Why it was a Huge Mistake Paying Off My First Rental Property Early!

Рет қаралды 5,415

2 жыл бұрын

I bought this rental in 2010 and I was able to pay off the loan in 3 years. I was so excited that I had paid off a property until I realized it was a huge mistake. I go over why it was a mistake and what I would do differently if I had it all over to do again.
Here is the written article on my blog that goes over everything as well. investfourmore.com/snowball-m...
To get the free book showing how I got started in real estate click here: investfourmore.com/yt
----
InvestFourMore Instagram page: / investfourmore
----
InvestFourMore Insider club: investfourmore.com/insider/
----
Direct Coaching with me: investfourmore.com/blueprint/
------
My books: amzn.to/2VGI6a9

Пікірлер: 80

@scottjohnson921 2 жыл бұрын

IDK, I paid off all 10 of my rentals and my home. I don't like having loans, and I'm glad I don't have any.

@JL-hn6hi 2 жыл бұрын

It’s logical to have regret about paying off a house, but the flip side is that having everything paid off is what saved some folks during the downturn, and allowed them to keep all their properties without worry.

@investfourmore 2 жыл бұрын

I know many investors who had loans and did just fine. The key was having cash flow and reserves. Rents didn't really drop in most places.

@bradysg 2 жыл бұрын

You get anxiety from not having debt... I get anxiety hearing you talk about all that debt! 😳

@investfourmore 2 жыл бұрын

😂😂😂

@petercolquhoun2086 2 жыл бұрын

Back when you bought this house for roughly 100k rent income was roughly 1k/month. Now it is worth 400k (4X increase) but rent is only about 2k/month (2X increase). Since rents have not kept pace with property costs it seems to me this is an unsustainable bubble in prices. If there really was a *shortage* that is driving prices up, rents would also go up.

@Trenttabor 2 жыл бұрын

Dave ramsey will tell you that the statistical analysis does show that leveraged properties will yield better BUT doesnt account for RISK which is qualitative. You can be reset to zero with leveraged properties if you dont play it right. The comfort that comes from debt free is a gain that isnt a dollar amount.

@investfourmore 2 жыл бұрын

I personally think having multiple properties with more cash flow and equity is better than having one paid off with all your money tied up in it.

@jeffhulsey989 2 жыл бұрын

@@investfourmore until it crashes again. Just like it did to Dave Ramsey. Currently you are getting your entire "$1050/month" and don't have to worry about what happens if it's not rented. It's paid off. I can see your points in the video, but it doesn't negate the risk factor just like Trent up above mentioned.

@investfourmore 2 жыл бұрын

@@jeffhulsey989 you should always have reserves for rentals. in fact banks won't lend to you if you don't. Feom what I read, Dave had 90 day loans on commercial properties that were bought for tax credits with no cash flow. They changed the tax laws and he had worthless properties. You can't even get 90 day loans now. If he would have been buying residential rentals on 15 or 30 year terms he would have been just fine. That market didn't crash.

@volenteertjm7373 2 жыл бұрын

I live in a paid for house thanks to Dave Ramsey and I love watching your stuff but I’ll never build it the way you did- I just think it’s too risky. I do love the peace of mind of knowing it’s mine and I’m saving cash to buy my first property in all cash

@investfourmore 2 жыл бұрын

@@volenteertjm7373 how long is that taking you?

@JakesVideos614 2 жыл бұрын

Thanks for showing Mark, however, that's in hindsight, you didn't know if that price was going to spike like that. So at that time you based your decision on the market from then. Now the markt seems to be at the "top" i don't know if it is, so would you do the same right now? if you were to start today?

@gameoflife7235 2 жыл бұрын

Leverage is king in RE imo. Very easy to walk over dollars for some pennies if you don't look at the bigger picture like this!

@investfourmore 2 жыл бұрын

👍👍👍

@montrosepm4745 2 жыл бұрын

I don't regret paying off a duplex for a bigger heloc. It's reusable and much cheaper than cash out refi. I don't have to sell and lose the rents. This funded me many 25% down payments on cash flowing duplexes. I still pay off and reuse. Also increase line for recent appreciation.

