How to Pay Off Rental Debt in 5 Years (A Case Study)

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🎙️ Episode 301 - Debt is not a religion, it's a tool. Once you're done using those tools, it's time to put them into the tool box. I'll share powerful strategies to reduce risk and increase income, keeping things simple and measurable along the way.
📄 Show Notes: www.coachcarson.com/payoffren...
▶️ Next Video:
4 Reasons to Pay Off Debt on Your Rental Properties: • 4 Reasons to Pay Off D...
🎬 Timestamps:
0:00 - Pay off in 5 years
1:27 - Reduce your risk
3:05 - Increase your income
3:58 - Being simple
6:40 - How to measure progress
14:26 - Strategic refinancing
20:06 - Pay cash
22:27 - Debt snowball
26:22 - Buy more than you need
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[@pawelwisniewski6849]

Not a lot of people talking about less risk , I appreciate that

[@CoachChadCarson]

yes, you're right! And when no one is talking about risk, it should tell us something 😆

[@dropoutandretireearly1781]

Thats because in business pigs get fat and hogs get slaughtered.

[@MobileVisions]

Summary: 1. Refinance one property to pay off another. 2. Save for 100 yrs and pay all cash (not really a strategy to pay off a property if you never had a mortgage) 3. Snowball cash flow against the lowest balance 4. Buy more than you need, say 20 properties… then later on sell off 10 to pay off the rest once there’s enough equity. Unfortunately in today’s market you will most likely not cash flow from new rentals… but with principal pay down and appreciation you can eventually sell (and pay long term capital gains) then apply to other debt. Can you discuss the strategy of taking a HELOC and using that to pay bills plus lump sum mortgage payment?

[@lailaatallah1857]

Quite revolutionary. You don’t hear many people talking about things like this. I had no idea that you could be MORE at risk with your bank, the MORE equity you have in a property. I’m drawn to your fourth strategy of initially “over-buying” properties, and then selling some of them off, paying the capital gains, and potentially using the profits to help pay off or pay down some of your keeper properties, that are hopefully less risky and cashflowing nicely for you.

[@CoachChadCarson]

I remember when I first heard that concept from John Schaub, and it blew my mind. But it makes a lot of sense to me. I like your plan of over-buying. It's what my business partner and I did. If you're confident you can buy enough good deals with equity, it's a great route to go.

[@torifuentes1879]

Extremely undervalued content. Almost dropped my drink seeing that this isn’t a multimillion viewers video

[@cycron3]

Finally someone agrees that going/buying and going is not needed. You can just stop and enjoy at a goal. Ex. 30k-50k a month. Or just enjoy life and hobby buy.

[@jefflong5640]

GREAT video! I’m loving your new book so far. Thanks for writing it!

[@CoachChadCarson]

Great to hear Jeff! And thank you so much on the book. Makes me really happy to hear that.

[@et6794]

I love your quote about it's not always about optimizing your returns, but optimizing your life that is the goal.

[@AliciaFlores-tk7tf]

Thank you for this! This is right up our alley of what we are trying to achieve. It makes a lot of sense.

[@CoachChadCarson]

glad to hear it! Thanks for watching.

[@andrewmaccaskey4388]

Awesome thanks so much for sharing your experience

[@pushthelimitled7954]

Loved this book. One of the best. Changed the way I think about investing.

[@PeymanSultan-wn6iw]

This is a good perspective, thanks

[@rickymagicanada]

Thank you Coach for such a great video! Awesome content. Can't wait to read your book

[@CoachChadCarson]

Thank you for watching and for the comment!

[@gonoenriquez26.2]

Thank you for your time and share your opinions!!

[@miketdarnell]

This is a very good post. Thank you

[@CoachChadCarson]

Glad it was helpful!

[@myndfulness]

Awesome video--thank you!🎉

[@AdamCranmer]

Great video Coach! This is exactly where we are in our journey. Looking forward to getting my copy when we get home from Europe to dive in and select a strategy. Thanks for a great video!

[@CoachChadCarson]

Glad to hear it's helpful, Adam! Let me know how it goes when you implement something similar, and I hope you enjoy the book!

[@DennisMartins-pp7ry]

Loved it thank you do very much😊

[@andresvaldes2491]

Great strategies.

[@pberggre]

Great value

[@Apollo_Sebastian]

I love Spain. I live part-time between Marbella and Las Vegas. I follow U regularly Coach

[@jensbiederstaedt8022]

It is totally possible. We pay off 2 houses with lump sum payments. We are 2 and 3 years into these 2 rentals and are half way done.

[@kikinelson6636]

Great content With clear explanation Thanks so much appreciate

[@ColivingInMallorca]

Hi Chad, great content, I love what you're sharing on this channel, it's super helpful, thank you and please keep churning out the invaluable material! I just heard you're wrapping up living in Spain, are you still in Spain? If so, in which part of Spain are you based?

