26 years old, What to do after paying off personal property?

8 Replies

Louisville KY resident here. Just looking for some advice on what I should do next?  My personal property is paid off so I am literally debt free. I am not tied to my home and will not live here for a long time (not against renting it out). just looking for some guidance on what I should do real estate wise? basically for those of you who are successful real estate investors what would you do in my shoes?  Thank you

Hey Michael, 

One thing you could do is refinance your personal dwelling (80% of equity) and use that money to buy your first rental property or properties.  You will get a better rate than you would by using the prospective rental home as collateral on the loan.  However, if you plan on moving out of your own home,  you would need to do this before you put it on the market.  

I'm following this strategy myself. 

You can do private money lending using a home equity line of credit interest only loan. Earn 12%+ roi on insured and secured loan. We have three lenders doing this. Takes about 6 weeks to get it set up at the bank.

Generally speaking, you should duration match your liability with your asset. Bringing your debt balance down to zero on any subject property implies a very short life of the asset. You can manage the duration gap as you see fit.

@Michael S.  When I was 20 I bought my first investment home and then used the money generated by that investment to buy more investments and to supplement a shot-term lifestyle I will never regret.  I traveled a lot and spent a lot of time studying...  I lived three months in Jamaica, spent some time in Vegas, traveled to Europe...  Studied at 12 colleges and universities.  The right question is not "what do I do when I pay off my home" the right question is "how do I want to invest this part of my life?".

If you want to make as much money as possible I would recommend getting a HELOC agenst your home and start building residual income with rental properties, do a few wholesale flips every year, buy long term hold properties (or buy on contract) in areas where the land values will go up due to prospective government invest or commercial development.

If you want to experience a little bit of the world and understand life better than forget investing rather sell the house and go hostile jumping for a few months in an exotic far away place.  You can always make more money but you can never make more time and the 20's are a great time to learn about yourself and the world you live in.

Originally posted by @Nicholas Miller:

  You can always make more money but you can never make more time and the 20's are a great time to learn about yourself and the world you live in.

 I love this advice!

wow that's great advice from everyone! thank yall so much. I took me only 2 years to pay off my property I live in, off. I can easily do it again and again. I really like the Heloc route. but should I pull all the equity out and use it for the whole purchase of a property or just enough for a down payment?  

@Michael S. First it is awesome that you had the discipline to pay off a home when you are so young, congrats.
When I'm looking at properties or investments I always want to generate the best cash on cash return. So if I were in your shoes I would look to find several properties or possibly a small multi family to invest in. You can use the BP calculators and play with some numbers but when you buy a property with all cash your return is lower because it is going to take longer to return your investment to you. If you put say 25% down then if you pick a good property your investment will be returned to you faster.
Theoretically if you buy a property with no cash and you get a return on it then what's the return percentage?
It's infinite. What a beautiful country and a great way to build wealth.
Good luck buddy!

Thank you everyone for these great ideas!

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