My methodology is very very conservative. A lot more conservative than many here. Most are using other peoples money, and taking equity out of houses to buy another, etc. I just really don't want to get to a point where i have 20 rental properties, all with lots of debt - if each flowed $200 a month, that would be $4,000 a month and thats great! But I couldn't imagine the headaches. I own my own business, and am planning on paying off my house before I get the next. The next house I hope I will be able to get for $80k or so with 20k built in equity and pay it off like mad over the course of a year or 2. This way I could have $800 or so cash flow and live house payment free. Then keep doing it until my residuals are met. This should take about 5-6 properties and I would be done in maybe 10 years. This is my exit strategy. If my own business dries up, I don't want to have massive amounts of debt to the point my back breaks. I also want to get to FI the quickest way possible. That means to me, living simply and shoveling as much green into real estate, one house at a time. Is anyone tracking with me here? Who else is doing this? Who thinks this is smart? Who thinks this is ridiculous?

To the first poster: I like this type of stragedy and in fact we are in the process of closing on our first investment house here shortly and it will be a cash deal. I for one dreally wanted to go into this NOT having to worry about debt or relying on the rent payments to pay mortgages. This way, worse case scenerio if the house is empty for a few months due to not having renters, then we aren't stressed over making the mortgage. Our obligations will be the taxes and insurance and any regular maintenance. That we can handle and will sleep much better at night :mrgreen: We plan on saving up again to buy a second one...and so on. It will take a number of years but our goal is to have several by the time we want to retire and at that point have a positive cash flow.

David, well said! Shari, I am not confusing fear of buying with fear of debt. First off, they are the same. Fear is fear regardless of the intent. You also need to re-read Mr Buffet's book as you are taking things out of context. WB holds a mortgage on his own personal residence and when asked why was quoted as saying that where else could he find money for that price. He does not fear debt, in the context of leverage. What he does not like is a company that has too much debt compared to income/assets. THere is a large difference!

Jason, I think this is a no brainer. Pick the level of risk you are comfortable with. What is it? 50% LTV 70% LTV 90% LTV If you own a house outright and get a low interest 50% LTV first loan on it (not an equity loan)...use the money to buy a great deal @ 70% of value...and make sure it is an easy rental (3bd, 2ba, SFH,etc) put the money you borrowed down on the new place to get that loan at 50% LTV...it would be hard to loose your shorts. Especially in this market. If housing prices drop another 50%, this country is in big trouble. My humble opinion.

Sometimes it's hard to separate those fears, especially for big ticket items and when starting out in REI. It's great to learn about so many different strategies. There's one for every comfort level :D

Don't confuse fear of buying with fear of debt--they are very different. Example, I just finished a book about Warren Buffett who does not like debt and avoids debt on a long-term basis. Most of the companies he buys have little or no debt. Buffett says, "Good business or investment decisions will eventually produce quite satisfactory economic results, with no aid from leverage. 'It seems to us both foolish and improper to risk what is important for some extra returns that are relatively unimportant." Buffett spoke of buying companies but I think it can translate into RE investments. Nobody said Jason is afraid to try real estate investing. Jason simply asked about a strategy to invest. I asked the same question last year and most of the responses I got were to keep debt as little as possible and I have been moving forward in that manner. Many of the people who posted to pay off properties as soon as possible hold numerous properties so they were obviously not afraid to invest.

Thank you Aly. I just get frustrated when people spit out the common fear factor phrases. Here is my favorite saying rgarding fear: "The rich act in spite of fear, while others allow fear to stop them". This is not just a statement of words, but something to live by.

You're welcome :) I leaned towards conservative savings for years. That, and the current market, made it easier to be brave about REI. I asked myself the same things others ask before doing this - I'm afraid a) that I won't be able to pay the rental mortgage, b) that the house will need more work than I anticipated, c) that I won't be able to rent the house, d) that the eventual tenant won't pay the rent, e) that the tenant destroys the property, etc. etc. I was afraid of all those things, and some did come to pass, briefly. I'm much more afraid of doing nothing. Failing is still better than never trying.

True, and never trying is failing in my book. All the fear factors you mentioned above are the same common ones which stop many potential RE investors. Just one more of my favorites: The greatest mistake in life you can make is to continuously be afraid you will make one.

Buying 1, paying it off, buying another, paying it off ... am i alone?

Michael Rossi

Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes

18y

I think it's a good strategy, not the way I've done it, but good nonetheless. There's a lot to be said for having properties that are paid off!

Mike

Buying 1, paying it off, buying another, paying it off ... am i alone?

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