@investfourmore 2 жыл бұрын

In my experience helocs on investment properties are much tougher to get and pretty expensive. Many banks won't do them at all.

@montrosepm4745 2 жыл бұрын

What do you have on this rental now? Ive had helocs on investment properties from national credit unions no closing cost. And commercial lines with local banks with closing cost. Currently have one of each.

@jerrydesu 2 жыл бұрын

As long as the Fed can keep stimulating the economy, assets and rents should keep going up. The last few years are definitely not normal market behavior, and absent the accommodative Fed, it would be very different. Japan has still not recovered from the excesses of the 80's and holding on to declining or flat assets for decades is really hard to do. If the Fed ever loses control, things could unravel very fast - banks at risk could call loans due. So far the Fed has been able to get it under control, but one could imagine at some point it falling apart.

@TommysTanks 2 жыл бұрын

Great video Mark have a good weekend you and your nice Family.😎👍.

@investfourmore 2 жыл бұрын

Thanks and you too!

@renelacad2603 2 жыл бұрын

‘’Courage taught me no matter how bad a crisis gets ... any sound investment will eventually pay off." - Carlos Slim Helu

@chrisjohn7823 2 жыл бұрын

Making it out at a young age is quite difficult. I started a side hustle at 17, saved up and made some good investments. l'm 28,live on my own and having a good life for myself. Big ups to you and everyone out there trying

@steceymorgan814 2 жыл бұрын

@@chrisjohn7823 Sounds like plan, how do you put money to work?

@danromero533 2 жыл бұрын

@@steceymorgan814 Yes it sure is. I put in money in investments and get profits. That 's how I make more money without working. This does not sound new to you right ?

@steceymorgan814 2 жыл бұрын

@@danromero533 Thanks for replying me, I've heard so many people talk about investment but none had said how to do it right.

@hoshifuyo4494 2 жыл бұрын

Am hoping on you can explain more on how you make extra income from investments

@SergioB-MakingMillionaires 2 жыл бұрын

Great breakdown

@surfnbacker84 Күн бұрын

Hindsight is 20/20. Would have been no GFC if everyone had paid off homes.

@mr2fas2 2 жыл бұрын

Great topic

@tylerowens2192 2 жыл бұрын

Who do you use or how do you execute the 1031 exchange?

@harveytaylor0101 2 жыл бұрын

Great vid mark

@investfourmore 2 жыл бұрын

Thanks!

@yoshimoboss 2 жыл бұрын

Great video mark, the appreciation should have been double for the two properties.

@investfourmore 2 жыл бұрын

👍thanks!

@harleyharleyharley 2 жыл бұрын

I know Dave Ramsay has helped lots of people but he cost me millions by paying off my investment properties early . Same as you paying off your property early . As long as you can lock in a low fixed 30 year intrest rate do it.

@investfourmore 2 жыл бұрын

👍👍👍

@EricDanzeisen Ай бұрын

Yeah but you weren’t ready yet. You’ve grown in knowledge. Important to stay in an aggressive comfort zone.

@School_Me 2 жыл бұрын

I think it’s a good idea to pay off houses fast and then pull a Heloc on it and keep it rolling

@hihaters2004 2 жыл бұрын

Why pay it off just to heloc? 😂

@evanvandeusen9573 2 жыл бұрын

@@hihaters2004 to use a heloc you need equity in a property. That heloc can be used to buy flips. But a lot of banks right now won't do that for investment property

@School_Me 2 жыл бұрын

@@evanvandeusen9573 I know , a lot of banks have stopped, that’s why I started doing business with non- Fannie and Freddie Mack banks, doing business with private banks now

@investfourmore 2 жыл бұрын

Why not just save your cash and invest it now?

@hihaters2004 2 жыл бұрын

@@investfourmore exactly 😂 makes no sense

@jdeeezie Жыл бұрын

Are there any other risks of having your equity fully vested if you were to be sued by a renter? I think a lot of people put rental properties into LLCs to protect their assets. Essentially, if you have a mortgage and you've only paid off 30%, and it's inside of an LLC, then it seems like a risk is mitigated. Your risk seems like it is limited to that 30%. But if you have 100% equity vested inside of an LLC, isn't that whole 100% subject to risk?

