The way to wealth is debt?

Question

So, I am sure this question has been answered many times, but let me ask it again and see where it goes.  If you have a link to a related forum discussion, I would be thrilled to check it out.

I jumped into the investing game about three years ago.  The only way I was able to do so was by refinancing my house, that I would have owned in about three years.

To date, I have a duplex and three single family homes. I owe about $460,000. That includes a HELOC on my personal residence and a HELOC on one of the investment properties.

I have about $35K remaining on one of the HELOCs.

My question is, should I purchase another home by using the remaining credit, or should I start paying down my HELOCs and other loans. At what point do I call it quits on purchasing and focus on paying off loans?

I realize there is a lot involved in this question, I guess I'm just looking for some ideas.

Thanks!  I love Bigger Pockets!

Shaun Hunt · Answer

Jr. T,

I owed 46K on my house a few years ago.  I now owe 120K after HELOC, I owe about another 340K on other properties, a duplex and three SFH. Just guessing, my properties, including my house are valued between 750-800K.

I make about 50K in my "regular" job each year.

Shaun Hunt · Answer

Thanks Matt and Kyle! My goal to obtain five more homes within the next eleven years. Eventually, I would love to have a handful of paid for homes.  Should that me now, or later?   I would like to "retire" in eleven years.  That will allow me to draw a retirement after thirty years of employment. Once I retire, I would like to invest full time.

Things are going well, so far.  Each property is cash flowing.  I just need some council on how deep of deep I should go.  Should I use a HELOC as my "sleep well at night account" or actual cash.

Should I take another HELOC out of my properties that have equity?

I would like to learn more about how to use "OPM."  I have tried to go at it alone with only having books and the internet to mentor me.  I am sure I have made mistakes that have cost me thousands of dollars.

Kyle, do all of your properties have debt?  More owed than not?  When do the banks say enough is enough?  That is where I am at right now as an amateur investor.  I still have my SFH, six kids, one on college that may be getting married next year, and a slew of medical issues.

JR T. · Answer

How much total equity do you have now and how much did you cash in when you started?

That's the only way you can get an answer to this question.

Kyle Penland · Answer

I want to build as much debt as possible because I purchase the property right!  If it doesn't make sense then I don't go forward.  So with that said all of my properties have debt, but they make great money.  Its whatever your personal preference is.  I would use that money and buy another.

Matt Moger · Answer

What is your end game? That sounds so cliche, but is your goal to own them free & clear? Is your goal to grow your cashflow to 'X' per month? How are your current properties performing? All those factors play into your decision. If they are all bringing great cashflow & there are no foreseen major expenses, then you may consider using the remaining cash.

Perhaps that $35K could return an extra $500+ per month & you could use all your cashflow from the 5 or 6 units that you have to start chipping away at the debt.

OR!

You may want to look at using "Other People's Money" :) Obviously depends on your level of confidence in your abilities, comfort level & the specific market you are after, but that is the preference of many investors & can exponentially slingshot your investing career.