Great video I appreciate the perspective. I think the only way the 5 property scenario works is nothing can go wrong. Increase risk and it may work but you're really going all in. I believe in pay cash and let it cash flow like crazy. 1 tenant, 1 set of repairs, and not as much time spent. If you're new to real estate I wouldn't jump in on 5 properties as you don't know what you're doing and will most likely be miserable.

You're missing the obvious...by buying one fully, you can leverage the second one pertty quickly and double up on your payments from the proceeds of the first one. That allows you to have sufficient cash security to sergice the debt. Then get the third proprty and triple the payments from the income of the other two and keep doing that.

I bought the 5 houses 40 years ago and retired at 55. I enjoyed the adrenaline rush of the highs and lows of investing. 62 now and I'm doing what I want to do. Selling of a house every couple of years as I need the cash.

Hear me out.. Buy one cash, refinance that, buy another in cash, then refinance that, and buy another in chas, and so and so... once you have 10 homes making 500 thats 5,000 and you still keep the cash of the last refinance. With that buy another cash and own that one out right, or just keep doing it, and sell each house after 5-8 years. That way you never have major repairs. At the end it's all a cycle, sell the oldest make a new one. Just an opinion, any feedback would be great. (planning on starting to do this)

If you own 5 properties, remember you owe 500k. Plus interest. Which will bump it up over 600k. In the long run. I can't sleep knowing I owe that much

One unspoken benefit in taking out loans is that inflation is in your favor here. If you pay cash for one house, you dont get that benefit. But if you buy 5 and take a mortgage out on each, not only will you be able to raise your rent with inflation, but the loans actually depreciate as inflation makes the dollar worth less. So instead of winning once, you win twice.

5 Roofs, 5 water heaters, 5 X the repairs. Make sure the properties wont need much maintenance in order for these assumptions to work. Older distressed homes that you buy at a discount usually need some repairs . Keep that in mind.

I was in this exact situation. my first property 6 years ago was a 68k quad with section 8 tenants. it was a DUMP. I put my 50k down took a 3 year loan with a payoff bubble at the end. rent was 2000k a month total. i hired a tough black lady to be my property manager. over the next 2 years we got off section 8 transformed the building and improved the whole street. I hired a guy to redo the Masonite siding that had peeled away and put up new vynal siding with new windows. we gradually gutted each apartment and then put on a new roof. we made it the best building around and had it free and clear in 3 years. with 130 thousand spent we net 15k a year for past 3 years. saving now for next opportunity.

During a recession, if you have financed all your properties, you are competing with owners who own their rentals "free and clear" and can afford to rent at a lower prices than you. They will get the tenants, not you! They drive rents down. Don't you get it? You will die and up short selling or foreclosing. The rich then get richer as they buy your short sale and your credit now is destroyed. Economies don't always grow in the real world,,, stuff happens,, Recessions happen. Being in an over financed position in your investment properties is dangerous. You are totally at the mercy of the rents in your given market.

Dave Ramsey will definitely go for the cash option...

My take is: Do you want to pay cash up front and have that tenant pay for the next investment (this option may take longer but you could speed it up by adding your money) or do you want to borrow and have the tenants pay for the current investment (comes with a lot more risk but allows you to buy investment properties quicker)?

Plus if two or three other properties become empty the same time, that could be totally costly every month

I personally think paying cash is the most responsible way and less risky. I believe more people will say leverage because it takes less time to get in the game and has more instant gratification. I also think that the real estate market is white hot right now and the market is inflated. If this was 2009 and the housing market was down, I would agree buy quickly if your able to get a loan.

Finding 5 creditworthy tenants can be quite tricky and a lot to manage especially if you are just starting out. Every property can have different issues and those issues have to be addressed and will cost money and start with one townhouse out there newbies. I'm not sure where Brandon gets his figures from but in most of middle America, $100,000 gets you hardly anything.

I Love your videos so clear cut and straight to the point

Looking through videos on real estate investing, this one stood out and made me rethink my possible strategies. I am about to jump into this world and your podcasts and Bigger Pockets are awesome, thanks!!!

Buy one property and rent out every room

In my opinion I would've bought the house cash. I like having no debt and it's a good business practice. But what do I know I'm just a youtuber.

Cash is the better safest option.

Good video! I love learning from you guys.

Hi Brandon, thanks for another good, sensible and balanced video. Wondering how much discount a cash buyer normally gets vs the down payment buyer? If a cash buyer normally can buy for between 15% ~ 20% lower than mortgage buyer, would it not be immensely more beneficial to buy one property with cash down and later get a mortgage on it? This process can be repeated over and over.

Thank you for this advise. Very helpful!

I'd buy 2 properties and pay half down on both of them, then use the profit from both houses to pay the principal on the "better" One, considering appreciation rate.

I used your four square method and the cash on cash roi was double when paying for the property in cash rather than having a mortgage. But I also don't like to risk putting all that money into a property and losing it all.

You Buy a House. 3 BD 1 BR in Virginia for 145k. You take out a 30-year mortgage. You put 20,000 into the house and decide to split the upstairs into its own apartment and the basement into a 1BD 1BR apartment. You charge 800 a month for the bottom and 1300 a month for the top. Buy it in the right location and neighborhood and your mortgage is 800 including property tax, HOA, and principal. With all of this. You can put an extra 1300 to purchase another home in the future or put it back into the mortgage and pay it off in 8-11 years.

do the one home!!! when you have the money buy the second home when the market crashes you will be happy you did it this way. dont buy 5 home with mortgages

Doesn’t 20% down eliminate mortgage insurance? Are we talking about a landlord type policy? And cap ex on 5 properties is a bit much if you blew your 100k on down payments. I prefer the delayed financing method. Just buy with cash, then pull entire purchase price out almost immediately (a month) after closing to buy your next property all cash. Rinse and repeat 😉

The finance scenario wins only if you plan to sell the property after a few years. The property will have appreciated, and you will have gained a profit. If you're like me and your plan is buy and hold forever, then you are paying more by financing it.

