@Calvin Lang
My planned approach, at least presently, is to accrue a number of properties (I am shooting for 10-15 multifamily homes) with leverage and than use waterfall payments to pay of the existing mortgages. This can be summed up in the following phases:
Step 1) Acquisition Phase - Accrual of the initial properties (likely 4 - 10, though can be more)
Step 2) Consolidation Phase - Pay off the lowest capital balance loan with the cash flow from the properites
Step 2a) Wash, rinse, repeat until all mortgages are payed to $0. During 2 and 2a you are increasing your monthly income stream even though you are not accruing additional properties.
Step 3) Repeat Step 1
In my opinion, this strategy is a nice mix of conservative and risky. During stage 1, your acquisition phase, you are putting leverage on your books though, if you are buying right your cash flow and diversified idiosyncratic risk should be sufficient to service all mortgage payments. This is the stage where you take on a majority of the risk, and as such I would recommend keeping a 12 months PITI capital reserve account in order to mitigate any risks in capital short fall. I know that some might argue that this is too conservative, but bankruptcy is not an appealing option to me, so I would rather acquire more slowly and have a reasonable certainty of not going bankrupt.
After you have finished your Acquisition Phase, it's now time to start consolidating your debt. For each $100,000 mortgage that you pay to $0, your cash flow will increase approximately $450 per month.
By the time you have paid off all loans, you will have increased your cash flow substantial and solidified your capital base (all of which are assets that can be pledged as collateral on future loans through a HELOC or other method if need be). This should allow you to enter the next Stage 1 in very good financial position, and allow you to decrease the amount of time from Stage 1 to the completion of Stage 2 by a substantial amount.
