All Forum Posts by: Edward Heavrin

You don't pay holding or closing costs. 

@Edward Heavrin, you technically can BRRRR with financing but you have to get the deal well below market value so you can pull your capital back out of the refinance. Easier said than done.

@Edward Heavrin, you just described the BRRRR method and its advantages. You're correct, the strategy allows investors to pull their capital back out and use it as a means for the next deal.

Remember, no matter how much investors promote leverage, interest is still a huge expense. My recommendation: at least one paid for home for every two mortgaged. A built in safety net if you will.

 Haha I appreciate your honesty on your personal situation. I also like how a lot of the comments you're getting here say to do what's best for you personally, there's no right or wrong here. I tend to get hung up on optimizing my return on equity and using low-interest leverage to build wealth as efficiently as possible, but there's also something to be said for the peace of mind factor as well, as others have stated, or in your case the opportunity cost of distracting you from your job. Some people sell and trade up if their ROE hits 35%, while others pay in cash and follow the principle NEVER SELL. Different strokes for different folks.  

Trading stocks actively became untenable for me also. Not because I was losing money so much but because I got too OCD/ obsessed with it and lost too much sleep, couldn't turn it off. I ended up closing the account I was using to trade actively which made it too easy and opened a Schwab account that I just check/adjust occasionally and that works well for me. Depending on what your account balance is, it might make sense to hire an account manager to handle it for you, since you can't be trusted lol. They would take that off your hands but for a fee obviously. If I were you I would just delete that Robinhood app, go with something more traditional like a Schwab account and just buy some high dividend yield ETF's plus a few aristocrat dividend stocks you like and leave them alone/ manage them slightly occasionally. What is the interest rate on your properties?  

What is your interest rate on the debt?

I'll give my personal two cents on some pro's and con's. Take it with a grain of salt or a whole carton or morton's iodized, because at the root of it every investor is different and so is every unique investment situation.

Also, CONGRATS! 

If you're cash flowing positively, gaining natural appreciation, your interest rate is reasonable and your tenants are paying down your debt I don't see why you would want to make extra payments, personally, unless maybe you're ready to retire and need the extra monthly income to cover your living expenses, or you're worried about hitting a rough patch and not being able to make the payments. However especially considering the tenants are hitting that monthly nut for you, there are much better uses for that money. Personally I would put it into more property because that's what I've had the most success with. Since it sounds like you're not really looking to grow your RE portfolio due to management/ capex issues/ personal reasons, you might just look for other ways to put your capital to work and grow your wealth. You should be able to achieve a much higher cash on cash return simply by investing that money instead of paying down debt. There are also tax benefits you would lose such as being able to write off the interest portion of your mortgage loans. Ramsey's advice is really only helpful for people who have a lot of bad debt IMO, or who live beyond their means and need more financial discipline. He doesn't like debt or bankruptcy for personal reasons because he was an over-leveraged real estate speculator that couldn't liquidate his assets fast enough when the bank called his loans at the bottom of the market, leaving him with millions of dollars of debt which resulted in a rough bankruptcy for him. However his advice is illogical for most people because low interest rate mortgage debt is generally considered good debt. Why not borrow the money to make more money with it? Personally my stock portfolio (mostly very safe, set and forget/ "lazy portfolio", un-speculative "aristocrat stocks" and some basic high dividend yield ETF's like Vanguard's VYM which pays 3% dividends and has a 30 yr. average compound return of 10%) is doing much better than if I were to use those funds to pay down my very low interest, not at all over-leveraged real estate debt. You could even just buy I bonds that will do more to build your long term wealth than paying down a low interest mortgage faster. Or look into syndications. There are many ways to make a higher cash on cash return than paying down a mortgage faster (unless the mortgage is a really high interest rate of course). To me using low-interest leverage is the best thing about investing in real estate, as well as forcing appreciation but that is a more active strategy than most comparable investments. Anyway like many people I look at my investments from a cash on cash/ rate of return/IRR/ ROI basis and IMO having a bunch of dead equity in a property is a lost opportunity.