Rental Property Investor · AR · Member since 2020 · 12 posts · 28 votes
It took me a while to pay off my first 2 rentals. I then bought a duplex about a month ago. I want to scale my business. I am real fortunate in my life right now bc I don’t have children and I’m not married so I can relocate and house hack if I need to. I just need a little advice and motivation I guess. Thanks everyone for your feedback.
Refinance and use the proceeds to scale. Paying down debt versus investing the cash flow back into the business has the opposite effect of leveraging and scaling it.
...or sell the two paid off properties. I know that you think that goes backwards, but it is in fact moving forward. If you sold the properties and reinvested the profits, you could buy 5 times the amount of properties. If they each had the same cash flow as the ones you paid off, you could have 10 times the CF...and now 10 properties instead of two appreciating.
Then, stop using your money to pay off the properties. That's going backwards. That's not saving you money, it's costing you more money. Your tenants were happy to pay them off for you...for FREE. Why help them? Put your cash to better use by turning them into 5 times their face value.
Refinance and use the proceeds to scale. Paying down debt versus investing the cash flow back into the business has the opposite effect of leveraging and scaling it.
Refinance and use the proceeds to scale. Paying down debt versus investing the cash flow back into the business has the opposite effect of leveraging and scaling it.
...or sell the two paid off properties. I know that you think that goes backwards, but it is in fact moving forward. If you sold the properties and reinvested the profits, you could buy 5 times the amount of properties. If they each had the same cash flow as the ones you paid off, you could have 10 times the CF...and now 10 properties instead of two appreciating.
Then, stop using your money to pay off the properties. That's going backwards. That's not saving you money, it's costing you more money. Your tenants were happy to pay them off for you...for FREE. Why help them? Put your cash to better use by turning them into 5 times their face value.
@Joshua D baker I would agree with @Joe Villeneuve on the basis. Don’t be afraid to leverage your current assets to scale. The goal is to have 0 cash in the deal and cash flow while it appreciates. I would refinance your current assets and use as down payments for other properties. I would gear towards quads and up though. You could sell and trade up, but I would prefer to refinance and buy more.
@Joshua D baker I would agree with @Joe Villeneuve on the basis. Don’t be afraid to leverage your current assets to scale. The goal is to have 0 cash in the deal and cash flow while it appreciates. I would refinance your current assets and use as down payments for other properties. I would gear towards quads and up though. You could sell and trade up, but I would prefer to refinance and buy more.
I would sell for two reasons:
1 - It maxes out the value of the existing equity.
2 - It doesn't reduce the cash flow of the original properties like refinancing does. It maxes out the cash flow returns too.
@Joe Villeneuve I’m not oppose to selling, but without knowing the market and appreciation rate right now along with how long we’ve had the properties, I can’t really give an informed decision on. Of course refinance reduces cash flow, but if the numbers still allow the property to be paid for and cash flow a little while it appreciates, that better in my strategy then giving up the asset. On selling we lose any future earning on that particular property while refinancing we start gaining equity again to use all while having the asset pay for itself and using the equity and cash flow of it to scale!
@Mike Dymski. That’s the answer to refinance. I have a 160k brick home and 2 mobile homes that I should have refinanced years ago. Lack of education. I basically bought 2 mobile homes, rented them out to pay for the house. Now all 3 are paid off. I just bought a duplex. Refinance is definitely the answer thanks everyone.
@Joe Villeneuve I’m not oppose to selling, but without knowing the market and appreciation rate right now along with how long we’ve had the properties, I can’t really give an informed decision on. Of course refinance reduces cash flow, but if the numbers still allow the property to be paid for and cash flow a little while it appreciates, that better in my strategy then giving up the asset. On selling we lose any future earning on that particular property while refinancing we start gaining equity again to use all while having the asset pay for itself and using the equity and cash flow of it to scale!
First, you don't sell the properties until you have a place in mind to put the cash.
Second, no wait, no second is needed...LOL.
Actually there is a second. Who cares about any future earnings with the original property. If the money you are taking out is $100k buy selling, and the property gains 10% in equity over the next year, you gained 10% in "future earnings". If you sold the property, and used that same $100k as a DP (20%), that means you would now have a property worth $500k. If you just gained 5% appreciation on the new property, you would gain $25k in appreciation. Future gains are based on property worth, and has nothing to do with equity.
The higher property value should also have higher cash flow (logical). Thus, you are losing money when you build up equity and leave it in a property. Selling maximizes: Property values, cash flow and future gains on an exponential basis. Refinancing is a lineal return, and it reduces the CF on the property being refinanced.
The best way it to scale is to keep your equity moving forward, and realize the asset isn't the property...it's the equity, and that equity is better used, and has a much higher value, when it doesn't die in a property.
