Morris Invest: Should You Pay Off Your Rental Properties Quickly?

Should you pay off your
investment properties quickly or drag them out for
the next 30 years? That’s today’s show. Let’s dive into it. Hey, everyone. I’m Clayton Morris. I’m Natalie Morris. And we are husband and wife. And you are across
the country right now. What are you doing
out there, by the way? Can you please share? And why are you not home? [CHUCKLES] I’m in Idaho. I’m visiting my sister. She bought a new house
in the suburb of Boise. And you know what I
realized when you come here? It’s not pronounced “boy-zee”. It’s pronounced “boy-see”. “Boy-see”? “Boy-see”. Mm-hmm. Did you– now you
learned something. I did learn something. All right– “boy-see”. [STATIC] Yeah, “boy-see”. Last night I [LAUGHS] had this
argument where my mom says, I think someone told
me it’s “boy-zay”. [LAUGHS] We’re like, mom! What? That’s embarrassing. It’s not “boy-zay”. [LAUGHS] No. That’s just someone
pulling her chain. I think so. But everyone I talked to
in the airport said, oh, welcome to “boy-see”! “Boy-see”. So there you go. Oh, there you go. Yeah. All right. So yeah, this is the
show where we talk all about building passive income. And the vehicle that we use
to create passive income is buy and hold real estate. If you’re a longtime
listener of the show, you’ve downloaded the podcast,
you know we’ve walked through a whole manner of things on
how to become a millionaire, property management do’s
and don’ts, how to reach your financial freedom
and independence day– so all of those things
we talked about. But when we acquire
rental properties, sometimes we think that we have
to carry debt for a long time, or we’d like to try to
pay them off quickly. So the two schools of
thought– and we thought– because we’ve gotten this
question from investors into the office– how can we pay off our
investment properties quickly? But I think it’s important to
maybe start with the question, before we ever go there–
is should you pay off your rental properties early? Why would we ask that
“should” question? Well, because there
is no one size fits all when it comes
to rental real estate or owning real estate
as an investment. There’s so many
factors that come in. And it’s funny, because we’ve
been thinking about this a lot lately, you and I. Because we get e-mails
where people say, well, should we partner as
husband and wife in this LLC? Or should we put this
bank account in this name? Or should we have
this bank account? We get all these questions. And there just is no one size
fits all answer for anything. So, yes, it sounds awesome
to have debt free cash flow. But there are also reasons
to leverage and reasons to have debt service
on your investments. So we figured we’d talk
about it, because we are not financial advisors. There is no right or wrong
way for any one person. It’s just– financial
investing is like a buffet. You have all these
options, and you just want to make the best choices. Right, so let’s– we’re going
to walk through four key areas and key reasons why– or asking yourself
these questions– should you pay off your
rental properties early? Typically, with a
rental property, you can get a 15 or
even a 30 year mortgage. Or if you’re working
with a private lender, it might be as small as 5 years,
which is a different scenario. But we’re going to work off
of the premise of a 15 or a 30 year note, I think,
for this podcast– so a typical Fannie,
Freddie FHA style loan, right– a 15 or 30
year mortgage note. Well, first of all,
before we do that, what do you think of the
benefits of the 15 versus 30, or 30 versus 15? Well, obviously, you want
to accelerate your debt. You want to make sure that
you pay the littlest amount of money for money. And so you’re evaluating
these products based on what tolerance you have
for debt service, how much you want to pay in the
long term for interest, and how quickly you want
to own that debt free so that all of that cash
flow belongs to you. So, it really comes down to
just making a spreadsheet and making the columns. How much am I going
to pay for the life of this loan in interest? How much am I going to
pay per month in interest? And what’s my
tolerance for that? Will I have money left
over to then cash flow a little in my pocket? Will I have money
leftover to pay the taxes and pay my property manager,
and pay for a light bulb if I need to, or what have you. So you’re evaluating those based
on your tolerance for risk. We have a portfolio loan,
for instance, that’s a 30 year portfolio loan. It’s on eight
properties as a package, and it cash flows quite
a bit, because the debt service is relatively low. It’s less than 1/2 of what we
cash flow for that property. We are trying really hard to
accelerate that and pay down principal so that we don’t
have to pay a ton of money in interest. But we chose that because
we knew that if we had– those package of
eight, they cash flow a little over $5,000 a month– our debt service is
about $2,500 a month. So we said, awesome! We’ll keep up with that. And so that’s why we
chose that product. Right. And so the question comes down
to deciding whether or not you want to start
funneling money back into the balance
