I love this, @CoachChadCarson! I’ve been practicing this philosophy and teaching this philosophy to my clients for years now. No controversy here! Thanks for sharing!
This man knows what he is talking about. We have 4 paid off rentals with good cash flow. Low stress. We use a property manager. We can easily retire on the income.
I bought distressed properties with cash for years as a hobby. No mortgages. Sold one recently and still have 5. I have great tenants. Cash flow is amazing. Super easy to manage at this point.
@patriceysimmons3897 My tenant offered to buy the property, and I thought it wouldn't be a bad idea to cash out on that property while the market was hot.
I agree. I have 5 paid off rental properties. These are much less risky than 20 houses with limited cash flow. These will fund the bulk of my retirement.
Yes, I love this strategy. When I started investing I always said I wanted the least amount of doors with the biggest amount of profit. Less hassle, big returns!
I love that you are finally talking about this approach, Rob! Much like Coach Carson, I quickly learned that the key to success isn't quantity; it’s quality! Having a paid-off, cash-flowing primary residence or even a single investment property is a complete game changer to maximize for two variables simultaneously: wealth accumulation AND peace of mind/resiliency! I’ve been advocating “small and mighty”/KISS for years! Welcome to the club!
Having a paid off house enabled a lot of growth for me. I was able to take bigger business risks because I knew if it didn't pan out, I still had a roof over my head.
I've slow flipped for 22 years. First house I had before I started slow flipped was in San Jose. Fixed it up, sold for $440k net, moved to Phoenix and bought for cash. Live in the house and slowly fix it up. My total spend to remodel is never above $15k. Do all work myself. No rush so I have the time to use almost all salvaged materials. Currently building kitchen cabinets using oak veneer 3/4" plywood from tossed furniture. Countertops Brazilian cherry flooring about $200. Working on house #4 (slow) to sell next year. Should net $530k. Then moving to SE Asia where $2000/mo is considered a high income. The $530k will give me $2000/mo @ 5% and act as my medical insurance. Then in 2 years I take SS estimated to be $3895, so about $6k/mo income which is crazy good in SE Asia.
I have three investment properties & leveraged with good debt. The renovations & capital improvements will take me additional months to break even- Good debt will result in a higher COC returns, whereas a paid off home will go based upon the cap rate return- Equity appreciation is the icing on the cake -
Sometimes we forget why we invest and end up doing something similar and stressful like the 9-5 that we were running away from. I did buy rentals for cashflow until I knew I could live on my cashflow, then I stopped buying and now I am doing what I call "Investing in myself" by paying them off. I have two strategies in paying them off doing a recast to increase cash flow while minimizing my debt and getting more money to pay the rest off while I increase cash flow.
We LOVE whenever you have Chad Carson on! There are SO many gross investors that drip greed and sell the wrong message that you can never have enough. Those greedy ones are giving bad advice to just keep people spending money and getting over leveraged then hurting when times turn bad or health issue come. Great video 👍 Love the "pruning" analogy 👍
I quit a 100k IT job to do Airbnb full time in 2022 because I was simply overwhelmed. I took 13 months "off" and eventually ran into an old colleague who asked if I was in the market for a new IT gig. It was absolutely happenstance and I was interested because I needed health insurance for my family. That is the one thing nobody talks about when you go full time on Airbnb is how are you going to protect your assets when you incur a $300,000 hospital bill. It happens. I've had multiple surgeries that would have bankrupted all this hard work had I not had insurance. Something to think about! Awesome content as always Rob!
Rob I love your new channel bud! Leaving bigger pockets was your biggest blessing in disguise keep doing you and what you are good at ! Thanks for all the info bud. I am a house flipper and will be getting my first unique air bnb because of you🎉
Facts!! It’s all about your end goal. When I retire in DR, I’m not trying to have 5,000 doors to think about. My first investment is a 4plex that cash flows pretty much NOTHING now due to louisianas awesome insurance rates. Had to use one unit as airbnb for it to cover its own expenses. But when that thing is paid off, it will do so much more for us.
I have one long term all paid off, one mid term being paid to me via constant long term lease, and an STR in addition to my primary….this is the best perspective that I have heard in real estate yet! There is always that voice in your head to get one more property but I think this interview just shaped how I will do all my future real estate. 5 properties sounds like a magic number…Can’t take it with you when you die. Thank you for the insight.
So glad I found this vid. Loved you on bigger pockets Rob. I’ve been tryna convince my wife of this same model. Better to pay off our rentals to set ourselves up for financial independence
More RE content creators should be talking about this strategy! It's such a refreshing philosophy. I love Chad's "Do what matters" approach. That's different for everyone so no exact model but it's important to be intentional about how we spend our time. Life is short.
My model has been to always put more down on the next purchase. I started with a 0% down VA loan, then next year purchased with a 15% down VA loan, then the next year a 32% down conventional mortgage, then finally this year I did a 50% down. Next year I plan to do 75-100% down, and then to use the income to pay them all off before looking for more real estate to buy in cash.
Suuuuper good stuff here. Thank you for presenting an alternative to “scale, Scale, SCALE!!!” at all costs and all the time. Parallel book to the concepts they present: DIE WITH ZERO.
