All Forum Posts by: Brandon Crumpton

@Brandon Crumpton To me it's no different than any other risk assessment.   Identify the probability of a risk (such as vacancy) occurring and the mitigation steps required (cash reserves) to cover yourself.   As long as you don't over leverage yourself by keeping not enough cash on hand then it's a great way to build wealth.  

Personally I rather buy 3 100k houses by putting 30k down on each rather than buy 1 house at 100k.  Triple the rent for the same money and it's unlikely you'll suffer some catastrophe on all your properties at the same time.  

@Brandon Crumpton

 - Great question and @John Thedford summed it up nicely.

Yes, it's a double edged sword that enables you to take massive leaps forward and risks or can be utilized to the point where you overextend yourself and then being unable to sleep well at nights.

Use leverage wisely and you will benefit from it's advantages positively.

By doing a cash out refinance (assuming your 1st property will still cash flow) it provides you with the cash that you can utilize to use as the down payment for your 2nd property, rather than pull the money out of your bank account. So essentially the equity that was built from your renters in your first property paid for your 2nd property.

A con is that you lose equity in your 1st property and your cash flow is reduced as well. But you gain a 2nd property with no out of pocket expense.

The pro is you may never need any more cash again.  You just refi out of the 1st, use the cash on the 2nd, refi out of that one to use that cash on the 3rd, and so on...never actually spending the cash...just using it over and over again.

The cons,  you have no cash at risk once you refi each property, you are reducing your cash flow from each property by the amount of the debt service, but as long as you are still positive you are winning (as opposed to leaving all your cash in the deal, having a higher CF/month, but being behind from the beginning until your CF s  l  o  o o  w  l  y catches up and you break even), you have debt at risk (no wait, that's the bank/lender that is at risk there since it's their cash that you received from that debt).  I guess all those cons are actually added pros.