of your mortgage, right? For Natalie and I, we’re not
huge fans of paying interest. [CHUCKLES] So you and
I wrote a whole book on how to pay off your
mortgage using a home equity line of credit. By the way, go to our–
go to Amazon and find it. It’s on Amazon– How to Pay Off Your
Mortgage in Five Years using this system that the banks
don’t want you to know about. So we’re not big
fans of interest, I think it’s safe to say. Knowing you, when I married you,
we– you were always like, wow. That’s such a high
interest rate. Why would we do that? So I quickly learned to have
a lower tolerance for interest or a lower tolerance
for interest than I used to back
in my college days when I had credit cards
with an 18% interest rate. So most mortgage
payments right now, most interest payments on
a mortgage are 3%, 4%, 5%. So you have to ask
yourself this question. Every month that I am
taking that extra money to pay it back on
principal balance, I’m putting money into a– I’m putting that money into
a 5% interest rate, right? But if you can make– if you can get a great
investment property that’s going to bring in 12% interest
as that return on investment, then you’re trading 12%
for 5%, with 7% in between. So you have to ask yourself,
does it makes sense for me to funnel money to
this mortgage balance, because I’m paying 5% interest,
but I could make 12% if I took that money and
ran with it across town and bought another
rental property, right? Right. So you’re thinking about the
trade off between making– I mean, I think I
want to emphasize this point that the
most important point is that you’re in. You’re in an investment. Now you’re making money, right? So you’ve taken your money
out of some other investment vehicle. And now you have
partial ownership over rental investment. And then the part that you don’t
own, you’re thinking about, do I want to pay down
this debt service or use the money that I’m cash
flowing to own something else? I’ve been reading
this book based on this interview that you did
with Garrett Sutton, called Loopholes of Real Estate. And he talks about how there are
so many advantages of leverage. Because let’s say you
own a $100,000 asset. We’ll call it a property, right? But you only put,
say, 10% or 20% of your own money
into that asset. Now the bank owns 80%. Let’s just pretend it’s 80%. So you are in it for cash
flow, right, for 20%. But the depreciation and the– let’s see– the, oh,
the amount of ownership and the deductions, all of those
benefits, you get 100% of it. The bank doesn’t
take depreciation. The bank doesn’t
take the taxable– the tax cuts on it. The bank only owns
the debt service. But the other– all
the other advantages belong to you, so it’s pretty
awesome, right, when you think. I just have never
thought that way. I’ve never thought of that
[CHUCKLES] that way either. Right. You’re basically getting all of
these benefits for your taxes, mitigating your other income
with this investment property. The only thing
you’re on the hook for is that mortgage
note for that– You take the depreciation on
that $100,000 value, right? But you don’t own
$100,000 of it. You own $20,000 of it. But you’re taking full
advantage of that asset. The government
makes it that way, because they want us to be
investing in real estate. So it’s just an awesome
way to think about it. So the point is
you’re in, right? Once you’re in, you own,
in this scenario, 20%. Now you’re thinking, OK. Based on what I’m
making and based on whatever else
I have saved, do I want to pay down that
debt, or do I want then to own something else? And I think what we like to
do is own as much as we can, right? And then say, we’re
getting– we’re paying an acceptable amount
of money for that money. So I’m OK with holding
that, and then I’m going to go over here
and buy something else. So, let’s look at it this way. So step one in this
process is, well, do you have other
investment opportunities? So the reason you would
pay down your mortgage quickly is because
you don’t, right? [CHUCKLES] You might not have
other investment opportunities. You’re fine with where
you’re at right now. So if you do have other
investment opportunities, you may want to take the
cash flow from that tenant and run across town
and buy something else. So let me give you some
hard and fast numbers. So let’s say if you’re
looking for more deals, and let’s say in an
example of where you’re bringing in about $1,200
a month net per month from your rental properties,
right, that’s about $15,000 a year or about
$30,000 in two years. So in two years, you could
have that additional cash flow, which would enable you
to go and buy another property, or put that as a down
payment on another property. Or you could take that $15,000
or $30,000 over the two years and funnel it right back
towards the principal balance. So on the one hand,
you could pay it down. But if you have another
investment opportunity, you could go across town
and buy another property with that cash flow. So that’s point one. The second one is your
tolerance for debt. It really– wait. Are you saying that you
could go across town and buy another property cash,
