Financial Help for Real Estate Newbie

[Matthew Medlock]

Hello,

My name is Matt and I am new to the real estate game. I have taken my first step in my journey by renting my home and moving to another home that I plan to rent in a couple of years. This is my dilemma. I have only 5 years left on my rental property until it is paid off ($65,000). It has a loan with a good interest rate (2.95%) It was an eleven year note and the current monthly payment is around $1630 with everything included. I already have a renter that is renting the place for $1700 per month. I will have zero cash flow each month after the repair costs after accounting for the repair costs. The house is worth $217,000.

I was able to put zero down on my current home ($210,000) and it has an interest rate of 3.04%. I have enough in my bank to pay off the rental property and I was going to do so to give me immediate cash flow ($1100) monthly. Then I was going to apply that cash flow to my current home and pay down as fast as possible by putting $3,000 extra each month to principle. I will be able to have it paid for in around 3.5 years.....if all goes well. Then I would move to the next house and do the same. I would use the money coming in to pay the next mortgage and so on.

I have not gone through with the plan because once I drop that cash it is gone and my investment potential will be reduced. My fear is that I will end up losing all of the investments because of something stupid if I use leveraging like most people.  

I really don't know what to do: pay off the rental, pay off current home, or buy another home with the extra money.  I have thought about refinancing the rental for some cash flow but I am unsure about this because it will be paid off soon and the cash flow will be a lot. Should I use the equity in my rental plus the extra money to buy my 2nd rental free and clear?  I should be able to cash flow around $1000 per month with it being paid off. My current sketch that I put to paper has me owning 8 properties free and clear (1.8 million equity) and a conservative yearly passive income of $86,000 in 24 years. Like I said earlier I would be snowballing each payment to a new property every 2 years ish. 

I currently bring home about $72 k per year and my wife makes about $12 k. Once she starts working harder she can be making around $70 K. (physical therapist) My monthly expenditures are around $5 k ( I was only figuring one mortgage payment) and bring home is $7 k ish. In 5 years I will not have a baby sitter bill which is an extra $1,300. I don't have any other debt except the mortgages on both the homes.

Someone smarter than me that has been in my boat please help. I have been reading books and listing to videos a ton but I figured someone was super savvy here. Sorry for the novel.

Matt

[Ivan Barratt]

@Matthew Medlock this sounds a lot like the Millionaire Real Estate Investor (A book by Gary Keller). It's a great get rich very, very slow plan. If that's what you're looking to do keep it up and maybe read the book above.   It's not my plan but to each their own. All the best!!