Brand New REI- Just Purchased 1st Vacation Rental

[Adam Roll]

Hello BP community.

Been following the forums and listening to the show for quite some time. Finally made the jump and just bought our first vacation rental.

My longtime girlfriend and I emptied out the account and put 60k down on an amazing 300k vacation rental near Bass Lake and Yosemite National Park.

By conservative estimates, it should cash flow over $1,000 a month after ALL expenses.

As I am still learning on the fly here, I am most interested in the next steps in acquiring the next property (and the next, and the next).

The house should appreciate some throughout the year, and it is nearly turnkey as it was wonderfully taken care of by a family for 40 years, so we won't be adding too much value with remodeling.

My main question to the BP community is "What's the best options to finance our next purchase of a rental property?".

Should we take the cash flow, pay down the mortgage and build equity, then take out a home equity loan or a cash out Re-Fi?

Or do we save the cash flow, and use that money to work towards the next purchase?

I genuinely appreciate everyone's help, and look forward to communicating with a lot of you in the near future.

[Todd Rasmussen]

Hi Adam,

I wouldn't pay down the mortgage just for equity to borrow against. If you have positive cash flow on the property (and that's how it shows on your taxes too) Then you can use the cash flow as additional income to qualify for another loan. If you pocket the cash flow and hold onto it for a down payment on the next deal, you will be able to leverage that money 5x as much as if you borrowed it from yourself. You should be able to pick up several properties before a traditional lender starts to flinch at your application.

Todd