or you could get another debt service on another property? Well, what I said was you
could use that if you found a– our properties are in
the $40,000 range, right? So for us, it’d be
maybe 2 and 1/2 years it would take us to get
the cash from that tenant to buy another one. So you could buy it
cash, or maybe you’re buying an $80,000 property,
which we don’t do, or a $100,000 property,
which you and I don’t do. But you could. And then that would be that
$20,000 or $30,000– $25,000 would be the down payment on
another debt service property. So you could get
another mortgage. Now you have the down payment
for that $100,000 home that you’re buying. So either way, either
you’re paying cash if you can find the
deals, or you’re going to pay a more
expensive home, and you get debt service–
so one of two ways, I guess, right? Yeah, I mean, there
are a million ways. If even– in this
book he talks a lot about partnering with
other people like you. Sign five people, you’d
get a $80,000 quad-plex. Is that the right– Right, well, yeah. But that would be
an equity partner. So you might even
come to the table with nothing out
of your own pocket. You found the deal,
and your equity partner is going to put up
100% of the money. I mean, there’s so many
different ways to do it. I’m just talking in
the general sense of we’ve got a mortgage
for 15 years or 30 years, and you want to decide whether
or not to pay that back quickly or go across town and
buy another property. So the second point in this– Plus, [STATIC] it’s the second
one that takes creativity. Well, yeah. The first one, you’ll be able
to get a traditional bank loan. The second one, the
bank is probably not going to take on a second loan. They just don’t
usually do several. So then you’re
either going to have to get a hard money lender, and
then it’s a different scenario. Or you’re going to get– so we’re talking about
either you use your cash or you get one debt service and
then you use your cash, right? Because we have to think
about this not just like I’m going to get the
bank to help me here. And then I’m going to
get the bank help me here, and then– because the
bank will only get you so far. And then you’re going to have
to think more creatively. That’s our MO, anyway. We’re– go ahead. Well, yeah. Well, I’m saying is I’m not a
big fan of debt to begin with. But under the federal
law, you can only have up to 10 mortgages, I
think, in your own name anyway, or your LLC’s name– well, in your own name. So you can’t. You’re going to have to
be creative to begin with. They’re only allowing you to
buy 10 federally backed loans anyway. So 10– you’ve got
1, you could get 2, but you can only go up to 10. So the second point– [STATIC] on this list– what’s that? Oh, I didn’t– Huh? I said, look at you knowing
things about the law. I didn’t know that, actually,
that you can only have 10– You didn’t? No. I thought you did. Yeah, you did. Well, OK. But yeah, right
now the law is 10. But you could– this is all
part of the Dodd-Frank stuff. And we could see some– we’re seeing some significant
fracturing of the Dodd-Frank law, and we’re seeing that
the Trump administration may be increasing that 10 to
20 under your own name. So we may see some
movement there, which would be
great for investors. Because I really think investors
are probably typically going to be the smarter ones, right? They’re– you hope
they are, anyway, that they’re investing smart. And the bank is going
to put that money up. So anyway, I’m trying to get
to the second point, which is your tolerance to debt. So that was– the first one is,
do you have other investment opportunities that you’d
want to pay it down quickly to use that cash for it? Number two is your
tolerance for debt. So you and I don’t have a
high tolerance for debt– at least I think we do. I don’t know if we’ve ever
really discussed this, but I get the sense that we
don’t, because if we look at our portfolio, and we look
at our debt to income ratio, our debt to asset ratio, it’s– we’ve got up– we’ve got
lower debt than we do assets. Right. We have a– it’s hard to say. We have a low
tolerance for bad debt. And we evaluate debt– Well, based on– so,
on the point I’m making is that some buy
and hold investors only buy property with cash,
while others prefer financing. Because each has
their own benefits. So you might be fine
having $5,000 in debt for an apartment complex, while
others would say, no way, Jose. I want to have– I don’t want any debt. I want that property to
cash flow free and clear. So this is, again,
your tolerance to debt. And it’s a totally
opinionated second point. It’s not– or totally
subjective second point– there’s no one way, right? I mean, if you listen
to Dave Ramsey, he’ll tell you all debt is bad. If you listen to
Robert Kiyosaki– you [CHUCKLES] listen to Robert
Kiyosaki, then he’ll say, there is a difference between
good debt and bad debt, and those that get
rich understand the value of leveraging debt. So it’s up to you. I think most people who build
a financial portfolio are OK with debt when it
comes to real estate. Very few people just have
the cash like Monopoly, and just buy everything up. And then– wouldn’t
it be awesome if Monopoly let
