Hi Guys!

My husband and I have been buy and hold investors for the last 10 years. It was not our primary focus, which is why we only own two investment properties. However, we have paid off both mortgages and now make $5000 a month in rental income which is great, but I know we could be doing so much more with these two investments. Our equity in both properties is significant. My husband is debt adverse so the idea of pulling the equity out of the homes to purchase more homes is a hard battle to win. My focus this year is to grow our real estate portfolio. If you were in this position what would you do to capitalize on the situation?  

Amanda, my wife is very debt adverse too. We have a couple of properties that are not paid off. Don't worry too much about the fact that you own these outright - that's really the goal right? And an awsome achievement. I've done well by doing my research, then explaining the deal to my wife, taking her criticism seriously, and working to mitigate risk. It's slower growth, but also less risk, so it's a good thing in my mind, to make everyone happy and comfortable. 

With that said, you might consider getting HELOC's on both properties. This gives you some money to invest elsewhere (essentially, you can be your own hard money lender on a BRRRR). If your husband is worried about the risk, talk about doing a smaller project initially, and keep the books and communication open during the process. My wife is not super interested in the minutiae, so I generally show her yearly that our net worth is growing, and talk frequently about the cash flow on properties, both good and bad.

You might also discuss how much of your net worth you are willing to invest. For example, it's much easier to swallow if you are talking about investing 5% or 10% of your net worth into a deal, and that you can show that the maximum downside would be say 1% of your net worth, and the upside can add 20% to your net worth. 

I don't think appealing to logic helps in these cases - the worry about debt is more emotional. You have to recognize this concern and show you care about it. In my case, I've been married long enough that my wife trusts me, but it's because I listen to her concerns and work to mitigate them. 

Great feedback @David Sisson ! A home equity line is always a good option, but once again it is still debt. However, we have a very low-interest rate. I think presenting in a way of looking at our net worth is a great way to get his head around the idea.  Where have you invested in RI? Our properties are in MA and we are currenting looking in Providence, East Bay area and a couple of other areas in RI. The prices are SO much better here in comparison to where we were in MA. But I also recognize you can't charge the same in rent. 

Account Closed I like your analogy! Yes, prices are not what they were 10 years ago. We are more interested in buy and hold. Even it is not much cash flow, but the appreciation is there we are interested. I think Providence is a great city with so much potential, but it needs industry! There are not many deals these days, but I am hopeful and spring is coming! :) 

@Amanda Bruneau  

I definitely don't blame your husband for not wanting to pull equity out of your home. If that isn't something your husband is trying to do, then I would recommend financing through a lender. If there might be an issue getting approved going conventional or a lack of liquidity for a 20% downpayment, then look into hard money. If you are able to find flip with a decent enough margin, I know hard money guys that will finance up to 95% of the purchase price and 100% of the rehab. Obviously, there is risk involved in this and it can get expensive if your rehab goes a lot slower than expected. But if he doesn't want to do a HELOC then it might be the second-best option.

@Amanda Bruneau  first, congratulations, that's an amazing achievement! And you picked an incredible 10 years to do it, too 😊

On growing your portfolio, if your husband is averse to putting any new debt on your current properties, then it seems like the only solution would be to put aside money from your cash flow to fund the downpayment on new properties.

An equity line on one or both properties, as David mentioned, is definitely a good idea since you can manage it and pay it down. I know that you replied he's averse to that too, but as a possible counterargument you could point out to him that rates really are at historic lows and this probably won't last too long (see Time to Wake Up To The New Mortgage Rate Reality)

You could also try to get seller financing on any new properties, which might reduce your downpayment requirements and let you expand faster/earlier. If that's something your husband might have feelings about too, then it might be a good conversation to have with him now rather than when you find a deal and start talking about it with a seller.

@Klint Ruud thank you for your input. I have not explored hard money. Do you have any idea what the interest rate is with hard money lenders?  I am working on saving the 20% too, it just takes longer! :) 

@Anthony Thompson great to hear from you! We spoke a while back when I first moved to RI. I believe it was right before the world turned upside down. I am starting the good old fashion way of saving from our cash flow, which will eventually pan out. And I do think once I have more experience under my belt it will be build confidence in my husband's risk tolerance. How have things been for you in the last year? Have you bought any new properties? I got my license and am now working with Residential Properties out of Barrington. It is going very well, I just wish there was more inventory! :) 

@Amanda Bruneau

Sure thing! There are a bunch of lenders out there. The lender I have used is lending 9.99% and 2.5 points.