[@claytonsizwe]

I'm going through the new Small and Mighty Investor ebook...It's awesome!!!

[@CoachChadCarson]

Thank you Clayton! Glad you're living it.

[@FinancialFIRE-Fighter]

Great Video Boss

[@leeroach3381]

Very helpful Thank you

[@CoachChadCarson]

thanks for watching!

[@victorarnolphalinas9632]

I truly believe in you Coach 👍

[@CoachChadCarson]

I appreciate that!!

[@obie1coby]

Is been awhile since I learned since new concepts with RE. Thanks for that

[@CoachChadCarson]

Big compliment! Thanks.

[@LetsSellItNow]

Hey Coach, another great video. It seems like a mountain to climb, but when you calculate the risk and buy the right places for the right prices, good things happen short term and long term.

[@CoachChadCarson]

agree! It does seem like a big mountain at first but just take one step after the other.

[@dropoutandretireearly1781]

AT 11:11 THATS VERY VERY VERY TRUE !!!!! People run with leveraged debt risk for way way way too long which exposes them to too large of a window of risk.

[@CoachChadCarson]

It's a hard treadmill to get off!

[@dropoutandretireearly1781]

Its kind of like when I asked a super wealthy debt free Landlord one time that had around 200 debt free rental houses, what is your best business advice that you can give me ? He replied always remember in business that "PIGS GET FAT AND HOGS GET SLAUGHTERED" and then he said "SO DONT BE A HOG, BE A PIG AND KILL THE DEBT !!!! LOL !!!!! Best advice ive ever had !!!! @@CoachChadCarson

[@HappyPenguin75034]

A higher down is also more leverage 😂

[@joshuakrilov4042]

Another great video! Just to clarify, the strategic refinance only works if property 2 has appreciated enough to pay off property 1 free and clear, correct? Something about it still not clicking 100%, perhaps more numbers in the example would have helped me. Thanks!

[@CoachChadCarson]

I'll do a video on this in the future with my white board because I think that'll make it easier to understand. But you're right - the ideal situation is if they have both appreciated enough that you can use all the cash from the refinance to pay off the other. However, even if you didn't have enough cash - for example if your refinance of property #1 only produced $60,000 extra cash and your loan on property #2 is $80,000, you could possibly save up your own $2,000 cash for the difference. This would still be a less risk situation with higher cash flow than before.

[@paulgugger8987]

I sold one rental property and paid off every debt I had and paid down my rentals. I then refinanced my home at 2,99% interest and pulled money out to pay off my rentals. at this point I had really great cash flow and started making extra principal payments. My wife informed me that our house payment had fallen $400 a month, not understanding why I called the mortgage company to ask why? They explained to me that because I made a payment $10.000 over the required payment that they re-amortized my loan and explained "it's in your contract sir" At first I was upset but then quickly realized as long as I continue to make the same payment it doesn't matter, and if I ever needed to, I could make the smaller payment.

[@Wanderer25]

This is fantastic content. At the moment I have just one triplex that has about 600k in equity and cash flows. LTV is around 40% The intent is to house hack another small multifamily but waiting until interest rates are more favorable. Unless, I can find a deal way under market. I'm also concerned about being over leveraged.

[@pyrochickhop8339]

I almost didn't listen to this, but found it very useful! You shifted my mindset. It took me a loong time to convince my partner that we should buy an investment property. While it was a very difficult decision, it has overall launched us into a different way of thinking about money. Thanks!!

[@CoachChadCarson]

Glad you found it helpful! The idea of paying off debt (eventually) it just a different perspective and another tool in your toolbox.

[@lorenazaragoza6411]

Thanks for your knowledge and sharing it. I am more in line with your investment style than most of the people out there. I feel some people are over leveraged. I know a lot of people that lost their home in ‘07-‘08. I wasn’t surprised when they did because the loan products during that time made no sense. Even my loan officer that pushed for me to get a crazy loan lost multiple properties! Most of the time 34:03 the least sexy thing is the best way.

[@CoachChadCarson]

The people I knew who went out of business or lost a lot of money made a big impression on me too. It reminded me how risky debt can be just fine for a long time ... until it's not! Then it can become a nightmare. I appreciate the feedback!

[@pbdmd3688]

Lot of respect and gratitude to Coach Carson and mastermind John Schwab ❤I find peace and more in control in your mantra of starting with 4 SFR rental portfolio. I’m following it have 3 rentals and 1 coming up. Next goal would be to go after house debt snow ball and be free and clear. Can’t wait to you buy your book Coach Carson. Thank you !

[@CoachChadCarson]

sounds like a solid, achievable plan!! Good luck and stay in touch to let me know how it goes! I hope you enjoy the book.