you leverage debt? Because in Monopoly you
have to build up the cash to buy the real estate, right? Right. Yeah, you can’t. Well, wasn’t
there– did you ever play where you could
borrow money from your– the person playing next to you? Did you ever play it– No. –that way? Ah-uh. I definitely– But that’s how it’s to play. What’s that? No, but that’s how we’ll
teach our children to play. Right. [CHUCKLES] I’m going
to borrow money. Then they’re going to
be massively in debt. Yeah. Well, right. But it’s the right place to
learn it on the Monopoly board. [COMPUTER INDICATOR SOUND] All right. [LAUGHS] So you– [LAUGHS] I don’t like
this remote session we’ve got going on, because
you’re texting me that I’m rolling my eyes at you. I’m not. I’m looking at my notes
on my screen so I can– But no, because you’re going
on these long diatribes– like monologues, soliloquies–
and I try and break in, and then you roll your eyes. So [LAUGHS] if you– they see. I’m not rolling my eyes! On the podcast, when I try and
make a point, he’s like, oh. She’s talking. [LAUGHTER] No. I didn’t mean to– You know what? I’m just going to
wear sunglasses. Here we go. And I said stop rolling
your eyes at me. It’s hurting my feelings. There. How does this look? Is it down? No– my point. With the sunglasses
on, I can’t see. All right. So we talked about other
investment opportunities. Number two is
tolerance for debt. And number three is
your time horizon. So this could really be arguably
maybe the second most important point, because– Hey, goose. Can you take those off? [LAUGHTER] All right. I’m taking the sunglasses off. Now I get to roll my eyes again. Listen. The time horizon is important,
because if you’re 30 years old, it’s going to be totally
different than if you’re 65 years old. I talk to investors all the
time on the phone that say, you know, I wish I would
have started when I’m 30. But guess what? I’m nearing retirement,
but my wife and I want to travel and enjoy
the rest of our life. And we don’t have
any real estate. And we haven’t
saved anything up. We don’t have any cash flow. And I’m tired of working. I’ve got some good savings. I’ve got an IRA
that I can leverage. I’ve got a 401K that I can use. So financially, they’re
in a better situation. They might be able to put
more of a down payment. But how quickly do they want
these properties to cash flow? When you’re in your retirement
age, you want the cash flow. You’re not really–
you don’t want to be sitting on a lot of
debt where you’re not enjoying being able to travel and
have this cash flow coming in to support your
lifestyle, right? Right. And so in that case, you want to
accelerate your debt as quickly as possible or, again, it’s– you’re right– that it’s
a matter of attitude. Because you could say, OK. I’m cash flowing $500, but
the debt service is $200. I’m going to pretend that that
$200 doesn’t work and enjoy my life on the $500, right? Well, that’s, yeah, perhaps. But that’s really point number
four, which is required income. So do you need that money? So point four is, how much
money do you need to live? And that’s where
our freedom number cheat sheet came
in when you and I, we had that epiphany many years
ago on coming up with that. How much money do you
need to live every month? What does your monthly
expenses look like? And if it’s $5,000
a month, well, if you’re only cash flowing the
amount that you need to live, then that’s financial freedom. But if you are
carrying a lot of debt, and you’re not experiencing
that cash flow yet, then maybe you want to try
to accelerate that so that you can
enjoy and actually pay for your required income. So for some people to– I don’t want to work anymore,
and I’m literally right at the dollar amount. This rental property
is going to get me– I’m going to be– Pay the bills. Pay, and I can eat. Yeah. It literally covers
me down to the penny. I know some people
that go through that. I mean, [CHUCKLES]
we went through that. So it is the required. How much do you
require to live on? There’s a difference between
being fine and being free, right? You’re fine, meaning, you
can buy gas and groceries. But you’re free, meaning
you travel the world and do what you want,
and stick it to the man. Right. So obviously, if you need your
cash flow to pay your bills, then paying it down– your mortgage down more quickly
is probably not an option, right? If you’re walking away with
$5 at the end of the month, then that’s maybe not an option. And that’s where maybe
using a HELOC strategy, a home equity line
of credit strategy, that we write about in the
book, would be an option. Because now you could
take– even if you’ve got a few– well,
we walk through it very clearly in our book. But even if you’ve got an extra
$5 a month or $10 a month, or few hundred
dollars a month, that can be used, by using the
power of a home equity line of credit, to pay
down your mortgages and accelerate it at a
way that you might not be able to, because you’re right
there on the line every month with how much you
need to live on. Right. And then the
ancillary benefit is that every dollar
you don’t spend is another form
of savings, right? So you’re incentivizing
yourself to trim the fat out of
