All Forum Posts by: John Morgan

Quote from @Haley Brodecki:

Quote from @John Morgan:

I've bought 5 houses by using 401k loans as down-payments. I've bought some houses with 0% interest for a year credit cards and a few with consumer lines of credit from banks. I use all the rental cash flow to pay these loans off asap, then repeat. I've also used a HELOC to buy a couple houses. And don't forget about tapping into equity if you have any. I bought 14 houses basically for free by harvesting the equity in my houses by doing 5 cash out refis. I use that cash to scale up and buy more cash flowing houses with zero $ out of pocket. That's how I've grown my portfolio of SFR without using hardly any of my own money.

Hi John,

this is great to hear. I'm new to all of this and looking at 401k loans and HELOC as options. Were you investing with a vacation loan / 10% down? I'm curious what markets you've invested in if you don't mind sharing. Thanks!

My first properties were STR in Branson, MO. I paid cash for them (130k and 56k). I got the cash from a HELOC, Roth IRA and 401k loans. Then did cash out refis to get all my $ back. Then I’d take that cash and buy more and more properties with either putting 20% down or paying cash then doing a BRRRR. I kept recycling equity to buy more and more cash flowing houses since I didn’t have any savings. lol. I’d pay my 0% interest for a year credit card loans and 401k loans off asap then repeat. It was an easy way to scale up with no money out of pocket. I just keep using my rental cash flow to pay off these short term loans. Dave Ramsey probably wouldn’t approve, but it’s how I was able to scale up to 29 buy n hold SFR. The cash flow now is good enough for me to retire. 

@Curtis Cutler

I started investing 10 years ago at 44 years old. I was broke and didn't know what to do. I only had 25k in savings. lol. I bought my first two rental houses with a combination of using a HELOC on my primary and using my retirement $. People told me I shouldn't use my retirement funds to get started, but glad I did. I didn't have much money and needed to find a way to get in the game. 10 years later, I've got 29 SFR that profit 19k/month (not including things breaking or vacancies). Give yourself 5-10 years and you'll be set. And I'm all for tapping into funds anyway you can to buy cash flowing real estate. It's tax free profits due to our tax code. And a great hedge against inflation. Not to mention it will create generational wealth for your family if you keep scaling up with leverage over a 10 year period or so. Good luck!

I bought 8 out of state sight unseen. No regrets!

I'm a fan of sec 8. I only have 4 SFR with sec 8 but I'd highly recommend it. I may do more. These people get free govt money with these vouchers that never seem to expire.

@Josh Otero

The hardest part for me was being flexible with my tenants and realizing all these people are living paycheck to paycheck. Rent won’t hit on the first. For some people it won’t even hit on the 15th. But I’ve learned to be more relaxed with my 29 properties and the tenants.

@Jermaine Washington

This has happened to me a few times. Not a big deal. Keep their deposit and get the place cleaned up and rented out asap.

This is great to hear. I’ve been investing in RE for 10 years and hitting 19k/month profit not counting things breaking or vacancies. It’s a get rich slow game, but if you can be patient and give yourself 5-10 years investing in RE, you’ll be set.

Quote from @Theresa Harris:

Quote from @John Morgan:

@Brian Chadwick

Yes, do it. Or do a cash out refi to scale up. I've done both to grow from 2 paid off STR and now have 29 SFR by using equity that was sitting there doing absolutely nothing for me to buy more and more with 20% down. My net cash flow went from only $1600/month to 19k/month over the next 6 years. I'm a fan of harvesting the equity to buy more and more cash flowing properties with zero out of pocket cash for down payments. But some (Dave Ramsey) people would rather have just a few paid off properties making just a little cash flow. I'd rather double, triple or quadruple my cash flow by putting that equity to use and leveraging my way to wealth. That's how the wealthy do it with real estate or businesses. Leverage is key and will create generational wealth in less than 10 years.

Leverage is key and the diversity of options is also good. The only thing I'd mention is cash flow with a paid off property is a lot higher than with a mortgage, so it is 6 of one, half dozen of another.  Yes with a paid off property, you have equity sitting there, but also have higher cash flow.  With pulling out your equity (or selling), you can diversify and buy more.
I did sell one of my places and used that money to buy two others.  At the end of the day, cash flow was similar because I now had mortgage payments.  One difference was to have two properties appreciating (though at very different rates as they were in different areas) instead of 1. Looking back 7-8 years from when I did that, if I had held on to the one property between cash flow and appreciation, I'm not sure I'd be any further ahead.

I’d rather have more properties with mortgages than a couple paid off properties. My first property was paid off making me only $1000/month profit. I did a cash out refi on it to buy 3 more properties. Yes, I’ve got a mortgage on it now, but my cash flow went from only $1000/month to $2400/month and I picked up 3 more properties basically for free with no out of pocket cash to buy them. 

I did this another time where I was only making $600/month profit with a lot of equity in a rental. I bought 3 more cash flowing properties with zero out of pocket by doing a cash out refi on it. My cash flow went from only $600/month off the one, to now over $2200/month with the 3 more I picked up from the cash with the cash out refi. 

I did this again last year with a paid off property only cash flowing me $1200/month. With the new mortgage from the cash out refi, I’m only cash flowing $150/month off it now. But I bought 3 more houses with the cash and now cash flowing $3000/month vs only $1200/month with that one paid off house. Not to mention having many more houses leveraged and appreciating 3-5%/year. Your net worth and cash flow goes up exponentially when you tap into your equity to scale up and buy more and more cash flowing properties. Mine went from only around $1600/month with a couple paid off properties 7 years ago, to 19k/month by leveraging and harvesting equity in properties to scale up. But I also understand some people don’t really care about the cash flow as much as the security of not having to worry about a vacancy or whatever. But those who wouldn’t mind a lot more monthly cash flow, I recommend tapping into some of that equity that’s just sitting there doing nothing and using it to buy more cash flowing properties.  

@Alex Tang

I just had a major fire in one of my rentals in December. If the cost of rehabbing it is more than it’s insured for, they’ll just cut me a check for what it’s insured for minus the $2,500 deductible. I want to rebuild but the cost will most likely exceed what it’s worth.

@Spencer Ware

Single family is where it’s at. What area are you in?