@investfourmore Жыл бұрын

there is much more risk with paid off properties.

@jdeeezie Жыл бұрын

@@investfourmore Ahh -- so that's a pretty huge reason not to pay it off then. Most videos chat about the $ and % but I haven't seen any discuss the reason not to being that the fully vested equity inside of the LLC is potentially at risk. Do you have separate LLC's for each property? Do you get really high $$ insurance? Or do you go low so that you're not a beacon for lawsuits? Are there any other approaches to protecting the vested equity in a rental property, such as the "RentalCo-LLC" selling the house to "YOU-LLC" and the RentalCo-LLC not owning anything, but being the leasing company that the renter does the deal with?

@SawmillerSmith 2 жыл бұрын

Seem like home loans have lots of fees and expenses you have to pay plus lots of paper work to get a loan. I just pay cash and skip the who process. Maybe if I was planning on becoming rich I probably need to borrow money from a bank. But I like my life to be simple.

@investfourmore 2 жыл бұрын

Usually about 2 to 3% of the loan amount.

@SawmillerSmith 2 жыл бұрын

@@investfourmore in 2006 they were going to change me 10% of the loan amount And in 2019 I went to see about a loan and it was about 6% of the loan amount . Guess I'll check next week and see what they charge.

@jaandel1 2 жыл бұрын

Depends what your goals are... if you buy a property a living 1 family or you use it as investment as long as pay by rent ( most of time you end up 25% or more). You will.make profit after taxes and realtor cost 30% after 15 yrs asuming the propertyincrease value and you have not eviction costs....

@jaandel1 2 жыл бұрын

But if you live and account you property taxes and manintances expenses hahhah you will gain no too much over the years unless the property values goes to the sky... in 10yrs period... of vourse you avoid pay taxes are exempt

@investfourmore 2 жыл бұрын

My properties hundreds of thousands of dollars with $30k to $40k investment

@investfourmore 2 жыл бұрын

@@jaandel1 buying is almost always better than renting especially after considering rising rents due to inflation

@wkjeom 2 жыл бұрын

I haven't had any audio issues with your videos.

@investfourmore 2 жыл бұрын

My last two were off

@jaandel1 2 жыл бұрын

If you plan to just have aplace w/o do any investment yeah pay you full mortage..if you plan to invest in t future sure try and pay as much as you can in to reduce your capital loan at half.. Between 5 or 10 yrs then you will save interest if you try do it later its too late ... large interest amount are already paid.... this is true use excel and you will see

@investfourmore 2 жыл бұрын

Excell will show you that it's much better to invest that money somewhere else

@jaandel1 2 жыл бұрын

@@investfourmore yes sir. Its all about numbers.. its all based on what your strategies are. Some people dont want deal with tenants. But for any average guy the best way to get a good deal its the simplest way its made prepayment to the capital till 10 yrs of the loan... late on if you want to deal with tenants.. great need 25% down and yes if the rent pay PITI and hoa... you will make money after taxes ( selling investment property) and realtor fee but that will be 10 yts later assuming 3-4% appraisal

@jaandel1 2 жыл бұрын

@@investfourmore large numbers of people fail to understand money over time or even consider taxes brokes fee. Property taxes maintenance cost.. what its to deal with tenants fail to have a good lease dont obey the law.. and yes all those cost they havent anticipated so they may be force to sell and eventually lose money...

@marshallhennington4369 2 ай бұрын

You guys are hustling backwards. Pay off the investment property loans then increase the rents each year. Live off the cash flow. Otherwise you can’t live off the cash flow doing it the way that is described in this video.

@jaandel1 2 жыл бұрын

The real true if you want to have a house and make a rent and profit you must buy multifamily if you dont good bless you.. . Or have 25% for each next investment property which after 15yrs you will see profit

@investfourmore 2 жыл бұрын

You make more with 30 year loans. Lots of single families make money

@wkjeom 2 жыл бұрын

Brrrr !!!

@investfourmore 2 жыл бұрын

🤘🤘