your monthly budget as much as you possibly can. Right. So four key areas–
let’s review. So if you have other
investment opportunities that you’re looking at, maybe
you’re not done yet, right? You bought this one property. That’s not all you want to do. You want to get
to 10 properties. Well, in that situation,
you definitely want to think about
how quickly you can use some of that cash flow
to buy other properties, maybe as a down payment. So you’re not terribly concerned
about paying down the property. Number two, your
tolerance for debt– do you have a high tolerance,
or you don’t really care? In which case, if
you’re OK with leverage, then there’s no real need
to accelerate your payment– your payoff– as long as
your cash flow is good and your ROI is strong. So that’s really the caveat
to all of these points. You’ve got to make sure that
your property is cash flowing and that you actually have– [LAUGHS] you actually have
a high return on investment. Because otherwise, this
whole thing falls apart– that your whole house of
cards is going to collapse. Number three is time horizon. How quickly do you
want to get there? Are you young, or are you
older nearing retirement? And number four, how much
required income do you need? If you need this cash flow
from the tenant to live off of, to pay your kids’ school,
and groceries, and gas, then, obviously, paying
down the mortgage is probably not going to be an
option for you, in which case and you should look at the
HELOC strategy, which I think is probably a better way to go. Now, we’ve talked many
times about the virtues of leveraging debt to
build your portfolio, because it’s necessary if
you want a large portfolio. But we talked many
times about the beauty of having debt free cash flow. So both things are virtues,
and you want to balance them. You don’t want to
be over leveraged and have this huge portfolio,
but if you own everything cash, you’re under leveraged. That means you could
have so much more if you had some tolerance to debt. So the reason we’re
discussing this in this way is so that you can figure
it out for yourself and figure out, OK. What’s my strategy? Because again, there’s just
no one answer for everyone. And I think all of us want
to have cash flow as much as possible that we can actually
enjoy instead of cash flow that we then funnel back
into the debt service. Absolutely. So, hey. If you want to go out there
and download the book, go to Amazon right now. It’s in the business section. We’re super excited about it. We took quite a few
months of working on this book on How to Pay Off
Your Mortgage in Five Years Using a Strategy the Banks
Don’t Want You to Know About, by Clayton and Natalie Morris. We’re super excited about it. So go download it. Pre-order it. It’s available on July 11th. So if you’re just
listening to this, it is available on July 11th–
pre-orders starting right now. Yeah. All right. That’s one– one way. Any final thoughts? Any final words? In our arsenal– I did have something
to say, but then you were rolling your
eyes, and I forgot. I was not rolling my eyes. You are. I have notes all over my screen,
and I’ve got a very large iMac. So when my eyes are moving,
I’m keeping the show moving. Oh, that’s– It’s not me rolling my eyes. This is me rolling my eyes– looking up to the ceiling. I haven’t looked at
the ceiling once. See? Look. You’re looking in exasperation. [SIGHS] This is me– You don’t like to
be spoken over. I’ve got a lot of notes here. I want to keep the
train on the tracks. Such misogyny on this podcast– sexism is at work–
sexism at work. What? I think I– No, I’m– –picked on. I think I get picked
on more than you. By me? By you! OK. No. I did have something to say,
and I thought it was good. And I’m going to remember it
the next podcast I’m sure. But I’m working my way
through this book Loopholes of Real Estate. And there’s a lot of little
good nuggets in there. So hopefully, I’ll
have something more to share next week
about it, because he talks a lot about
evaluating your debt service and making sure you’ve
got your ducks in a row, and figuring out what your
financial situation is in order to make a plan, and the
stuff that we tout here on this podcast– but some new ways
to think about it. So I’m excited to share that–
will be done off a book report. Yeah. And that’s Garrett Sutton. His interview will be
coming up in August, which I’m excited about. Because we are going to
have Robert Kiyosaki here on the show. We’re going to have
Garrett Sutton, who is his legal advisor on the show. We’ve got a whole panel of the
Rich Dad advisors coming up. I’m super excited about this. Garrett was a great interview. So I can’t wait to
share it with everyone. So, all right, folks. That’s going to do
it for today’s show. Thank you so much for
dialing us up, subscribing, and watching all of my
wife’s eye rolls at me. We’ll be back here with another
episode of the Investing in Real Estate show. Get home safe, my love. I love you. Say “hi” to the people of
“boy-see” Idaho, for me. Yeah, I will. All right. All right, everyone. Go out there. Take action, and become
a real estate investor. We’ll see you next
time, everyone. Bye. Bye.

