What if I don't want cash flow?
I just listened to the August 1, 2018 podcast "7 paths to financial independence". Really great episode. They talked about the following method for those who don't want to be super active in real estate:
- Buy one house a year, ensure rent covers all expenses at a minimum
- Have each house on a 15 or 20 year note
- Once you hit year 16 or 21 (whatever you amortize the loan for), start doing cash out refinances
This method only requires one house (more would work too) a year, and would greatly supplement or even provide a retirement.
I have been wanting to build a portfolio of single families and small multis that cash flow ~$100 a door after expenses. I've always thought building equity would be great; pay them off and enjoy more cash flow, do a cash out refi and buy more, cash out refi and loan the money, do a 1031 exchange into a more passive portfolio, etc. I hadn't really ever thought about just doing the cash out refi to have cash and not pay any taxes.
This got me wondering, what about putting small multi families on as fast of a note as possible? Ensure you can pay taxes, insurance, property management, save for vacancy, save for repairs and cap ex, but then put everything else into the principal and interest payments. This way you pay the property off as soon as possible, allowing you to do a cash out refi asap.
Assuming you are ok with no cash flow for awhile, would this provide any tax benefit? Avoiding rental income to take advantage of refinance income?