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Something to keep in mind is that once you own a few rentals, it's easy to pull equity out for a down payment on another rental, and buy the rest with a loan. L

Something to keep in mind is that once you own a few rentals, it's easy to pull equity out for a down payment on another rental, and buy the rest with a loan. Leveraging is easy when there you are buying physical assets that retain value. In other words, even if you own 10 rentals, you are probably wealthy, but the bank my still own a majority % of those assets.

toomuchtodo 6y ago
The goal is not to own the rentals, the goal is to own the cashflow through the control of the properties (whether that's mortgages, leases, or option agreements with the owner). To your point, you want to be stripping equity whenever possible to accelerate asset acquisition. Very similar to private equity LBO operations. If you're highly levered (as a smaller landlord), and funneling that income into retirement accounts protected from creditors (varies by state for IRAs, 401ks are federally protected), it's all upside with no downside. Heads, you walk away with appreciated real estate you eventually cash out of. Tails, you walk away from your investment properties while your retirement assets are protected with credit blemishes that are quickly forgotten by lenders. It is rare to be pursued by lenders in recourse states, as being (mostly) judgement proof and the option of bankruptcy are significant hurdles.
- jb775 6y ago
  > you want to be stripping equity whenever possible to accelerate asset acquisition By "stripping equity" do you mean taking out home equity loans whenever possible? Or are there other efficient ways to strip equity?
  - toomuchtodo 6y ago
    Home equity loans or cash out refinances. What you pick is determined by your financial models based on interest rates, origination fees, etc. Typical carrying cost math. Once you have enough properties to bump up against Fannie or Freddie GSE underwriting guideline limits (~10 properties), you transition into commercial lending, where you build a relationship with a bank and they lend against your combined portfolio. EDIT: You can find more information regarding these strategies at https://www.biggerpockets.com/ https://www.biggerpockets.com/
    - jorts 6y ago
      Where can someone read up on these strategies/practices?
    - darkwizard42 6y ago
      appreciated your insight and the link!!
- kulig 6y ago
  Sounds like free money. And there aint no such thing as free money.

toomuchtodo 6y ago

The goal is not to own the rentals, the goal is to own the cashflow through the control of the properties (whether that's mortgages, leases, or option agreements with the owner). To your point, you want to be stripping equity whenever possible to accelerate asset acquisition. Very similar to private equity LBO operations. If you're highly levered (as a smaller landlord), and funneling that income into retirement accounts protected from creditors (varies by state for IRAs, 401ks are federally protected), it's all upside with no downside. Heads, you walk away with appreciated real estate you eventually cash out of. Tails, you walk away from your investment properties while your retirement assets are protected with credit blemishes that are quickly forgotten by lenders. It is rare to be pursued by lenders in recourse states, as being (mostly) judgement proof and the option of bankruptcy are significant hurdles.

jb775 6y ago
> you want to be stripping equity whenever possible to accelerate asset acquisition By "stripping equity" do you mean taking out home equity loans whenever possible? Or are there other efficient ways to strip equity?
- toomuchtodo 6y ago
  Home equity loans or cash out refinances. What you pick is determined by your financial models based on interest rates, origination fees, etc. Typical carrying cost math. Once you have enough properties to bump up against Fannie or Freddie GSE underwriting guideline limits (~10 properties), you transition into commercial lending, where you build a relationship with a bank and they lend against your combined portfolio. EDIT: You can find more information regarding these strategies at https://www.biggerpockets.com/ https://www.biggerpockets.com/
  - jorts 6y ago
    Where can someone read up on these strategies/practices?
  - darkwizard42 6y ago
    appreciated your insight and the link!!
kulig 6y ago
Sounds like free money. And there aint no such thing as free money.