100 thoughts on “Morris Invest: Should You Pay Off Your Rental Properties Quickly?

  • The debt service will cost you twice or 3 times the initial loan. It still high risk. All debts are bad debts, no such thing as good debts, only necessary evil debts, if you have to. The only winner is the (sharks) finical institutions.

  • I don't have a tolerance for debt, so I would funnel all my cash flow from the rental property back into the mortgage, this is called accelerating debt?

  • Great way to describe the thinking process. The way you put it really helps those who would benefit from paying down debt and those who should invest in a new property. Really like your channel . I am with you.

  • I think it really comes down to tax advantages. The way I look at is: I run a business out of my primary home, well actually 2 businesses the rental business and HVAC business. I pay more tax thru HVAC business because of self employment tax with the HVAC business, because the rental business is capital gains, it's taxed at 20% after all expenses there is no self employment tax with that. Because I am taxed at a higher rate for the HVAC business I carry a loan on my primary home then deduct a portion of the use of this house and all expenses on the higher taxed business entity loan interest costs and so on. The flip side of this for me at least is I wind up double depreciating. I depreciate my main home for business use of the home while I live here fixing it up / making typically what amount to high value changes and then, convert it to rental after so many years of living here and running my HVAC business from it AND then: I depreciate the whole thing again at a higher valuation after I turn it into a rental. Nice area, great schools. I think the main thing is to figure out what is going to give you the highest advantage. A few points here and there all add up over time. If the government gives you a tax break cookie, it's time to turn yourself into the biggest cookie monster you can.

  • I've hear him say many times the buy homes for 40k where are these homes? I cant even find something for 60k

  • All these other big real estate youtubers miss a lot of things in their videos that you talk about. When Natali asked the question if you should get a loan on the second property or buy it in cash I instantly subbed since most youtubers don't answer these questions that seem straight forward to them.

  • Mortgages are crazy tho..youll end up paying more than more closing costs and fees and mandatory insurances..alot of money(interest) and stress you can save buy using cash instead..there are advantages (tax advantages..etc…using debt(mortgages)i guess it all boils down to the actual math ..its alot of mathematics involved in deciding.i hate owing money tho..

  • I have to say your channel is one of the most rich in real usable information i have found. I am currently looking to move to the southwest and looking to become a rental property owner. I would love to talk to you about what options would be available to someone like me who would basically be starting from zero with student debt.

  • I’ve watched too many videos and I’m waiting for the “why”….”how”
    How do I write off everything (depreciation, etc.) to offset the debt service?

    If you told me to clean a table sure I could clean it but is it clean?

    What are you using the table for? Changing a diaper? Playing poker? Having dinner? Do I clean it with winded and pledge? Vinegar and water? Sweep it off and throw a bowl of chips on it?

  • I have 8 paid off rentals cash flow. My next move is 10 financed 4 plex units. I'm 56 debt free living below my means. It does work. Just buy 1 to start the rest gets easier.

  • What if you want to build a primary residence and use the current house to rent. And use home equity for the down payment? And oh forgot to.mention, the equity would then be maxed out

  • Principal pay down is taxable income. You didn't bring this up. It feels awful to pay tax on money you don't have to expand or repair.
    Having more properties means more repairs, showings, and labor. Leverage up and create more of a job for yourself.

  • Eye rolling probably due to her repeatedly interrupting his thought process. Eye rolling = "I'm trying to make a point here…..darling…. Thank you very much….lol."

  • this is awesome.. Clayton is amazing.. his wife seems nice and knowledgeable as well…Will definitely be contacting you guys.

  • Clayton, you have so many great videos. I'm 31 and if you could point to a Youtube video of yours that lays out a possible "blueprint" to follow so that someone like me can accumulate 50 rentals, which could I watch?

