Leverage Strategy

2 Replies

Lately, too much of my time has been consumed by the notion of growing my real estate portfolio into a legitimate money maker.  My dream is to supplement my current W-2 income with passive real estate income within the next 10 years.  Yet, to do so, I need to be a more bit aggressive. 

Out of my nine properties, two are paid off.  Additionally, I have one property with approximately 150K in equity.  

All things considered, for those who have jumped into real estate full-time, would it be wise to pull out the equity from my properties?  Afterwards, it would be used as seed money to acquire more properties in better cash-flowing markets like the Mid-west or South.  

Smart?  Or dumb? 

I think that depends on where your level of comfort with risk is.

I pulled equity on my main residance and a rental up to 50% of value to finance buying 4 more houses.  It has proved a good investment for me as the last of the 4 is paying for itself and the rental right now.  By 4 we finally understood our niche market and nailed it.

For me, 50% gives me room for if the market dives again to get out if I need to.  All of the rentals can easily be sold for what is owed on them.

My strategy is not to pay off, but to let others pay off for me in rentals.

There are, of course, myriad other ways to look at this.

Leverage can be dangerous, particularly in a rising interest rate environment. Good luck.

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