Words from a few (VERY) wealthy humans:
Unless you HAVE to sell your house in order to buy another, DON’T!
As long as the banks are willing to lend you the money, keep on buying houses.
For all those houses you’ve bought and don’t occupy, hire a great Property Manager and know that whatever the management fee is . . . It’s worth it because, properly managed, that house will likely pay for itself with dividends for the rest of your life.
Those dividends come in the form of financial leverage which far exceeds most any other investment alternative with significantly less risk of loss.
Assuming the rents paid exceed the cost of mortgage, Taxes, Insurance, & Maintenance each month, the principal of the mortgage decreases and (based on Historical data dating back to the 1950s) the property will increase in value to the tune of 3%/year. Of course, some years will be better than others WRT appreciation, but that’s OK because you’re in this for your retirement and don’t need to sell the house now.
My recommendation to all of my clients who take this advice seriously is to pay any surplus (after paying Mortgage, Taxes, Insurance, Property Manager, and reserving for Repair and Maintenance) into the principal of the mortgage with the goal of paying that mortgage off as quickly as possible . . . and to set up a dedicated Bank Account for each property . . . with no “co-mingling of funds” between that account and “personal accounts.”
Owning a rental property is a business whether it’s a single property or several.
The “Gold Medal Moment” is that time you stroke that LAST mortgage payment for the rental property. Of course, you’d still have to pay the taxes, Insurance, Repair and Maintenance, and management fees . . . but no mortgage . . . SO . . . Why not redirect the mortgage payments you’ve been used to paying into the mortgage of another property (the house you live in or another investment property).
This strategy is sometimes called a “snowball strategy” – As it rolls along, equity and wealth increase.
Essentially, this is nothing more than “financial focus” as you get yourself into a monthly budget that doesn’t change until EVERYTHING is paid off. Each time, you’re able to pay off a debt, you simply redirect those payments to another debt . . . This compounds (leverages) the surplus money WAY more than any bank account or most other investment instruments could.
Add a dose of strategy by pointing the focus first to the highest interest debt (those 18% credit cards) . . . and it snowballs.
I know a guy who used this exact strategy back in the ’90s . . . in 8 years, he was able to purchase and pay off all mortgages on 10 duplexes AND his personal residence . . . the goal was to move to Vail, CO . . . He sold all of the properties to the tune of $2,500,000, and made his move. I haven’t heard from him in years, but I know that when he left Nashville, he was financially set for the rest of his life because he fully understands this strategy and has “been there, done that” and is likely in Vail doing it again and again 🙂
So . . . How would YOU like to be able to retire in 2024?