How do you manage your mortgage?

Question

Kevin Siedlecki · Answer

@Mark Devens. Most buy and hold investors keep mortgages, even refinance to take on additional debt as properties appreciate and loans get paid down. There are several reasons for this, but I'm not sure how to sum it up in a short forum post.

John Thedford · Answer

Mortgages are great until they bury you. They can be a great tool. By using leverage, you can increase returns and acquire more properties. I tend to play a bit more conservative, but you should decide according to YOUR situation. People at a younger age with longer earning power may benefit more by using more leverage. Old people that are only concerned with cash flow may pay off their properties and live on the higher cash flow. Since you are purchasing your first, I would not hesitate to get a second mortgage, and then third mortgage, etc to acquire property. BEFORE I took that step, I would acquire property #1 and put back a generous amount of reserves. Once you are prepared to handle emergencies such as new roof, new water heater, new A/C, etc...then acquire your next property. Most new investors that get into trouble find themselves in that situation because they didn't have enough money set aside. Remember, it just isn't the purchase you have to worry about. Taxes, insurance, maintenance, vacancies, broken A/C, roofs...you must be prepared to handle all of these.  I just went through 25K of reserves...thinking I had plenty!

JD Martin · Answer

If you want to keep growing, remember that equity locked in a property is like paying workers to sit around and do nothing. That has to be balanced by having some easy access to liquidity, and by not being over leveraged. I prefer a mix of the two, holding some back for rainy days, and moving others forward to grow the portfolio.

How do you manage your mortgage?

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