Couldn’t agree more - debt recapture - we don’t talk about debt recapture as much as we should. So many benefits to deleveraging efficiently! I’ve discovered some interesting tax advantages to enhance my personal life while also now realizing I’ve unlocked a better scaling platform. Great concept great content. Thank you
I also love this because it leaves room for everyone. Instead of 1 person/ company owning hundreds/ thousands. People can live well without hoarding all the properties & wealth.
This interview resonated a lot with me. Thank you so much. This is a very simple and straightforward way of approaching a very difficult topic. Eat the fruit is the best analogy of enjoying your life. Thank you so much for this interview, my husband and I needed this.
I totally agree with this. It hit me the other day that peace of mind is the ultimate reward after all the hard work! I love knowing my properties have so much equity and I can relax and enjoy what we built!
I think coach has the right idea. I am in total growth mode, but once my gross hits around 3x my target i think the pay off emphasis is absolutely the play.
Totally. It doesn't make quite as much sense to start paying down your debt out the gate. But once you have a pretty solid set of properties, then it may be time to start chipping away.
Thank you Rob, Chad, and team for this excellent content on the power of paying off your mortgage. We at Arbor Advising help people grow their wealth with real estate portfolios in relatively, affordable Michigan agree having a few paid off rental properties can change your life. Will share this on our social channels as well. Thank you again!
I truly love the honestly and practical approach here. I've organically moved to the phase of paying down my investments to be more lean, and I think this is a conversation that many investors should consider.
I paid off my debt - I feel better and more secure…. I can freely and risky invest my money without looking back 😊 … I do not care about crisises / economics turmoils… I feel free
I know Pete Fortunato personally and yeah he’s a genius. I live in Clearwater I’ve trim down to all the properties are within driving distance of my lawn tractor. I just bought a boat and a slip in a marina. 10 minutes away. Life is good, stress sucks time is worth way more. This is of course for people in their end phase of real estate investing. I’ve been an investor for over 22 years now so. I absolutely love connecting with my two children which is priceless. Good episode guys thanks for the info hopefully people take your advice.
As a multifamily real estate investor, I tell people the same thing while helping them find their own opportunity into investing. Think of this: Having a multifamily property that generates income more than what you are paying on. Then instead of using that income to play around and buy things, put it towards the balance of the mortgage. After it's paid off, you have possibly over 100k income from that single building. Now imagine having dozens of these properties and doing the same thing. Then sell them once they are paid off, for over 100million. Real estate investing is, in my opinion, the best way to have income! Could always keep them for the passive income as well
I bought the most bedroom house I could find in a city that tourists flock to. I bought it as a fixer upper to get it at a great price. I took the master bedroom and rented out the other 5 rooms. The rent money not only paid off the mortgage, but also paid most of the utilities. Without a mortgage, my only expense per year is property tax and insurance. It's gotten to the point where I don't even touch the income from my employment. I work remote so am able to travel most of the year and still have the master bedroom at the house when I want to take a break. My advice, get the biggest bang for your buck in terms of the most bedrooms possible.
28:33 I paid off the house. It felt great Dave Ramsey motivated me then six months later I realized I need cash to be ready for the downturn in the market lol so I took another big loan out on that same house for almost 150% of what I paid for it. Now I’ve been waiting for the market to crash and nothing. I’m thinking about just buying something with cash and collecting some rental money but the stock market is paying too well lol
I used to be obsessed with interest rates and would never pay something off early if it didn't make sense from the numbers perspective. Then my wife and I started talking about starting a family and I had to ask "do I really want these loans sitting around when I'm going to be taking care of a kid?" The answer was no. So I started paying them all off even though it didn't make total sense. The last personal loan I have to pay off is our personal residence. I can't wait to get it to zero and have that low living expenses that I could cover with a job at mcdonalds.
I’m a flipper as I have anxiety dealing with tenants lol… I’ve been buying flips in cash where before I would fund my deals with hard money. Not having an interest only loan breathing down my neck has not only increased my total return, it’s also given me way less stress. It’s been awesome to minimize debt in a high interest environment.
The tradition of borrow then buy, and then borrow more to buy more only works if cash flow is steady. Right now, that steadiness is starting to look fragile. Reducing that liability strengthens your position. You can always jump back onto the borrow buy wagon again.
I would buy ZERO houses to list on Airbnb right now and this is from someone who lost $10k on a deal during the pandemic when I was concerned that over leveraging would be bad. Hate I walked away but it made sense at the time. I think a lot of people don't comprehend that what goes up WILL come down. Timing be damned. It is about cash flow, interest rates and payment obligations VS income.
My father has 18 apartments plus two single family homes for rent. No debt. Funds their retirement. The homes don’t do as well as the apartments considering their value. He’s selling them to buy a 6-plex. Those two homes earned him $4k/month. But the 6-plex will earn him 9k/month…for the same investment. I you want to be a landlord (I don’t) a duplex, 4-plex or 6-plex can be a great way to go.
At 28:25 you gained MASSIVE CASHFLOW by paying off your house coach !!!! Now you dont have to make a house payment !!!! the main reason to payoff your house is ti minimize the need for money period. Your wife was very smart and you were smart to listen to her !!!! She must be a Dave Ramsey listener.
Uh. You lose the cash. The availability of it and it making interest. Loan interest is deductible too which helps get behind the standard deduction. For people that give money to Church and charity.