I would only buy more houses if the market prices are incredibly low

Ok point taken.. but this is my red flag lets say i buy one property cash and take it from there where to i have leverage to getting more cash flow and a peace of mind, with your own money, now i understand why tie up your own money into one deal instead of blossoming and purchase multiple deals and have mortgages, put a renter in them and let you renters pay back your mortgage right.... what happens if inflation kicks in people scattering and running to get every dollar they can to hold on to because everything is so damn expensive then what??? Rent doesn't get paid on all 5 properties then what? mortgages still has to get paid banks don't care about inflation THEN WHAT????

Can you not first buy one from a private lender as personal home and then get more morgages using your own property as practice to what to expect?

#BP How do you collect rent from a house or property that you do not own ??

Thank you, good video.

when you paid cash for a house, later you can take loan against it, collateral, and what else? can you go into more detail thanks

In the current market it is extremely hard to find a positive cash flow property. Rent is way too low to cover all the expenses. Is it better to buy one instead of 5?

So if I buy to keep and rent, the tenants would pay the mortgage overtime. Long term I see greater benefits plus long term appreciation.

This was usefull,tnx

I heard that we can now get Fannie and Freddie loans, but only 10 per person. If your married, you could get 10 for the husband, 10 for the wife, if you get them separately = 20. Or only 10 if you purchase together. So if you plane to own more than the 10 or 20 mortgages, you will have higher interest and worse terms.

Sounds good to leverage in 2016, when RE was still appreciating. Harder to make that call today, EMD of 2019.

Absolutely cash or at least 80% into is the way to go. It's not if something will go wrong. It's when.

#bp what to do when you have pay the loan of the house and there is no tenant !

I'd say if you introduce a service-based business that can help either case in funding the projects would change the answer. It is truly a case-by-case/luck/strategy basis.

Where this the actual prices when the video was shot 😄?

If you have 1 paid off it won't take long to put 20% down on the next

How would you do this with DTI?

everyones lookin at the pie in the sky and leveraging, but no ones really taking an accurate assessment of risk. If you fail your mortgage obligations, the lender will take everything. Your downpayment, all the money you put into it, the house, and this risk stays with you until you payoff the house. What if you can't rent it out for whatever reason. What if there is a recession. You can't rent out your properties, no income, you lose everything.

interesting take. I would 100% take the 5 properties.

I'm using cash to get 3 first properties...5 seems like a lot to handle right off the bat

Hey there! What is the number of maximum mortgages a person can get?

What’s this leverage tactic? Leverage against what? The banks?

Tax benefits and appreciation are awesome but don’t you also have 5 roofs, 5 sets of tenants, 5 water heaters, 5 heaters, 5 properties to paint, etc

🕺🏾 💃 all around. Never being direct.

I have same question as Jason Rowlett. Please answer.

why would you tie up 100k for over 16 years when you can invest that money on a flip. Get your initial investment plus your profit faster. In your scenario, you would have to wait 16 years and not spend a dime to get the 100k back in your pocket and then see a profit. Is my thinking correct or am I missing something. Please help me out on this one. Thank you

How are you coming up with enough income on paper to support the 5-$100,000 mortgages?

A lot of people are talking about how its 5X the repairs. but the way i look at is if u have a vacancy in the 1 house with cash, u lose all of ur rent income. if you have a vacancy with 1 out of the 5 houses with the mortgages, u only lose 20% of ur rent income for that period of time. Plus in the long haul, 30 years down the road, when the mortgages are paid off, the houses have all appriciated in value you will get so much more money if u plan on selling them. lets say the houses are all worth 150k. the cash house, after sold, nets 50k, but each of the 5 properties nets you 50k as well. I think in the short haul cash is the way to go. But me personally, im 18 and looking at the long haul leveraging seems to be the best option.

Would it be good to buy an auction property cash, then refinance it to purchase the next

You didn’t include closing cost. So you could have had 4 properties.

All you guys teaching real estate use $100k or $200k property examples, do they really exist? Where do they exist?

those numbers were way off. you will get alot morw then 500 dollars a month from a fourplex property

is 48% cash on cash return good?

Forget about appreciation or depreciation, let´s say the real value of the property remains the same, which is usually the case, on average, when you consider inflation. A 20% down payment means you multiply by 5 your initial investment. With a 30 years mortgage, that gives you 5.5% annual return. With a 20 years mortgage you get 8.3% annual return and 10 years mortgage, 17.4% annually. On top of that you need to add any cash flow you get along the way, like the 6% of your example. BUT that 6% is not compounded, it´s fixed, so over the years it will represent an ever-decreasing percentage of your equity. In other words, it all depends on the time horizon: with a 30 years mortgage your total annual return would be rather meagre. If your down payment is more than 20% the above returns are reduced drastically. But if you don´t use leverage, your returns are even worse. In that case I would invest in the stock market where you get similar returns with no leverage at all.

U crazy 😅😅😅 5 tenants 5 problem

5 properties builds 5 times the equity.

And why would you pay cash 100%?

Can You Refinance When You Have A Mortgage?

From an old man... never ever use up every penny you've got. There will always be a need for emergency funds

Once upon the beard was small...

Why did the outgoings on the house randomly go down from 500 per month to 400 per month? Youre talking absolute rubbish mate.