Back me up on this one please! Or not!

Hello everyone,

First, I would like to thank you for the useful information that I found reading your posts here. You are the best!!!

My husband and I started investing in real estate in 2012. We bought our first rental- SFH with conventional mortgage(30 years, 20%down). Last year, we thought we were ready for our next one , but the banks didn’t think so. Then we went to some real estate courses and decided to flip houses first , so we can make money for down payments. Just sold our first flip, on which due to inexperience, we made no profit :flush. We live in a home with $1,600 monthly mortgage payment(15 years, 4,5%, 11 years left to pay off), but we planing to rent it out and buy another one in the next two years. The market rent for our home is $1,300 to $1,400. We can probably rent it all furnished for $1,600 to $1,800( very limited possibility). What I think we should do is to refinance this for 30 years now. This will bring the payment down to $1,000 per month, so the property can cash flow when we rent it out, and will make us eligible to buy one more rental right away. That is what I think, but my husband cant bare the thought that we will not have at least one home paid off before retirement. I don’t see his point since we are going to bye another house to live in , while this one is going to be a rental with mortgage payment paid by someone else. Am I right ? Please help us stop our daily :argue. Thank you!!!

Congratulations on getting started and pushing forward.

A couple of things.

You want to assume a 50% overhead on your rentals including maintenance and management (at market rate).

That means any mortgage payment that exceeds 50% of your rents will mean that you will be donating time and money to the maintenance and management of your investment property.

The next issue is to know what you’re investing for…

Equity build-up? Cash flow? Appreciation? What?

It appears that you want to have one free and clear house to live in. Is this correct?

If that’s the case, then just continuing with the current scheme seems adequate. Or what am I missing?

Meantime, you’re confusing your primary residence with an investment property. These are not the same thing. One, you are paying for, and the other one, someone else is paying for. Whatever you are paying for is a liability. Whatever someone else is paying for is an asset.

You will pay nearly three times the purchase price in interest on your primary residence, by the time it’s paid off. That’s not investing. That’s simply putting your own money in a leaky piggy bank bearing negative interest.

Sure, the leak will slow down substantially over 15 years, as the loan is paid off, but it’s still a leaky liability.


If you want a critical mass of equity by the time you retire in 15 years, I highly encourage you to learn how to bypass banks and their lending limitations using creative financing tools. There’s not much to limit you when the only financing party you need a “yes” from is the seller.

After I learned this myself, my investing velocity skyrocketed. Of course, it doesn’t mean you shouldn’t use conventional financing. It has it’s place, but as you’ve experienced, they like borrowers who don’t need to borrow. That eliminates a lot of potential borrowers.

Meantime, I learned how to bypass the bank, give a seller what he wanted, and buy property anyway. A commercial agent taught me how.

Best thing I ever learned to do.

Another gem from my buddy Jay in SoCal. Take heed and pay attention to his message…private seller financing available for the asking. Conventional lenders only want ‘just so much’ loans walking around in one pair of shoes…private seller financing is unlimited! UNLIMITED!!

Although I’ve stopped counting how many transactions I’ve completed, in round numbers 400 or so…less than 50 had conventional funding and most were private financing by sellers or private money from IRA’s and Pension Funds.

Kudos to Jay…pay attention…this is the road to financial freedom.

Hope this helps.