15 vs. 30 years...

I like the extra cashflow that I get with my 30 year mortgages...at the same time when I do a 20 year loan I like seeing the principal drop quickly.

I agree with using the 30-year right now. It hardly makes a difference in the interest rate and increases the cash flow. I like to round my payments up to the nearest $50, though. Say $726.37 to $750. just makes my numbers neater (I'm weird that way) And yet for setting rent amounts I do the opposite. $795 still sounds cheaper than $800 to people. What is it with our brains?

Rina

I understand how people have have been given this idea to make an extra payment per year or rounding up will help pay it off faster. Let me ask you a question, if you are only going to hold a property for 3, 5, or even 10 why would you want to pay off the interest faster? If you are holding for this amount of time stop doing it. Don't take my word for it look at an amortization chart. I just came out of a wealth training course two weeks ago where we talking about this. Keep your positive cash-flow higher not the amount you are paying in interest. Also unless you specify to the bank the extra to principle, they will apply the extra to interest.
Rina for your example that is a loss of $283.56 in positive cash-flow the first year.

Rina on your LLC for forum I talked about protection from lawsuits. This goes hand in hand with that discussion if you don't have large amounts of equities in your properties the lawyers will not waste the time on lawsuits. This is one of the tactics the big players use to protect themselves.

I agree that debt is great liability protection. There are a few systems out there that teach you how to pay off your mortgage in about 5 years WITHOUT making any extra payments! Imagine every 5 years pulling out equity like that!

So far we’ve planned to keep most of the rentals we have (forever?). We’ve sold several over the years (only when we could double or triple our money) but those were places that were in mediocre locations or had issues that would affect their future value. Out of the 8 that we have now, there’s only one we would want to sell (we have mortgages on 3 of them). I try to buy properties that I can turn around and take enough equity out of to buy a couple more. If I’m fortunate enough to keep doing that, what do you suggest I do with the accumulating equity in the places owned free & clear? My LLC should be set up by Monday. Will transferring these properties into assets under the business give me any advantage in this area?
The reason I like holding properties is that they appreciate so doggone much, it’s like earning 10% APR besides the cash flow.

db, forgive me for a stupid question. In your previous post, did you mean that paying off the mortgage in 5 years was good!! or bad!! ? I suppose it depends on whether it’s your primary residence or investment.
cfk, where was the wealth training course? Something I can get in on?

Do you belong to an REI Club? There's none in our area (within a hundred or more miles). Can a person join one online?
Thanks, guys, for your help.

Learning as I go,
Rina

P.S. I always designate the extra payments to be applied to the principle.

oops. I meant cb (cbrpower). No disrespect.

Generally, I feel paying off a mortgage by paying extra payments is counterproductive. When I found a system that help you pay off your mortgage within about 5 years without making extra payments, or bi-monthly payments I was interested. I like cashflow every month that I can roll into the next property if needed, but being able to do a cash out refi in 5 years for $50K-$60K and still get a couple hundred dollars per month in cashflow is even better. I haven't named the program because I would want it approved by Dean before I listed it. I will send it to them and let them check it out.

As far as joining a REI Club, if there is one about 100 miles away I would attend it. That is only about 2 hours away. I drive 900 miles every weekend to invest in real estate.

I did some more research. The nearest club is 170 miles. I don't know if I'll drive that far or not. Your 900 miles a weekend, what does that include? If you mean looking at properties, I understand. You can put on hundreds of miles just driving back & forth getting to know a neighborhood.

OK, no more extra payments. Got it. But what about the equity in the properties with no mortgage on them? What are your best suggestions? I figure if I leave them free & clear I can do what I want with them. Not to mention, some of them need to be fixed up (these are unoccupied) before a lender would re-finance them. Do you cash-out on all of them?

Sincerely,
Rina

Hello, I have a question. I want to but this house and rent the space. If I have the money, should I just pay the house off, or should I just get a loan, and save some money. I'm just starting to get my feet wet

I am going to play both sides of this to prove my point.