  • In my home town 110k to 130k homes in b class neighborhoods are bringing in 1200-1500 rent depending 3 or 4 bedrooms

    Is this a good approach

    My town cheaper “ghetto” homes are 40-80k and none are concrete home they are all on pier and beAm should i be afraid of these??

    Im about to close a deal on a 130k home and gonna rent at 1450 a month not exacly super positive cash flow but i want to have equity to later down the line use equity lines of credit to get cheaper home with better improved cash flow that i can buy out cash money with the equity loan

    Me and my girlfriend are planning to pool money and go this route we combine almost 110k income and have no big bills at the moment

  • How do you do not to fight? I fight with my husband every time and we love each other. That's vey funny though. You should coach my coule😜😜😜😜

  • So many gimmicks. ONe way to be a millionaire…..start before age 40 or so….buy a house for 100K, get a 30 year mortgage. As you can and prove your ability to manage to a lender, buy another for 100k. Do this over the years until you have ten of them. Even assuming No cash flow, just breakeven after past repairs, etc, and no appreciation factored in – in 30 years yo u have 10 houses paid off, with a value of 100K each. 100K times ten, one million. Done. So many people do this, but, with ONE house that they live in, and have to sell it when they retire to get the equity out. It IS THAT SIMPLE> NOW, imagine you buy these so that the rents DO CAah FLOW, and there IS APPRECIATION over 30 years – you will be very comfortable. Best is start to be young, I am not. Most investors combine the two types – they have long term holds and they have some fix and flips. Legal advice Ive had – either have a big mortgage or paid off. A low mortgage in first place means the bank has a lot of your equity to go after, as well as liability things.

  • The problem of trading off between a 5 percent mortgage and investing it someplace else at 12 percent is this.. when things crash, and with the government pumpiong up the market to big heights, you suddenly have a 12 percent return that isnt -and yo still owe on the 5 percent loan. The NUMBER ONE reason people fail in long term holds in crisis is a LACK OF LIQUIDITY. I had breakfast with people worth millions in property equity, but had no cash to pay for breakfast. Leverage debt is a double edged sword – it can cut you a path, or cut yo in half. Be careful. There is also the quality of life issue as you get older….paying something off is not always the optimum use of money, but, you sure sleep well and cant be foreclosed on when no mortgage. Be careful of overextending yourself taking one thing that cash flows right now while everyone has a job and paying their rent, but might falter in a bad market. Take it slow, try to buy low. Right now the market is very high. Good to get in when young, but in a few years things will crash.

  • I love this video, it's so informative. by the way I'm in my early 30's, 2 kids and a wife – I have a mortgage of 180k but my home is valued at 320. At the same time I may have a an apportunity to pay off my Mortgage home within a 1 year and 6 months. My question – Should I pay off my home within the amount of time?

    Should I take the Heloc equity to buy a investment property and where, cause where I live in Maryland, properties are really expensive.

    Last question, I am really interested in a particular property however it cost about 130k, I could rent it for $1400 give or take according to the comparable around that area, at the same time I got approved for another mortgage loan through Navy Federal Credit Union. I would like to investment in this property which by the way the mortgage would be 1200 a month according to the bank/ that includes tax, homeowners, principle and interest – I don't know what to do – if it even makes sense to buy this 130k and only get about $250 a month on this investment property or should I concentrate on buying 40-60k homes with my HELOC? Thank you in advance, please comment need your help, you're the best? Or simply, should I do both? Help. Thanks so much..

  • Boise, in French/Haitian Kreyol means people of the woods or of the woods.
    Boi, which pronounces as "bwa" means stick or wood
    And "se" being of or an adjective or associate with.

  • Monopoly: We used to hide money EVERYWHERE and borrow from anyone who was willing to give it up. Younger ones never kept a written tally so lost. In the long run, siblings and cousins LOST in the real game. But I'm thankful for getting an early lesson. btw He always rolls his eyes at you but you tend to interrupt somewhat.

  • You guys are AWESOME! My wife and I have 3 rental properties in the New England area. Hoping to get into more soon. KUDOS

  • At what point do the bank say your debt to income ratio is too high and what is plan B to get over that hurdle.. should multiple duplexes be part of the equation

  • Ya’ll are so cute! Totally didn’t think about all the tax benefits you get when holding a mortgage. Great info. Period

  • I have a property that I'm about to do a short sale on. My question is should I apply for a HELOC before I sell the place with higher debt or wait until I sell which would show lower debt but lower credit score too?

