What would you do with six rental properties without mortgages

Question

Just curious about BP opinions.  I have 6 mortgage free properties that I bought around 2010 when the market had crashed. I am thinking about taking out my original purchase money thru a mortgage. Actually in would be much more that my purchase price.  I paid anywhere from 30K to 45K for these properties (condos) and I cash flow around 700 per unit.   if I took out a 75K  mortgage (75% LTV ) I would still cash flow around 300 per month  I am retired and like having the monthly income but it would be nice to get the money out as well.  What would you do.

Christopher Parsons · Answer

What are you looking for? If it was me personally, I'd either go for a HELOC (if I could find it) or refi the equity out to leverage and purchase more. I'm also 31 and am trying to mad dash to build my mini empire as fast as possible. If you're looking more for straight up stability, then having them paid off might work better for you. Thatch Nguyen talks about how having the peace of mind is sometimes worth more than money you'd receive (ep 395 of BiggerPockets Podcast). If you have kids, are you trying to build up a bit more to eventually leave for them? Maybe refi half of them to have money to play with while also keeping some of that peace of mind.

Honestly, its a very personal question that will be completely dictated by your goals.

Jonathan Taylor Smith · Answer

@Fred Cannon - Return on equity is ZERO - just like money under your mattress or buried in your back yard... So I'd take out cash at 70% LTV, at the current all-time low interest rates (FREE money) - and use that to buy 6 more rental properties at 75% LTV.

Nathan Gesner · Answer

It depends on where you are in life. If you were ready to retire, you could just live off the income the rest of your life. If you are still young enough and enjoying your job, I would cash out at least 50% of the equity and continue purchasing cash-flowing properties. You could buy more houses, put all the rent income towards paying them off, and have 12 paid off houses when you are ready to retire instead of just six. Or maybe 20.

I could be financially independent right now.  I could walk away tomorrow and easily support myself for the rest of my life without any sacrifice. More importantly, my family could survive without me if something happened. However, I also enjoy my business, serving my community, and providing jobs for others. So I continue to invest and grow my portfolio.

I am also focused on getting to where I "want" to be, not just where I "need" to be. My ultimate goal is to be financially independent AND wealthy enough to help others. I'm working towards $300,000 annual income so I can live very comfortably off 1/3, use 1/3 to help others locally, nationally, and globally, and still have 1/3 to continue investing.

Nick Robinson · Answer

@Fred Cannon

It depends what you want it. If the rentals you have make $700/mo x 6= $4,200/mo that’s a good amount to live on for retirement.  If you can take $75k on each you will have $450,000 plus make $1,800/mo in cash flow. I personally would take that money to invest in an apartment building. You’ll need about 30%down so you can buy a $1.5mm building.

What would you do with six rental properties without mortgages

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