I own two properties and each has an ADU which I designed and built with the help of a general contractor. Besides buying a rental property 20 years ago, my second biggest success are the two ADUs I have built. You can not buy another rental property cheaper than you can build one in your backyard. You can use a HELOC and move into the property to get a better rate. You generally have to live there a year or two but whatever. My homes are 15 minutes apart. Now my rental and its ADU are paid for. Paid $143k in 2003. With the ADU and other maintenance over the past 20 years, it is worth $700,000. This property I own outright. So yes, there is a LOT of benefit to paying off your loans and keeping your risk low.
I needed this. Paying $60k in cap gains tax this year much to my regret. But will own my house free and clear. Feels good. Saving up cash again for the next debacle.
Totally understand this strategy. I used leverage to buy rental, putting down 20 percent. Then sold the 12 unit receiving about $840,000. That was after 5 years of owning it. Now own a 4 plex. Want to pay off this to provide another $24,000 in income.
Good point less is more in real estate. I like the “craft” description of nice properties well managed no leverage. Works! Both of you strike me as readers of die broke , check the book out it’s an easy read. Insightful. We need to value time more, especially if you are over 40. It’s a struggle.
@@Robuilt long story short, it's very difficult to find good labor, no matter how much I pay, so my husband and I end up doing 90% of the work. I haven't had a vacation in 4 yrs, we usually work 7 days a week. I started with zero, was almost at the verge of bankruptcy, started unintentionally flipping about 10 yrs ago, kept rolling the profits over to more properties and lived in them while I rehabbed so I've been moving a few times a year and living out of a bag for 10 yrs. I'm finally building my house right now, and managed to build a $5 million portfolio, most of which is equity because of all that blood, sweat and tears we put in. I'm just fried. I can't see past the trees and am now considering selling one of my cash cow Airbnbs, maybe a huge mistake but when you get to this point of burn out you just want to cash out 😂
I’m in Ohio and the housing market here over the last 7-8 years is unlike anything I’ve ever seen. Homes that were bought for $130K in 2015 are now being sold for $590k. I’m talking about tiny, disgusting, poorly built 950 square foot shit boxes in quiet mediocre neighborhoods. Then you’ve got Better, average sized homes in nicer neighborhoods that were $300K+ 10 years ago selling for $750k+ now. Wild times.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Until the Fed clamps down even further I think we're going to see hysteria due to rampant inflation. If you are in cross roads or need sincere advise on the best moves to take now with financial markets will be best you seek a fin-professional with fiduciary responsibilities who knows about mortgage-backed securities for proper guidance.
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Carol Vivian Constable” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
Coach I missed you in Vegas in Feb but I watch your videos. I agree I have 1 soon to be triplex that will cash flow 4K a month and a 4plex in San Diego that I'm trying to pay off that will give me 15K a month. 2 properties 7 doors just under 20K a month. I can live with that. Rob I enjoy your videos also. Thank you both I appreciate you guys.
I have 3 properties on sub 3% 15 year mortgages. My payments are 80-90% equity. My cash flow pretty much all goes towards repairs and payments, but I am building a ton of equity every year.
I've done the same, I am down to one note with 12 years left at 2.65%, $1950 a month. This includes the ADU I built that we try to average $2k-$3k a month on with extended stays. We got into Airbnb in 2007 after using VRBO for 5 years prior. Lot of history and experience here. I have no regrets and we have made money. Closed down 3 of the 4 due to the Airbnbust. Ours were basic extended stays and once AirBNB had 4x the hosts than guests to accommodate you well... Anyway, keep up the good work!
In belgium you need short term rentals to make enough money to pay the bank. I can not buy a 250k house with a 200k loan to rent it for 800eur per month. Impossible business model. Her in belgielum either you pay 100k of 250k, then your rent is similar to your loan. Or you find good air bnb spot and rent with a minimum of 3 night to avoid the daily people who make a mess and go
This is very wise council that I wish would be more popular instead of all the get rich, quick TikTok videos. Not a lot of people have this type of risk adverse mentality, which in my opinion is the best type of well to build and create a life you lovewith the ones you love.
Some own companies not to be rich but to keep their family close too and help them. I know some families where it’s the third generation running a cattle ranch together. It’s like cool to have a mountain cabin or have a. Lifestyle you want. Now owning random apartments in a city with low sentimental value ya I can see selling those.
Using leverage to buy a property is great until it’s not rented and it sucks the rent from 2-4 other units. We have one owned outright and one that is mortgaged, it’s a lot more stressful when the mortgaged one is down or needs work than it is when the one we own outright needs to be worked on
When i got my home loan I set it to automatically pay an extra 100 a month. The time and interest savings just from that is insane. So now i am all about fully paying it off. I hate paying interest
I did the math... I could generate over $5k cash flow with 2 paid off single family homes rentals. Using the BRRR method you only get a few hundred dollars cash flow out of a property. You would need more than 10x the properties to generate the same cash flow... the risk profile for doing that is HUGE. In reality, the bank is making the most profit out of that deal.
You generate $2500 in REAL cash flow per propert after expenses? That's 5000/month rent per property. Unless these are lucrative to STRs then these numbers aren't penciling. I have a portfolio for they last 10 years and historical i have an expense ratio of 45% not including debt service.
@@yOnKiNaToR I do! I converted one of my STR properties to LTR (4/3 and 3/2 in the back yard) and I'm doing $4550 a month and only paying taxes and insurance since the property is owned fee simple absolute! No need to pay for their utilities, cable, or power anymore either. The lowered stress, work load and overall bother is worth the reduction in rents. I've made my money. I don't need a lot because I've managed my circumstances. Good luck to all here!