  • Last 6 homes, I simply put down 20% and finance the rest over 10 years (through my LLC). Homes are generally in the $110-130k range (mostly 3 bed / 2 bath) and lease for $1200-1400 per month. This model allows for the home to essentially pay for itself each month.

    Also, super important for people to remember: LOOK AT THE TAX RATE BEFORE PURCHASE. A $110k home in one neighborhood may only have a property tax of $800 but the same home in a different neighborhood can cost $3,800 in taxes per year. The annual tax expense is a huge factor in my search parameters. And, be sure to protest tax increases every single year.

  • Paying off your houses should be the number 1 priority. I would rather have 20 debt free houses than 50 with thousands still owed on them.

  • I love your videos. I was in real estate back in 2008 straight out of HS and it didnt go well for me. I bought a house a couple of years ago for 25k which is now worth 120k this year and i thought about selling but instead decided to rent. Ive been watching your videos and i feel motivated to start my own small businness instead. I want to own my whole neighborhood if possible 😁

  • With a half-second of delay it's difficult not to interrupt. You think they've stopped talking when really they started again half a second ago.

  • I'm I the only one that cought that??, I would keep that debt rolling. So I can buy more debt, cause the more debt we have the more money we are making correct. So it would be. It's up to the person tolerance!!! I would keep trading till. The interest didn't make sense

  • Great presentation. I enjoyed the the sincerity of husband and wife team presenting the different approaches available. Thanks for sharing the information from your experience.

  • Discussing rate of return & internal rate of return while using leverage and non leverage is the best way to explain this topic and weigh the option in my opinion. Rate of return is generally higher if you stay leveraged and raise rents as debt is paid down to maintain the rate of return. The less of your own money down the better rate of return. But always have reserves for each property.

  • Clayton – if I can only get 6 mortgages in my name (not married), how would I go about getting 50 more properties if I don’t have $3M cash to buy them? Cash flow from the 3 or 4 I could pay cash on would take a decade to buy another 3 or 4. How do investors finance and obtain 50-100 properties by themselves? Even using a HELOC will only get a few more properties.

    Curious to learn how investors are able to get a large portfolio of properties if we can only get 6 mortgages. Thanks!

  • Can you tell me what are some good places to apply for loans for rentals under 60k? A lot of places won't loan you less than that.

  • interest is tax deductible too, soo if you have less write offs you pay more taxes so its not how much you make its how much you keep

  • You guys are fortunate to get $50k property across your town. I could have acquired 30-40 with the amount of property values we paid. Here in Ontario Canada the props are expensive usually you don't get positive cash flows most of the time. So for folks like us in Canada how shall we do? Payoff rental debts by using HELOC? FYI min more than half a mil for single home. At least 300$ for apt. Currently our loan interest is 3-4%. 80% mortgage interest is easily 8-9k a year. So how to manage rental property debts with under water cash flows for folks in the North?

  • .Is Buying cash on cash the only way to get 10% to 12 % net roi . Having a mortgage on the prooerty lowers roi to 10% gross and 6% net . It wouldnt be worth it right ?

  • “HELOCs are something the banks don’t want you to know about”…yet they still offer them? This video was so good but lost credibility with that 😢

  • I loved watching this! Lol cute dynamic. I'm glad she interrupted him on point one because I found that clarification valuable. 🙂 Thank you both so much!

  • I was thinking after watching a few other videos, How to make it possible when buying a property to have the land and building in two separate entities "like the tax shelter video for business" where in one way you could lease the property to yourself " so in effect you would have to on paper pay more expenses from the rental income you get ? If u understand what I mean can u do video about it lol thanks

  • So if you're Goose… then she's Maverick. Okay got it. LOL — my wife and I are currently working on a 5th rental financed with a HELOC. The rest are free and clear but because we pay off the financing as soon as possible… growing the portfolio is a slow process.

  • Depending on what one does as an employee, shorter-term pay-off is will suited for people who labor for their living. White collar people may tend to take longer to pay-off rentals because they also invest in stock ownership. Pick your poison and go forward.

  • Depending on one's income situation, it's cheaper to have loan debt on one's home and more free and clear with the rentals. Rentals valued under 125K are better being paid-off as you can't get favorable lower interest rate loans under 100K. Do the hard work with more risk when in 20's -40's and lower the debt numbers by age 50 going forward. Pick your poison.

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