@Joe Villeneuve I like your thinking, however we will just have to disagree on this one lol! Again, I don’t disagree with possibly selling depending on some other factors, but you do not have to sell just to scale and selling does not maximize your return or potential! If that was the case, we should call back all books and podcasts on brrr method and cancel the bigger podcast show lol!
We can beat a dead horse all night but once you sell, that asset is dead. Whether you call the asset the property or equity (although the IRS would agree with me about what an asset is) that asset can never be used again. You start over again in another property. Sure maybe a better property or a higher cash flow property, but at the end of the day, you are much better off if you can cash flow on multiple properties using the same cash while rinsing and repeating. You can also rinse and repeat equity in a property just in a different manner.
If you and I both draw out long term strategies using the same cash either from selling an asset or refinancing an asset, I’m fairly confident I can show larger cash flow and higher wealth built!
At the end, either way can work, just depends on how you want to accomplish.
@Joe Villeneuve I like your thinking, however we will just have to disagree on this one lol! Again, I don’t disagree with possibly selling depending on some other factors, but you do not have to sell just to scale and selling does not maximize your return or potential! If that was the case, we should call back all books and podcasts on brrr method and cancel the bigger podcast show lol!
We can beat a dead horse all night but once you sell, that asset is dead. Whether you call the asset the property or equity (although the IRS would agree with me about what an asset is) that asset can never be used again. You start over again in another property. Sure maybe a better property or a higher cash flow property, but at the end of the day, you are much better off if you can cash flow on multiple properties using the same cash while rinsing and repeating. You can also rinse and repeat equity in a property just in a different manner.
If you and I both draw out long term strategies using the same cash either from selling an asset or refinancing an asset, I’m fairly confident I can show larger cash flow and higher wealth built!
At the end, either way can work, just depends on how you want to accomplish.
This is basic math.
Keeping the 100% equity in place gives you one property. Moving it forward gives you 5 times the value. Keeping the 100% equity in place gives you 1 cash flow. Moving it forward gives you 5 times the cash flow. Keeping the 100% equity in place gives you only 1 property to appreciate. Moving it forward gives you 5 times the appreciation.
In both cases, the equity is equal. The difference is in the 2nd option, it's not all in one place.
...and, when you refi, you're not using the same cash if you have to pay for it every time you refinance. Selling the property is using the same cash.
@Joe Villeneuve you just went off course there! Nobody said leave 100% equity in a property. We were talking about refinancing. I follow your comments often so I know you understand refinancing is leveraging a property, so we are only leaving 25-30% equity in a property at refinance. That’s basic math. Lol!
You do not build wealth by selling everything, you have to hold properties. I almost think your goating this conversation because I know you know that.
If you really believe what your saying, you should be giving him advice on how to be a successful flipper/rehabber because that’s what he would be doing If he sold every time he got good equity in a property.
We could go all night beating this, but I’ll leave it alone.....lol.
You have a lot of good feedback often, we just disagree on this one. Take care buddy
Likely doesn’t help much but I interpreted what Joe was saying as selling to do 20% down on 5 more. End. I didn’t interpret it as sell, buy 5, then target paying them all off to sell again and buy 25.
@Joshua D baker with everything going on I’d keep the paid off ones as piece of mind. I would just set up a heloc with the paid off ones and use the heloc make cash offers and pay for the rehab. Once the rehab and everything is rolling just refinanced Triston lay back the heloc. Do it again one house at a time safely.
Likely doesn’t help much but I interpreted what Joe was saying as selling to do 20% down on 5 more. End. I didn’t interpret it as sell, buy 5, then target paying them all off to sell again and buy 25.
@Joe Villeneuve I was on the same page with you guys, but I can take the refinance money and use as down payment on other properties just the same. Might be 20% shorter, but if we buy right we can brrr those and rinse and repeat that money.
Guess what??? We still have our original properties and didn’t have to give them up.
And if your feeling frisky after you scale to where you want to be following the simple brrr technique, take the same money from your original refinance and go back and pay off your leverage on your first two properties. Now your full circle and scaled and have 0 cash left in any deal!
We could start a whole other conversation of what might be better from a tax standpoint....
@Kris H. Nope lol! I knew exactly what he’s saying, but my strategy is to buy the same but use the cash out refinance to do it or a heloc and we don’t have to give up our assets to get the cash to buy 5 more properties. Simple strategy that a lot use on here and the way I built hundreds of doors in my portfolio
Leveraging is the name of the game if you want to scale and add cash flow. Paying off a mortgage is another great strategy but it is counter intuitive. Define what your goals are and go that route.
What do you want to scale and why? Do you want boasting rights to claim some arbitrary number of doors? Or do you want a predictable income stream that you can safely retire on? Do you want the stress of never ending mortgage payments, letters from the bank, demands for insurance proof etc etc the rest of your life? Or do you want autopilot checks coming in with minimal bills to pay? If you want the former follow the Refi till you die crowd but if you want the latter you are on the right path already.