Hi, what are your thoughts on purchasing a large piece of land to live on, but also build some small cabins to generate income instead of having to buy single home/condos to rent out.
it all depends on the market, if property values are skyrocketing and you can buy, buy. have a plan to sell some of your assets to pay off your debt as the market changes.
Debt set me free. This was a great talk. I’ll keep me: Levered appreciation. Levered depreciation. Inflation based debt destruction. Asset protection (bank in first position) It’s a balance. I wanted 70% LTV when in growth mode. I was 50% LTV now that I retired. I don’t want less. I don’t want more.
I think we're about at the same conclusion - but just with a little lower LTV. But nothing magical about a certain number. More of a personal decision. But I think it's perfectly reasonable to pay all or most of it off, too. - Depreciation happens with or without debt. - Appreciation happens with or without debt. - I'm not sure the bank in first position will stop a lawsuit if they think you have the same amount of equity overall.
The way to build wealth is with leverage. That’s true for any investment, but leverage may be too risky, such as buying stocks on margin for the average retail investor. Real estate is the perfect investment to use high (but prudent) leverage to build wealth. While you are building wealth through high leverage, you will have much less cash flow. So use leverage when you don’t need the cash flow, and then reduce your leverage to increase cash flow when you need the income (e.g. after retirement).
"It's okay to take your chips off the table" + the uncomfortable concept of paying taxes in order to boost cash flow. Another way to look at it is, you have to spend money to make money. This concept doesn't only apply to initial investments with leverage...it also applies to rationalizing your portfolio even at the expense of paying CG taxes in order to cash flow better and live the lifestyle you dream of.
I have 4 mortgages not buying anymore until I paid off a few of them. One will be paid off in about a little over two years so hopefully will be really building momentum then
in my opinion i think this would also increase the quality of the rentals and how landlords treat them. if every landlord had 5 paid off properties, i could see them easily being more willing to keep the rental in good condition because it wouldnt tap nearly as much into that rentals profit margin being that its paid off.
I agree. More landlords with fewer properties would mean they all pay more attention to them and their tenants (on average). It's hard to scale and maintain quality. I'd rather see a million small investors than a handful of big wall street firms with tens of thousands of properties each.
Thanks for having me back Rob! I'm happy to respond to questions or comments here if anyone has any about our episode.
Do you provide 1-1 coaching? I wanted to discuss my current state and see if I can get going on the small and mighty strategy.
Also interested
Great interview! See you at ORAAT event next February?
@@MattTheMortgageGuy thanks Matt! I'm not sure on February yet. It was a lot of fun last year though!
I love this, @CoachChadCarson! I’ve been practicing this philosophy and teaching this philosophy to my clients for years now. No controversy here! Thanks for sharing!
This man knows what he is talking about. We have 4 paid off rentals with good cash flow. Low stress. We use a property manager. We can easily retire on the income.
Do you have them under LLCs . I am struggling with that
@@sandraaraujo6199they should be - nothing but extra protection, there’s really no downside at all.
Rent/house?
I bought distressed properties with cash for years as a hobby. No mortgages. Sold one recently and still have 5. I have great tenants. Cash flow is amazing. Super easy to manage at this point.
Thanks for sharing bud
Nice
Not many have cash to be able to be mortgage free
@bryangionet4949 what was your best way to find these distressed properties before they went to a auction or gov liquidator?
Cool, Why did you sell one?
@patriceysimmons3897 My tenant offered to buy the property, and I thought it wouldn't be a bad idea to cash out on that property while the market was hot.
I agree. I have 5 paid off rental properties. These are much less risky than 20 houses with limited cash flow. These will fund the bulk of my retirement.
More details about your plan please...
You need to come on this podcast.
what is cost for new student?
Congrats! I have 4 paid off and family home paid off too. 👌🏾👌🏾👌🏾👌🏾
interest are tax deductible
Yes, I love this strategy. When I started investing I always said I wanted the least amount of doors with the biggest amount of profit. Less hassle, big returns!
I love that you are finally talking about this approach, Rob! Much like Coach Carson, I quickly learned that the key to success isn't quantity; it’s quality! Having a paid-off, cash-flowing primary residence or even a single investment property is a complete game changer to maximize for two variables simultaneously: wealth accumulation AND peace of mind/resiliency! I’ve been advocating “small and mighty”/KISS for years! Welcome to the club!
Having a paid off house enabled a lot of growth for me. I was able to take bigger business risks because I knew if it didn't pan out, I still had a roof over my head.
I've slow flipped for 22 years. First house I had before I started slow flipped was in San Jose. Fixed it up, sold for $440k net, moved to Phoenix and bought for cash. Live in the house and slowly fix it up. My total spend to remodel is never above $15k. Do all work myself. No rush so I have the time to use almost all salvaged materials. Currently building kitchen cabinets using oak veneer 3/4" plywood from tossed furniture. Countertops Brazilian cherry flooring about $200.
Working on house #4 (slow) to sell next year. Should net $530k. Then moving to SE Asia where $2000/mo is considered a high income. The $530k will give me $2000/mo @ 5% and act as my medical insurance. Then in 2 years I take SS estimated to be $3895, so about $6k/mo income which is crazy good in SE Asia.
