All Forum Posts by: Paul Doherty

@Charlie Kind of my thinking, too.  Not as aggressive as leveraging it to get more but as I'm approaching retirement I feel like that's the better end game.  More paid off houses equals higher cashflow (with less leveraged in debt), less work and less risk.  Just wanting to bounce it off people to make sure I'm not missing any obvious tax advantages to leaving a mortgage on that rental.

@Robert The payoff is right at 60K, so it would be $600/mo cashflow for 60K payoff.

@Bradley That's kind of what has me considering this - the savings aren't making anything and I'm 50 and starting to think about early retirement, so paying off these rentals (and letting the paid-off ones extra cashflow amplify paydown on the others) is starting to look attractive!

@Charlie That's been my take (keep getting more properties) up until now, too.  But starting to think early retirement has me swaying on the fence a bit of taking on more properties and their associated expenses, as opposed to paying down the ones I already have.

I have enough cash to pay off one of my rentals, which would increase my cashflow by about $600 a month (house rents for $1375 and currently cashflows about $400).

Question is, would I be better off simply leaving that house not paid off, with its lower cashflow, and simply invest that same cash into a taxable investment account like Betterment or Wealthfront?  Do any tax advantages on the rental while money is still owed on it outweigh this as an option?

I think when people were asking how you were financing they might have meant where did the downpayments come from and what % down were you doing?  Doing 10 of these at least 7 would likely need to be 25% or 30% down; once you get past either 3 or 4 mortgages I think Fannie/Freddie requirements (which lenders need to meet if they want to be free to sell the note) require this, and it's what I do now (30% down).  So if each house was 100K (no idea - I haven't read all the article yet) that would be 30K times 7 or 210K in cash for downpayments on just the last 7.  If you were sitting on a pile of a quarter million in cash to begin this venture then excellent (but what were you waiting for?? ;-) - if not, then I think questions about financing are trying to determine how you did this so quickly without a ton of cash.

As an update to this thread I decided to do a cash-out refi and invest in more properties. The house that was paid off was worth 175k or so and I did a cash out refi for 90k (total was 95k with all the fees). So that house now has a mortgage back on it with a PITI is around 950 a month and rents at 1425 (1325 at the time I did the loan). I then used the tax-free 90k acquired to buy two new properties at ~150k each, putting 25% down (approx 38k) on each. So each of those are cash flowing a bit (200 or so each above PITI) and the original house that got refi'd went from cashflowing about 1000 to cashflowing 400. So 400+200+200 = 800 of cashflow. So I lost 200 a month in cashflow but turned the one cash out refi house worth 175k into three houses worth 475k. I think it's also worth noting to others considering something like this, that I still have roughly the exact same equity as I had before - the only thing lost equity-wise is the actual closing costs on the two new purchases; all that happened was part of the equity got moved from the paid-off house into the two new ones.

Sorry to necro this thread but I too was a basic $500 member a couple of years ago and wanted to put my 2 cents in.  The biggest issue I see with their higher level memberships is that they give you no idea (nor will asking get you anywhere) about how many people have memberships at those levels, or whether they even attempt to limit the numbers of those advanced level memberships.  Why is that important?  Because if they have too many members that means your odds of actually getting any deals out of them dwindles considerably.  I've read a review online of a guy who was a mid level member ($5000) for a year and, despite actively pestering their realtors the entire year, got exactly ZERO deals from them.  That issue combined with their "throw deals out by email and first to rewind gets it" and the aforementioned issue that their prices aren't even very good (evidenced by the comment that wholesalers prefer selling through Lifestyles members because they get better prices there) begs the question of what value is even there.

I own 4 single family rental houses in the DFW suburbs.  I'm looking to continue to acquire these or move into larger multifamiliy units (5 or more) and need advice on how to best do that.

I think you're both on to something with that suggestion.  I can still get the benefits of leverage without the sleepless nights and additional risk that fully leveraging the proceeds of the cashout refi would bring.  I'm definitely going to consider that approach as I think it may very well be the in-between answer I need.  Thanks to you both!

I have three SFH rentals at this point and am in a good spot financially. One of the rentals is fully paid for and I'm torn between simply using the cashflow from it and the other two to rapidly pay the other two off, or taking a cashout refi on the paid-for rental and using that cash to buy two or three more at 25% down on each (so they will also cashflow about 300-500/month each). Doing the latter would improve my cashflow from that paid for unit from 1000/month (for the paid for house left as is and cashflowing) to about 1250-1400/month of cashflow with the cashout refi used to leverage 3 more properties.

I intuitively understand that the refi method will in the end make more money, since I'll have increased my house numbers by 3 (from 3 to 6), adds ~450K to my portfolio in house values (each being roughly 150k) and will have renters paying down the mortgages and also covering taxes and insurance as well.  But I also understand that this increases risk, as all 6 houses still need maintenance, etc. 

Somebody help push me off this fence!

Thanks, Bob - I'm in Texas and this site, at least, indicates contracts for deeds are dangerous now (after 2005).

http://www.lonestarlandlaw.com/Executory.html

"Contracts for deed, lease-purchases, and lease-options have long been traditional tools of Texas residential real estate investors. Why? Because it was easy to induce tenant/buyers into such arrangements (with a minimal down payment) and easy to evict them using the forcible detainer process if they defaulted. No longer. Since 2005, these devices are considered "executory contracts" and are heavily regulated under Chapter 5 of the Property Code. The lender, if any, must give consent. Numerous initial and ongoing requirements must be observed, and the burden is on the seller to meet these. Violation entitles the purchaser to cancel and rescind the contract and receive a full refund of all payments made to the seller. That is not all, since a claim may also be made under the Deceptive Trade Practices-Consumer Protection Act which can result in treble damages plus attorney’s fees. Add up the numbers and one can easily see that the potential downside is significant. Note that the statute contains no significant defenses for well-meaning sellers who thought they were giving the buyer a good deal, even if the whole arrangement was the buyer's idea in the first place.

Accordingly, the risks to an investor of engaging in executory contracts have nearly eliminated their use in the residential context."

Does anyone know if this is accurate/true in Texas?