[@pbdmd3688]

@@CoachChadCarson quick update Coach! Bought your book absolutely loved each page filled with your life wisdom and real estate experience! I own 4 SFR rental and 1 primary home now. Loved the video content ! This video to pay off mortgage early was great. I now own 4 rental properties and 1 primary home. Now I’m in quest to prepay my loans. Would first lien HELOC be a good strategy to prepay my loans? There are so many videos on it. Would love to see your video/thoughts on HELOC strategy to prepay loans. What is the risk involved in it? Please share your thoughts. Love and gratitude ❤

[@mollypluderealestateagent2753]

Love this video, great great strategies!! We are big on paying down debts and lower risks. We are contemplating whether to pay off on one of the properties with the saving we have or hold on to the money until the opportunity comes by since the number doesn't make sense to buy right now. But yet, we are afraid that we will be missing out if there's an opportunity comes by. We are just starting off, our goal is get one investment property each year. Im not asking for financial advice, but if youre in the same scenario, what would you do?

[@CoachChadCarson]

Early on I waited/held the cash for new opportunities. With interest rates higher now I'd rather pay cash for the NEW deal then pay off low interest debt on the OLD deal.

[@mollypluderealestateagent2753]

@@CoachChadCarson well of course, I wish I have enough to buy new one with cash but we don't have enough for one yet.

[@CoachChadCarson]

@@mollypluderealestateagent2753 that makes sense. most people (including me early on) don't have enough cash to buy it outright. But you can put a down payment on newer property and then if you'd like to start paying one down, just choose that newer, higher interest rate instead of the older, lower interest rate.

[@mollypluderealestateagent2753]

@@CoachChadCarson thanks a lot, that makes sense.

[@laurasamaniego5937]

​@CoachChadCarson I am in a similar situation. Debating paying the debt of a duplex with a 3.25% rate or a big down payment on a new property with a higher % rate. I was leaning towards a bigger down payment, but there was always that self doubt. I do feel so much confident on my decisions after hearing the comments of an expert successful REI like you. Thanks so much for sharing your knowledge.

[@ahtesham9129]

The problem with the first startegy: When you refinance 1 property, total loan amount remain the same but loan duration is reset thats why u r paying lesser monthly. But major portion of that refinance loan start going towards interest rather than principal. So I won't recommend that to anyone. If you take lesser term loan than amount won't change but refinanace cost would be there.

[@HappyPenguin75034]

Higher loan is more debt and more leverage. Opposite of the goal.

[@enoeljordana4278]

What about the closing cost, is it not included to the LVR?

[@enoeljordana4278]

Sorry I meant *LTV

[@TheRetirementality]

I'm in the process of selling one house and when it sells I'll be able to wipe out the debt on 3 houses. The income increase from having no debt will be equal to the income that was produced by the house I'm selling. So I'll have one less house to worry about and the same income. I'm planning to spend the winter in Spain if the house sells.

[@CoachChadCarson]

beautiful when a simpler solution produces as much income as the more complicated one!! Good luck. And definitely hope you get to spend some time in Spain.

[@DionTalkFinancialFreedom]

The last thing I want is to pay off debt faster. I worked hard to get into good debt. I want more. Not less. If it wasn’t for debt, I would still have to work. This is still a great video for people who do want to pay off mortgages.

[@motley06]

Agree 💯. The idea of paying down debt sounds good on the surface, but when it’s at 3% or less, I just can’t make myself do it

[@CoachChadCarson]

No worries. Different strokes for different folks! But you still may change your mind later😉

[@CoachChadCarson]

I mainly paid off 5-6% debt or more in my rental business. Only 3% debt I paid off was on my personal residence, but I felt very good about the decision. Would you pay off NEW debt you have that's a lot more than 3%?

[@SoulInspiredSeller]

This.

[@renee4100]

What if you don’t qualify for a loan to purchase even one property?

[@richardhauser8295]

Do you ever use DSCR to calculate your Equity when considering your LTV?

[@dropoutandretireearly1781]

I always say that if Banks exist why can you exist as your own bank eventually !!!! LOL !!!! YES BECOME THE BANK AND LOAN YOURSELF CA$H AT ZERO PERCENT !!!! LOL !!!! No MASSIVE CLOSING COSTS CRAP GARBAGE EITHER WHEN YOU PAY CASH !!!! LOL !!!!

[@CoachChadCarson]

Yep! Keeps life simple.

[@dropoutandretireearly1781]

YUP !!!! Less is more !!!!! @@CoachChadCarson

[@dropoutandretireearly1781]

Thats why ive driven a 1992 Geo Metro 3 cylinder for the last 20 years. It even came with a very luxurious heater to stay warm in the winter. Its all I need to go from A to B. @@CoachChadCarson