I have three investment properties & leveraged with good debt. The renovations & capital improvements will take me additional months to break even-
Good debt will result in a higher COC returns, whereas a paid off home will go based upon the cap rate return- Equity appreciation is the icing on the cake -
The take on paying off mortgages early really resonated with me, especially with the current interest rates.
Just bought a house hack duplex last year for 200k and am now started on my journey
awesome best of luck
Which state?
@@AndresLealco Kansas
Sometimes we forget why we invest and end up doing something similar and stressful like the 9-5 that we were running away from. I did buy rentals for cashflow until I knew I could live on my cashflow, then I stopped buying and now I am doing what I call "Investing in myself" by paying them off. I have two strategies in paying them off doing a recast to increase cash flow while minimizing my debt and getting more money to pay the rest off while I increase cash flow.
Sounds like a great plan! We didn't talk about recasting but I love that tool, too.
We LOVE whenever you have Chad Carson on! There are SO many gross investors that drip greed and sell the wrong message that you can never have enough. Those greedy ones are giving bad advice to just keep people spending money and getting over leveraged then hurting when times turn bad or health issue come. Great video 👍 Love the "pruning" analogy 👍
Thank you for the kind feedback! 🙏
Small but mighty investor is the way. Less doors and less leverage will also equal less headaches.
Promise you. I am debt free. The power that it gives is something
I agree if it's all SFH. I think it'd be simpler operationally to have an apartment building with 5+ units and 1 property mgmt company.
Always pay your primary mortgage off. Great advice. I paid my home off. Wonderful. Working on paying off my rentals.
Love seeing the other side of the Mindset, this is great!
I quit a 100k IT job to do Airbnb full time in 2022 because I was simply overwhelmed. I took 13 months "off" and eventually ran into an old colleague who asked if I was in the market for a new IT gig. It was absolutely happenstance and I was interested because I needed health insurance for my family. That is the one thing nobody talks about when you go full time on Airbnb is how are you going to protect your assets when you incur a $300,000 hospital bill. It happens. I've had multiple surgeries that would have bankrupted all this hard work had I not had insurance. Something to think about! Awesome content as always Rob!
You should buy insurance directly if you are not covered by employer
@@justathinker8669 absolutely.
Why didn’t you get marketplace insurance. I have free good insurance with $3 million in assets and rentals producing income.
@@HappyPenguin75034 or just go to India and get your treatment done there cheap and fast.
@ marketplace insurance is garbage. Luckily I never needed coverage while I didn’t have it. I have BCBS again and all is well with the world.
Rob I love your new channel bud! Leaving bigger pockets was your biggest blessing in disguise keep doing you and what you are good at ! Thanks for all the info bud. I am a house flipper and will be getting my first unique air bnb because of you🎉
He understood that there is amount that is ENOUGH.
Facts!! It’s all about your end goal. When I retire in DR, I’m not trying to have 5,000 doors to think about. My first investment is a 4plex that cash flows pretty much NOTHING now due to louisianas awesome insurance rates. Had to use one unit as airbnb for it to cover its own expenses. But when that thing is paid off, it will do so much more for us.
Bide your time friend. Make smart decisions and play the long game. You got this!
Chads wisdom is exactly what drew me to real estate. He is one of very few who think the way I do.
the means a lot. Thank you Sean.
I have one long term all paid off, one mid term being paid to me via constant long term lease, and an STR in addition to my primary….this is the best perspective that I have heard in real estate yet! There is always that voice in your head to get one more property but I think this interview just shaped how I will do all my future real estate. 5 properties sounds like a magic number…Can’t take it with you when you die. Thank you for the insight.
So glad I found this vid. Loved you on bigger pockets Rob. I’ve been tryna convince my wife of this same model. Better to pay off our rentals to set ourselves up for financial independence
More RE content creators should be talking about this strategy! It's such a refreshing philosophy. I love Chad's "Do what matters" approach. That's different for everyone so no exact model but it's important to be intentional about how we spend our time. Life is short.
My model has been to always put more down on the next purchase. I started with a 0% down VA loan, then next year purchased with a 15% down VA loan, then the next year a 32% down conventional mortgage, then finally this year I did a 50% down. Next year I plan to do 75-100% down, and then to use the income to pay them all off before looking for more real estate to buy in cash.
Suuuuper good stuff here. Thank you for presenting an alternative to “scale, Scale, SCALE!!!” at all costs and all the time. Parallel book to the concepts they present: DIE WITH ZERO.
Couldn’t agree more - debt recapture - we don’t talk about debt recapture as much as we should. So many benefits to deleveraging efficiently! I’ve discovered some interesting tax advantages to enhance my personal life while also now realizing I’ve unlocked a better scaling platform. Great concept great content. Thank you
100% agree. Know what enough looks like. Sarted paying off higher risk and rate mortgages fairly early in and never regretted it.
I also love this because it leaves room for everyone. Instead of 1 person/ company owning hundreds/ thousands. People can live well without hoarding all the properties & wealth.
This interview resonated a lot with me. Thank you so much. This is a very simple and straightforward way of approaching a very difficult topic. Eat the fruit is the best analogy of enjoying your life. Thank you so much for this interview, my husband and I needed this.
I totally agree with this. It hit me the other day that peace of mind is the ultimate reward after all the hard work! I love knowing my properties have so much equity and I can relax and enjoy what we built!
