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.