Should i keep buying more units or start paying them off?

[Hamad Khan]

Folks, need your advise on following.

i have 41 doors and i am managing them all by myself, good cash flow and i guess i am about yo leave my 9-5 job. 

question is should i keep buying more units or start paying 41 units off ? What should be a wise direction. 

For now all my investments is in real estate. 

[Randall Alan]

Quote from @Hamad Khan:

Folks, need your advise on following.

i have 41 doors and i am managing them all by myself, good cash flow and i guess i am about yo leave my 9-5 job. 

question is should i keep buying more units or start paying 41 units off ? What should be a wise direction. 

For now all my investments is in real estate. 

 @Hamad Khan

We also had 40 rental units a year or so ago.  What we did was sell the ones we liked the least and paid down the notes on others that had the highest rates.  We also did consolidation loans to lower our rates and free up loan slots (you are only allowed 10 Fannie Mae loans per person in the US).  Each of these moves reduced our interest payments, so also increased cash flow.  We timed it pretty perfect though, as now interest rates are off the charts, so refi’s wouldn’t make any sense now.

Here was our thoughts though… at about 40 units we felt we were sort of at the comfort level where we thought managing them was still easy… but we didn’t want to keep adding a lot more on top of that (we were working enough, but still happy).  We sold several properties in the past 18 months, and added new properties we were happier to manage… sort of ditching the C and D properties and repositioning ourselves with more B & B minus properties… so basically upgrading our portfolio. 

We also did this awhile back:  we were able to sell a property for enough of a profit (through market appreciation) that we could pay off another loan and actually not lose any cash flow.  So we went from 40 doors to 37 doors and still cash flow just as much due to losing debt.  That’s 3 less roofs, ACs, tenants, etc we have to deal with!  So we called this sort of “compacting” our portfolio.  It works when you have higher interest notes to pay off with lower interest new loans.  It obviously wouldn’t work now they rates are up… but was awesome while it lasted.  

We went from  19 loans to 8.  One loan was a consolidation loan combining 5 properties into one commercial loan.  A couple of others were cash out Refis to lower our rate and use the cash out to pay off other properties.  Again, that part wouldn’t happen today… but we refied a single family house at 3.5% and got nearly $100,000 cash out at the same time to pay off a whole other property.  Win-Win-Win!

Real estate is a little addictive though… we continue to look for more properties just to drive cash flow higher… so it's not like you only have to do one path. Part of it depends on how satisfied you are with where you are at financially. We both quit our corporate jobs, have freedom of time now, manage the rentals (easy pace), and do the rehab work we want up ourselves when we have turnover… we will paint units, can install lights, replace outlets, etc. but call in pros for things we don't want to mess with. We have a saying : Do what the market is telling you to do. If you have 3% mortgages, and can get 4.25% in a high interest savings account (check out Bask Bank - FDIC insured in the US), why pay off a 3% mortgage? so as interest rates keep going up real estate will continue to cool and we will shift to where the markets tell us we can do best.

Hope it helps some!

Randy