I think coach has the right idea. I am in total growth mode, but once my gross hits around 3x my target i think the pay off emphasis is absolutely the play.
Totally. It doesn't make quite as much sense to start paying down your debt out the gate. But once you have a pretty solid set of properties, then it may be time to start chipping away.
Thank you Rob, Chad, and team for this excellent content on the power of paying off your mortgage. We at Arbor Advising help people grow their wealth with real estate portfolios in relatively, affordable Michigan agree having a few paid off rental properties can change your life. Will share this on our social channels as well. Thank you again!
One of the best RUclips videos I've ever seen.
Also the problem in California is trying to rent a house for positive cash flow. Properties are so expensive it is hard to make the payment from rent.
If you have high fixed rate debt (6+%) then sure pay down after. If you have low fixed rate debt it’s dumb to pay off early. Liquidity is king.
I used to leverage all my properties when interest rates were low, however, I’ve paid off all my mortgages and now sleep better at night.
I truly love the honestly and practical approach here. I've organically moved to the phase of paying down my investments to be more lean, and I think this is a conversation that many investors should consider.
Timing is everything. Thank you.
I needed to hear this.
I paid off my debt - I feel better and more secure…. I can freely and risky invest my money without looking back 😊
… I do not care about crisises / economics turmoils… I feel free
I know Pete Fortunato personally and yeah he’s a genius. I live in Clearwater I’ve trim down to all the properties are within driving distance of my lawn tractor. I just bought a boat and a slip in a marina. 10 minutes away. Life is good, stress sucks time is worth way more. This is of course for people in their end phase of real estate investing. I’ve been an investor for over 22 years now so. I absolutely love connecting with my two children which is priceless. Good episode guys thanks for the info hopefully people take your advice.
I subscribe to both of you and LOVE IT when you team up on these! Thank you so much! 💗💗
Thank you!🙏
As a multifamily real estate investor, I tell people the same thing while helping them find their own opportunity into investing. Think of this: Having a multifamily property that generates income more than what you are paying on. Then instead of using that income to play around and buy things, put it towards the balance of the mortgage. After it's paid off, you have possibly over 100k income from that single building. Now imagine having dozens of these properties and doing the same thing. Then sell them once they are paid off, for over 100million. Real estate investing is, in my opinion, the best way to have income! Could always keep them for the passive income as well
I bought the most bedroom house I could find in a city that tourists flock to. I bought it as a fixer upper to get it at a great price. I took the master bedroom and rented out the other 5 rooms. The rent money not only paid off the mortgage, but also paid most of the utilities. Without a mortgage, my only expense per year is property tax and insurance. It's gotten to the point where I don't even touch the income from my employment. I work remote so am able to travel most of the year and still have the master bedroom at the house when I want to take a break. My advice, get the biggest bang for your buck in terms of the most bedrooms possible.
28:33 I paid off the house. It felt great Dave Ramsey motivated me then six months later I realized I need cash to be ready for the downturn in the market lol so I took another big loan out on that same house for almost 150% of what I paid for it. Now I’ve been waiting for the market to crash and nothing. I’m thinking about just buying something with cash and collecting some rental money but the stock market is paying too well lol
Love see a true sharpening of mind- instead of making fun of a different strategy, consider the benefits and the place it holds in decades of strategy
I used to be obsessed with interest rates and would never pay something off early if it didn't make sense from the numbers perspective. Then my wife and I started talking about starting a family and I had to ask "do I really want these loans sitting around when I'm going to be taking care of a kid?" The answer was no. So I started paying them all off even though it didn't make total sense. The last personal loan I have to pay off is our personal residence. I can't wait to get it to zero and have that low living expenses that I could cover with a job at mcdonalds.
I’m a flipper as I have anxiety dealing with tenants lol… I’ve been buying flips in cash where before I would fund my deals with hard money. Not having an interest only loan breathing down my neck has not only increased my total return, it’s also given me way less stress. It’s been awesome to minimize debt in a high interest environment.
Excellent Commentary/ Narrative. Carson’s Philosophy or what he lives by , Certainly makes sense.
The tradition of borrow then buy, and then borrow more to buy more only works if cash flow is steady. Right now, that steadiness is starting to look fragile. Reducing that liability strengthens your position. You can always jump back onto the borrow buy wagon again.
I would buy ZERO houses to list on Airbnb right now and this is from someone who lost $10k on a deal during the pandemic when I was concerned that over leveraging would be bad. Hate I walked away but it made sense at the time. I think a lot of people don't comprehend that what goes up WILL come down. Timing be damned. It is about cash flow, interest rates and payment obligations VS income.
My father has 18 apartments plus two single family homes for rent. No debt. Funds their retirement. The homes don’t do as well as the apartments considering their value. He’s selling them to buy a 6-plex. Those two homes earned him $4k/month. But the 6-plex will earn him 9k/month…for the same investment. I you want to be a landlord (I don’t) a duplex, 4-plex or 6-plex can be a great way to go.
Hi
What is 6 plex
@@maksgill676 apartments or condos in one unit.
$9k month profit in a 6plex?
What a great conversation! Need to stay in harvester mindset as I am 34. Hard to do when I am fiscally conservative.
At 28:25 you gained MASSIVE CASHFLOW by paying off your house coach !!!! Now you dont have to make a house payment !!!! the main reason to payoff your house is ti minimize the need for money period. Your wife was very smart and you were smart to listen to her !!!! She must be a Dave Ramsey listener.
