's a fixed rate.
Nobody, nobody in the world except in the USA, is willing to give money to us for 2% something rate, for an asset that keeps appreciating. And that's for 30 years.
If you think about it, it's the ldner that takes the huge risk, not us the borrower, hence you see the SVB debacle.
You invest cash for a house, only if you live in 4th world country where finance instituion doesn't exist.
having mortgage is actually a MUST, and better than high yield saving account.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
Leverage is how the business world works, and corporations are making money hand over fist.
Equity is not useful until you convert it to cash flow. That's where leverage comes in. Net worth looks good on paper ... just try spending it.
My credit mentor says, "Your credit score is a tool, not a trophy" and "Credit scores get you declined, not accepted. Ultimately, your credit report gets you accepted."
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
For decades people were gorging on cheap money. The spread between cap rates and mortgage rates was substantial. For example a 100K property with 1K per month rent would generate about 6k NOI (6%). You could get loans at 3% all day long (half the NOI). So leverage works mathematically in your favor. You are still taking on risk of course. Now when the mortgage rate is 7% and your NOI is still 6% or less, your leverage works against you rather than for you. And the risk is still there (compensated for only by potential appreciation).
The other part is psychological. True Financial freedom is not based on leveraged assets. Have a few paid of properties and enjoy the lower risk income.
The thing about the flips is it gives you a lot of free cash to buy more rentals. When we attended a seminar starting out, they had a ‘mantra’…. “Flip, Flip, Flip, Buy a Rental”. The idea being that rentals and cash flow are the ultimate goal, but you use the flips to finance the rental purchases. Feel free to reach out if you want to discuss offline.
My advice: only finance a deal that will cash flow well (like $300/month after principle, interest, taxes, insurance, and a $100 maintenance fee). If you aren’t finding that, continue to wait for the market (house prices / interest rates) to settle back down. It’s not worth tying up a chunk of equity for much less in my opinion given the expenses that can come along with rentals. Be sure to account for the property tax reset that happens the year after you buy it as well. In a high appreciation market that can eat up a pretty big chunk of what you thought was cash flow. I’m not seeing much worth buying right now with rates so high, but I’m always looking.
Real estate is not easy money. You have to do the work and find deals that cash flow. This means ensuring that after paying the debt, taxes, insurance, property management, vacancy costs and maintenance expenses out of rental income, you are still making a profit - rather than operating in the red. Real estate investing does have its risks though; major maintenance issues, long-term vacancies and difficult tenants can all affect your bottom line. If you make smart investments however – choosing properties with equity or a positive cash flow – then it can be an incredibly rewarding experience financially. With real estate investment comes great responsibility too though: taking care of your tenants while protecting your financial interests is key to success.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
Investing in RE from a traditional standpoint as you've outlined is a viable way to create long-term wealth over a period of 10+ years, most likely 20 years to see great returns if you amortize at a normal pace.
The better the price you negotiate; however, the more opportunity to leverage equity and acquire more units quicker, or conversely you can keep debt levels low, cash flow better and add units more deliberately.
Unless investing solely from the perspective of appreciating value, there should never be a scenario where you enter an investment with negative cash flow/value. Focusing on distressed deals allows to ensure good cash flow after debt service.
There are ways to structure debt service to pay off 30 year mortgages in less than 10 years without adding additional principal payments. I'd be happy to chat more about that with you.
Real Estate is all about time. It isn't about today, it's about each year thereafter. Rents go up and mortgage gets paid down. Eventually, it may make sense to sell and scale up (I sold my condo and bought two multifamily properties out of state). When you calculate cash flow, you also need to calculate loan buy down from the tenants because should you sell or cash out refi, that is money you would receive.
Let's say you wait and want to pay cash for every property. How many years would that take? During that same time, you could have purchased multiple properties and have the tenants paying down that mortgage. Effectively you are getting a free property.
I have a property that I own outright. I'm doing a cash out refi where I will receive $123K. The mortgage will be about $600/month. If I did take out that money, it would take me 17 years to get that money back. With that $123k, think about how many more properties I could buy.
If you are young enough, you can afford to make small cash flow while still working your W2 job. As things grow, you can slowly work less and live off of the appreciated rents.
The thing about the flips is it gives you a lot of free cash to buy more rentals. When we attended a seminar starting out, they had a ‘mantra’…. “Flip, Flip, Flip, Buy a Rental”. The idea being that rentals and cash flow are the ultimate goal, but you use the flips to finance the rental purchases. Feel free to reach out if you want to discuss offline.
My advice: only finance a deal that will cash flow well (like $300/month after principle, interest, taxes, insurance, and a $100 maintenance fee). If you aren’t finding that, continue to wait for the market (house prices / interest rates) to settle back down. It’s not worth tying up a chunk of equity for much less in my opinion given the expenses that can come along with rentals. Be sure to account for the property tax reset that happens the year after you buy it as well. In a high appreciation market that can eat up a pretty big chunk of what you thought was cash flow. I’m not seeing much worth buying right now with rates so high, but I’m always looking.
All the best!
Randy
Thank you for sharing those additional insights, Randy. I'll keep in touch.
At this point, I am a prospective investor who is looking to get into multifamily real estate. In short, I'm in the research phase of my development and in doing so, I've encountered several strategies for acquiring real estate and developing a portfolio.
Whether it be 20% down and then later, utilizing another 20% down to buy more properties, or by utilizing the BRRR method, the thing that I can't seem to understand is how anyone is profiting if they're constantly owing money to the bank, without paying off the mortgage in full from the first property?
On the surface, it appears that you're only making partial payments on one property, and then moving on to the next property by adding another mortgage that you're still responsible to pay for with interest. It would seem that if you're always in the red, that at some point, you could get yourself into a lot trouble with the bank or potentially ruin your credit.
In short, what's the point that I'm missing?
It's a 2 part process.
Part 1, get all the PERFORMING debt one can. Or that meet's one's end goal. Keyword PERFORMING debt.
Part 2, "Kill the Bank!". This is when one flips the switch from growing cash-flow, to focusing on debt paydown. Or maybe cash-flow is so fantastic that one just sit's back and let's it coast.
Remember that rents from month 1 are paying down your debt. Think about that, someone else is paying off your debt, and putting some into your equity piggy-bank, every month.
If your 65, yeah it's hard to see much benefit to starting at 65 because it's a time-play. If your with time to do 20-30yrs, it's a no-brainer. You pay once, for something that will keep paying you for eternity. It's a math game.
I subscribe to this 2 part process. I will add that if you have a longer time horizon, you can repeat that 2 part process with each cycle and build a more fortified high performing portfolio that is not tethered by the bank.
@David Ogas you make sure that the rent you can charge is MORE than your mortgage, taxes, insurance, repairs, etc. You should never operate in the red. Every month should be cash flow positive.
