Am I missing something?

[Debbie Rumsey]

I am hoping someone on these forums can help me out with understanding what the best way to leverage but not become deeper in debt. My husband and I own multiple SFR's, condos and a few small (du,tri,4plexes) some of which are paid off. We have been listening to podcasts from Bigger Pockets of investors that are buying much bigger multi units and saying that the numbers are much better. We are very excited to do the same, however, we are 50 yrs old and afraid of increasing debt by leveraging free and clear property into yet another debt when we purchase with the downpayment (taking a refi out on paid off property AND using it for only a downpayment creating 2 loans out of 1 paid off property) . I guess the question is....how can you look forward to cash flow for retirement when the debt has increased as well. Do most of you 1031 exchange or pull out the money in a refi to grow your investment portfolios? What am I missing?

Thank you for your help!

[Justin R.]

@Debbie Rumsey 1001 strategies and mindsets.  Here's what makes sense to me (since you asked):

Most of us go through an accumulation phase, an optimization phase, and a simplification phase.  When we accumulate, it makes sense to leverage (or 'arbitrage' as Andrew said) into anything that makes us more money - don't let capital sit idle.  When we optimize, it makes sense to 1031 (or otherwise adjust the portfolio) so that time and effort are optimized against returns - make more without doing more.  When we simplify, it makes sense to hire property management or sell in order to focus on an asset type or geographic area - less time and risk in return for lower returns.

Some people throw all that out the window and just want more, bigger, and faster ... forever.  God bless 'em.

Some people go through those phases repeatedly, and not necessarily in that order.  :-)

Figure out what phase you're in (or if you reject this framing entirely), then act accordingly.  You've got assets of different types spread out all over the place ... not typically a sign of optimization OR simplified portfolio.