Uh. You lose the cash. The availability of it and it making interest. Loan interest is deductible too which helps get behind the standard deduction. For people that give money to Church and charity.
Very eye opening. Thank you!
I love this perspective. Peace of mind with a few properties ❤
I own two properties and each has an ADU which I designed and built with the help of a general contractor. Besides buying a rental property 20 years ago, my second biggest success are the two ADUs I have built. You can not buy another rental property cheaper than you can build one in your backyard. You can use a HELOC and move into the property to get a better rate. You generally have to live there a year or two but whatever. My homes are 15 minutes apart. Now my rental and its ADU are paid for. Paid $143k in 2003. With the ADU and other maintenance over the past 20 years, it is worth $700,000. This property I own outright. So yes, there is a LOT of benefit to paying off your loans and keeping your risk low.
I needed this. Paying $60k in cap gains tax this year much to my regret. But will own my house free and clear. Feels good. Saving up cash again for the next debacle.
Totally understand this strategy. I used leverage to buy rental, putting down 20 percent. Then sold the 12 unit receiving about $840,000. That was after 5 years of owning it. Now own a 4 plex. Want to pay off this to provide another $24,000 in income.
Agree on paying off main home. We built a large portfolio and we are starting to shift to pay down of mortgage debt or buying hotels next.
Good point less is more in real estate. I like the “craft” description of nice properties well managed no leverage. Works! Both of you strike me as readers of die broke , check the book out it’s an easy read. Insightful. We need to value time more, especially if you are over 40. It’s a struggle.
This was a great episode! Its so easy to let this biz crush you, as he says. Life balance is and quality time is what matters in the end.
I'm feeling this more and more every day. I'm about to enter my pruning stage and I'm really excited about it.
@@Robuilt same here! I'm past burn out. It's not about the money anymore 😞
@@joeywharton5662 why do you feel burned out?
@@Robuilt long story short, it's very difficult to find good labor, no matter how much I pay, so my husband and I end up doing 90% of the work. I haven't had a vacation in 4 yrs, we usually work 7 days a week. I started with zero, was almost at the verge of bankruptcy, started unintentionally flipping about 10 yrs ago, kept rolling the profits over to more properties and lived in them while I rehabbed so I've been moving a few times a year and living out of a bag for 10 yrs. I'm finally building my house right now, and managed to build a $5 million portfolio, most of which is equity because of all that blood, sweat and tears we put in. I'm just fried. I can't see past the trees and am now considering selling one of my cash cow Airbnbs, maybe a huge mistake but when you get to this point of burn out you just want to cash out 😂
great interview. as someone who is in the building phase. I needed to hear this!!
Took me the whole video to realize you guys were doing the interview in a bathroom 😂
Ramsey been saying this for a long time. Glad more are on this side.
I’m in Ohio and the housing market here over the last 7-8 years is unlike anything I’ve ever seen. Homes that were bought for $130K in 2015 are now being sold for $590k. I’m talking about tiny, disgusting, poorly built 950 square foot shit boxes in quiet mediocre neighborhoods. Then you’ve got Better, average sized homes in nicer neighborhoods that were $300K+ 10 years ago selling for $750k+ now. Wild times.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Until the Fed clamps down even further I think we're going to see hysteria due to rampant inflation. If you are in cross roads or need sincere advise on the best moves to take now with financial markets will be best you seek a fin-professional with fiduciary responsibilities who knows about mortgage-backed securities for proper guidance.
this sounds considerable! think you know any advisors i can get on the phone with? i'm in dire need of proper portfolio allocation
There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Carol Vivian Constable” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look-her up.
She appears to be well-educated and well-read. I ran a Google search on her name and came across her website; thank you for sharing.
How about using leverage in real estate investing, considering the current interest rates and market trends?
Chad this is like the Jerry Maquire of real estate.. fewer tenants but they are happy and your happy
Coach I missed you in Vegas in Feb but I watch your videos. I agree I have 1 soon to be triplex that will cash flow 4K a month and a 4plex in San Diego that I'm trying to pay off that will give me 15K a month. 2 properties 7 doors just under 20K a month. I can live with that. Rob I enjoy your videos also. Thank you both I appreciate you guys.
$15,000/month is pretty life changing money!
I have 3 properties on sub 3% 15 year mortgages. My payments are 80-90% equity. My cash flow pretty much all goes towards repairs and payments, but I am building a ton of equity every year.
I've done the same, I am down to one note with 12 years left at 2.65%, $1950 a month. This includes the ADU I built that we try to average $2k-$3k a month on with extended stays. We got into Airbnb in 2007 after using VRBO for 5 years prior. Lot of history and experience here. I have no regrets and we have made money. Closed down 3 of the 4 due to the Airbnbust. Ours were basic extended stays and once AirBNB had 4x the hosts than guests to accommodate you well... Anyway, keep up the good work!
In belgium you need short term rentals to make enough money to pay the bank. I can not buy a 250k house with a 200k loan to rent it for 800eur per month. Impossible business model. Her in belgielum either you pay 100k of 250k, then your rent is similar to your loan. Or you find good air bnb spot and rent with a minimum of 3 night to avoid the daily people who make a mess and go
This is very wise council that I wish would be more popular instead of all the get rich, quick TikTok videos. Not a lot of people have this type of risk adverse mentality, which in my opinion is the best type of well to build and create a life you lovewith the ones you love.
