So I have been at this rental property thing for a while and my plan has changed on a few occasions based on my life with the Military and family things that were going on. When I first started I always wanted to have 1 home paid for free and clear.
I always felt that was my fall back plan in case I somehow lost everything lol. I grew up in a foster home as a kid so I have always had that lingering around in my head..I don't plan on losing it all, but that was my reserve parachute. Here is my current situation:
House 1 paid for: Rents for $975
House 2 Mortgage of 65k: Cash Flows $475
House 3 Mortgage 152k: Cash Flows $305
Child Care Facility Mortgage 352k: Cash Flows $1200 (My wife and I bought this. She runs the facility and pays my Rental Company $1,200 a month because of the money we laid down for it.)
In addition, I add $1,500 of my own money to the pot every month, which is a grand total of $4,455 a month in cash flow every month. I have about $17k on-hand for reserves.
I don't know if I should take that $4,455 and save up for house #4 or pay down mortgages. I would start with House #2 and just pay down the 65K if I did start paying down mortgages.
I will retire out of the Army in 7 years. My ultimate goal is to cash flow 10k a month between my rental properties and my Military retirement. I figure I can live comfortably off of 120k a year.
What are your thoughts BP?
@Chance Cooper I would reverse engineer. Figure out how many paid off rentals will get you to your cash-flow goal. Then, acquire that many rentals. Finally, use the combined cash-flow to pay off the balances starting with either the lowest balance or the highest interest rate.
@Chance Cooper I recommend buying as many properties as you can while you still have a W-2 income. It will be much easier to get loans for rental properties with your W-2 salary from the Army. You could easily buy one property a year for the next 7 years and then once you have your 10 houses, use the positive cash flow to start paying down the mortgages. You may have to get an interim job after the Army, but you could do something you love like real estate because you'll probably have enough residual income between your rentals and your retirement to pay for your living expenses. I have 3 years left in the Navy and that's my plan.
I'm with the others. Establish your goal ($10,000 a month income) and reverse-engineer it to figure out how many units you require to generate that cash. Your focus should be on acquisition until you hit that goal. Then you can decide to start paying off units.