Scenario #1: You own a house free and clear that rents for $1000 per month. Since you have it paid off, the only expenses you have are the monthly taxes and insurance. The taxes and insurance add up to about $250 per month. The house is worth about $100K. So you get cashflow of $750 per month. You are a happy camper but, you don't have a lot of extra cash to buy another property. So in 6 months you will have the $750 per month ($750 X = $4500) plus you are saving a little bit of money from your paycheck that adds upto $400 per month ($400 x 6 = $2400). You now have about $7000 to go buy another property. You do your homework and find a steal. You buy a house that is worth $100K for $57K. It needs painted and some very minor fixup. You put $1000 into rehab and the rest into the down payment. You now have a property that is cashflowing $250 per month to go with the property that is cashflowing $750 per month. You are happy and in 6 months you will do this again. Right now you own 2 houses that have a total cashflow of $1000 per month and you have $150K in equity.

Scenario #2 The house you own free and clear that is cashflowing $750 per month has a lot of equity. You decide to cash out $50K. Now the property cashflows only about $250 per month. But you have $50K in the bank. You do your homework and find a steal of a house for $50K that needs $5K in repairs then it will be worth $100K and rent for $1000 per month. It costs you $10K with repairs and down payment. You buy it, fix it, and rent it and it gives you $250 per month rent. In 2 weeks you find a similar deal and repeat the process. You add another $250 per month cashflow. It takes $10K out of you pocket once again. You repeat this process another 3 times and have now spent the $50K but now you have $1500 per month in cashflow (from the 6 you own) which is 50% more that what you had in scenario #1 AND you own 6 houses that have equity of $300K! Which is double what you had in scenario #1. What you could do next is sell one of the homes and take the $50K profit and roll it into 5 more homes. It does not take long to see this a very fast way to become a millionaire. And create a lot of cashflow.

cbrpower,
approaching the million mark already. Judging from your bio, I have to respect your opinion. To be honest, we're pretty comfortable on my husband's salary and he likes his job. I just get such a kick out of doing the real estate (I like the numbers, the people, the excitement, the challenges). Hopefully it will mean that our kids won't have to work as hard as we did (AFTER they HAVE learned to work hard, of course) Maybe in the future I'll become a philanthopist or something. Thanks for all the good advice.

By the way, I really like your profile picture and your motto/quote.

Rina

P.S. Am I making these posts more personal than they are supposed to be? Let me know, I'll adjust.

I tell ya, I did not know you were that young, and you have inspired me so much already and I even haven't had a chance to read the book yet. You are very helpfull. I thank you so much for the scenario's. Thank you, Thank you

Yes.. As long as you treat it like a business ie hold annual meetings, dont c-mingle funds etc.

My preferred holding method for rentals is putting the property in trust with the LLC as the beneficiary of the trust.

I have never favored the strategy of leveraging a property just to protect against lawsuits. Just get plenty of insurance.

Rina,

Thanks for your comments. Your comments are not too personal. By the way, great job on investing in real estate so far!

Thanks for the comments. Just remember age, whether it be young or old, is no excuse for a lack of success. You can be successful at any age. I feel like I have barely gotten started in real estate. I have been investing for almost 2.5 years and it feels like just yesterday I got started. Please read Dean's book. Many times. Remember this equation (I tell myself this one everyday).

Information - Action = Frustration

Information + Action = Results

This is to everyone out there right now who is prepared to take action during this window of opportunity.

This is your chance! This is your chance! Don't wimp out on us and quit! Don't you listen to a critic and disappear! Take action and claim your VICTORY!

I'm having trouble quickly absorbing all the information I feel I need to know about LLCs, business in general. Well, I'd better have it figured out by Monday, 'cause that's when I'm registering with the state, one way or another. I want to get this show on the road.
Mark, or anybody else, if you have something you think is imperative for me to know before then, you can either post it here or in my guestbook page so I can refer to it easier. What type of insurance did you mean?

Thanks in advance. Really like listening to you guys!

Rina

Liability. Or an umbrella policy too if you prefer.

Thanks, Mark. I put that in my notes. I really appreciate all your input. In regard to the message I left in your guestbook, if you just want to post information in the forums, that's great, too! I'll chew on any advice I can find in here. Have a lot of respect for all participants.

Sincerely,
Rina

I guess that means I need to go find my guestbook....

I'm new at this too, so thanks cbrpower for the info. I really like your equation format, but i will make my to:

Information - Actions = Nothing
Information - Actions + Results

Basically anyone can have all the information about investing in real estate, but if you don't do anything with it, then it becomes Nothing.

Information + Action = Results.
Little typo there.

Good looking out Rina...

lloydsap

I agree cash flow is everything. I even have a 40 yr mortgage. I'm trying them all out to see what they do.
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