Sound advice! Thank you!
Some own companies not to be rich but to keep their family close too and help them. I know some families where it’s the third generation running a cattle ranch together. It’s like cool to have a mountain cabin or have a. Lifestyle you want. Now owning random apartments in a city with low sentimental value ya I can see selling those.
Great video and well timed message for us. Thank you for sharing your ideas/viewpoints with all of us!
Using leverage to buy a property is great until it’s not rented and it sucks the rent from 2-4 other units. We have one owned outright and one that is mortgaged, it’s a lot more stressful when the mortgaged one is down or needs work than it is when the one we own outright needs to be worked on
Refreshing take! Thank you - more interviews like this please :)
When i got my home loan I set it to automatically pay an extra 100 a month. The time and interest savings just from that is insane. So now i am all about fully paying it off. I hate paying interest
If instead you would invest this $100 into Nvidia stocks……..
@2025at yeah true but paying off my mortgage is a guaranteed win/gain
@@2025atif you knew nvidia is going to grow, you would invest $1000
I’ve never been a fan of being leveraged. We have a portfolio of 8 properties with no mortgages. The cash flow buys independence and peace of mind.
Great conversation! I think Rob & Chad make great videos together.
I did the math...
I could generate over $5k cash flow with 2 paid off single family homes rentals.
Using the BRRR method you only get a few hundred dollars cash flow out of a property. You would need more than 10x the properties to generate the same cash flow... the risk profile for doing that is HUGE.
In reality, the bank is making the most profit out of that deal.
You generate $2500 in REAL cash flow per propert after expenses? That's 5000/month rent per property. Unless these are lucrative to STRs then these numbers aren't penciling. I have a portfolio for they last 10 years and historical i have an expense ratio of 45% not including debt service.
@@yOnKiNaToR I do! I converted one of my STR properties to LTR (4/3 and 3/2 in the back yard) and I'm doing $4550 a month and only paying taxes and insurance since the property is owned fee simple absolute! No need to pay for their utilities, cable, or power anymore either. The lowered stress, work load and overall bother is worth the reduction in rents. I've made my money. I don't need a lot because I've managed my circumstances. Good luck to all here!
Amazing and informative episode!! Thank you!
You found your nitch Rob! Interviewing cool investors on your own podcast and platform l.
So inspiring. Major goals!!
great advise- doing it now.
Hi, what are your thoughts on purchasing a large piece of land to live on, but also build some small cabins to generate income instead of having to buy single home/condos to rent out.
OUTSTANDING advice.
it all depends on the market, if property values are skyrocketing and you can buy, buy. have a plan to sell some of your assets to pay off your debt as the market changes.
Debt set me free.
This was a great talk.
I’ll keep me:
Levered appreciation.
Levered depreciation.
Inflation based debt destruction.
Asset protection (bank in first position)
It’s a balance.
I wanted 70% LTV when in growth mode.
I was 50% LTV now that I retired.
I don’t want less.
I don’t want more.
I think we're about at the same conclusion - but just with a little lower LTV. But nothing magical about a certain number. More of a personal decision.
But I think it's perfectly reasonable to pay all or most of it off, too.
- Depreciation happens with or without debt.
- Appreciation happens with or without debt.
- I'm not sure the bank in first position will stop a lawsuit if they think you have the same amount of equity overall.
Rock on, Dion!
Is it just me or is the idea of having fewer properties but more cash flow the dream? Anyone in the 'harvester' stage and loving it? 🙌
Make Sense like u guys u like me pay house is piece of my heart...
Sounds like it’s better to scale at first, then use the equity to prune and create more cash flow and free time by paying off debt.
The way to build wealth is with leverage. That’s true for any investment, but leverage may be too risky, such as buying stocks on margin for the average retail investor. Real estate is the perfect investment to use high (but prudent) leverage to build wealth. While you are building wealth through high leverage, you will have much less cash flow. So use leverage when you don’t need the cash flow, and then reduce your leverage to increase cash flow when you need the income (e.g. after retirement).
"It's okay to take your chips off the table" + the uncomfortable concept of paying taxes in order to boost cash flow. Another way to look at it is, you have to spend money to make money. This concept doesn't only apply to initial investments with leverage...it also applies to rationalizing your portfolio even at the expense of paying CG taxes in order to cash flow better and live the lifestyle you dream of.
A lot of wisdom in this interview 🙏
If I left the video with just that takeaway in the beginning it is life changing
Very good ideas for NZ we are now limited by DTI and LVR so the days of buying lots of properties are gone. Small & mighty is our only way.
I have 4 mortgages not buying anymore until I paid off a few of them. One will be paid off in about a little over two years so hopefully will be really building momentum then
Well done.
in my opinion i think this would also increase the quality of the rentals and how landlords treat them. if every landlord had 5 paid off properties, i could see them easily being more willing to keep the rental in good condition because it wouldnt tap nearly as much into that rentals profit margin being that its paid off.
I agree. More landlords with fewer properties would mean they all pay more attention to them and their tenants (on average). It's hard to scale and maintain quality.
I'd rather see a million small investors than a handful of big wall street firms with tens of thousands of properties each.
@@CoachChadCarson But that is where we are heading
Such a valuable talk 👏
Best advice Ever !!!! Thank you
Love this! Great advice.