Grow Your Portfolio or Debt Free Properties

[Kevin H.]

So I work in the MRO industry dealing directly with multi family management companies. A lot of the owners started out with owning properties and growing them to owning thousands of units. I was talking to one of my customers yesterday who runs over 6400 units. I was talking to him on my goals and inspirations. How I am closing on my first rental and plan on trying to purchase a property every year. He brought up a very good point that I never really thought about. He stated instead of leveraging yourself and creating more risk. Why not pay off your first property as fast as possible. This would increase your cash flow eventually, lower your risk/debt and make managing easier; being you have fewer properties. He stated that this method shows the banks you're a sound investor, protects you during down turns. Once paid off or a substantial amount of equity. You can take a line of credit on your property to finance your next project. Though I believe no answer is right or wrong. I am curious your thoughts on this process. I know everyone is all about owning as many properties as possible. However isn't the goal to have a high passive income, which grants you the freedom to choose how you live your life? Appreciate all your thoughts.

[Chad Nagel]

I used credit to build my portfolio, I am up to 38 rental units. Started at age 20, currently 36 years old ( semi retired living off my units). Once I started flipping 10 years ago ( yes I flipped right thru the downturn), I used the excess profit to pay off rental units and build LOC. This has allowed to purchase new rentals and flips with LOC cash and not have to ask permission from a banker or deal with private or hard money. There are many different way to get to the finish line. I prefer mine to be with paid for rentals, so WHEN ( not if ) we have a down turn. I am not caught swimming naked like the rest of the investors that bought when the market was hot and no longer have equity to refinance.

Feel free to bash away, this forum is built on the OPM strategy......