Quote from @D’Andre Ortiz:
Quote from @Scott Johnson:
I like to stick to straight mortgages and refinancing when I can, but HELOCs are a way to go if you'd like. The interest is just calculated per diem (per day) so it tends to be a bookkeeping nightmare.
I'd personally recommend that you build up your capital and let your loans get paid down, especially if you're not finding anything that'll cash flow.
Also, you may want to look at your current rental income and see if its worth buying a property that will provide an income loss (via depreciation) to offset that cashflow. Talk to your CPA first, but the viability of buying higher priced properties increases when you're looking to use them to offset taxable income.
Hope this helps!
This is golden advice! Right now everyone is struggling to find cash flow in deals. Taking a "loss" may not be such a bad idea to set your self up long term.
Just want to make sure I'm clear, because @Nathan Gesner brought up a good point.
I never said "negative cashflow". The strategy I'm speaking of involves minimizing cashflow (while still making sure it's positive) to around $50/month. This is a total of $600 cashflow each year.
Let's say your depreciation on a condominium (I like these because there's zero land so the entire purchase price is depreciable. Yes.... even with the HOAs....) is $3,600 for the second year (the first year depends on what month you buy it in). All of a sudden you're showing a loss on paper of $3,000, which offsets the cashflow of your other properties and reduces your taxable income.
Buying a negative cashflow property is a terrible idea for most people! So don't do it 😜
When you minimize the cashflow, you're able to pay a higher price or reduce your loan term so your payments are higher (depending on the type of market you're in). If you reduce the loan term, your loan is paid down faster and you realize the tax-free cash out refi earlier.
Hope this clears up any misunderstanding! If you have questions post them here or send me a message.
