Sitting down to make business plan. A question about multiple mortgages.

1 Reply

So I am sitting down to iron out my business plan. Spending time on BP it seems that many people who have 15,20,50 houses hold mortgages on most of them.

My wife and I are conservative by nature so the thought of 15-20 mortgages is scary to us. My thought was that in year three when I should have 4-5 duplexes to pay one off prior to moving on then acquire a few more properties then again pay off a mortgage or two. As a 32 year old am I ever going to be able to reach 20-30 properties doing this? The market I will be investing in the properties are only 40-60k for duplexes. With monthly rent per property of $1100-1200 and taxes on average of $1200.

Input is appreciated.

Jeff

@Jeff G. The biggest reason to carry a mortgage on any (and every?) property is to put your capital to work at higher returns. Paid in equity sitting in a property does not generate a return. It's like sticking money in a no interest savings account. A second reason is risk mitigation. Although having too high LTV on a property puts you at risk of going underwater in a downturn, carrying a reasonable mortgage can make you less attractive for lawsuits. Free and clear properties are more attractive targets (not only for litigation-happy folks but also - heaven forbid - for divorcing spouses).

Consider your risk tolerance, of course, but consider using leverage on all your investment properties - even if you need to eventually keep your LTV around 60% or 50% so you can sleep better at night.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.