Should You Pay Off Bank Loans on Investment Property?

[@freedom_mentor]

Every successful real estate investor has a mentor. Get your mentor here: www.freedommentor.com/apprentice

[@RyanJensenEE]

There are a lot of amature real estate investors on KZbin; Phil is *not* one of them. This guy knows what's going on.

[@FruitoftheSpirit-0909]

"You're gonna have to watch this again cuz I'm gonna keep flying" 😂😂😂😂😂🤣

[@yamiramengual307]

Hi Phil...all my admiration and respect for what you do. Blessings for you and all your family! We know that helocs are something difficult to get with a rental because of its risky nature but plocs are also revolving, with simple interest and no closing costs. What if you payoff the amortized mortgage loan by shunting at a 6 month period interval with a 25 to 30k plocs which are revolving and simple interest in order to substitute the amortized compound interest for the simple one. You can put in the ploc the cashflow quantity you will be shunting toward the loan. Using that method, you can have the benefit to pay it off in like 5 to 7 years depending on how much is the loan quantity, your cashflow and the shunting amount you decide. You will never lose your cashflow by doing so because remember that plocs are revolving and you will save thousands of dollars in interest and the best thing by using bank's money. Thank you for your time and passion!

[@chachee15]

Watched biggerpockets video with the same question and it was about 5 minutes long with no real answer. You go into it for 20 minutes with actual numbers and facts. Amazing

[@henrylacks9979]

I absolutely love this video, Phil. As always, you break things down so we simpletons can understand (even if we have to rewind to hear it again). Thanks for sharing!

[@natem2367]

I would not ever want to get into an argument about real estate with Phil. This dude knows his shizit. Thanks Phil for sharing your knowledge.

[@aaronc4724]

I would debate him anytime.

[@traviscagle1280]

good videos Phil. You have first class public speaking skills. I'm going to listen to all your vids

[@MavenWilliamson]

So powerful! Thank you for teaching about depreciation! I'm about to buy both of your books because your level of detail is immense. I can only imagine what's in the text. I just put a multifamily under contract that already fully rented. I am 100% financed and have paid $0 towards this purchase. This one is for me. The next is for my LLC. Keep up the excellent work and I'll spread the word about your books. Thank you again.

[@derrellharris4646]

Brittney Highsmith aaaaaààa!a!#I is the first of thhie year

[@QChannel-r2p]

Brittney Highsmith hey there I was very interested in real estate investing in a new grad and wanted to know other people experience do you mind talking to me for a few

[@donmatt1668]

Phil, I truly appreciate you sharing your extensive knowledge in real estate investing. This video is very informative!

[@AaronCMounts]

17:35 - 1. Yes, you still own the property. For the city to tax-foreclose on your property, you have to be several years in arrears on your property taxes. And if you fall that far behind on your property taxes, you're probably not responsible enough to be owning rental property, to begin with. 2. Your insurance agent will be blowing up your phone, trying to sell you another year of homeowner's insurance, each time your policy comes due for renewal. You don't have to worry about anyone else failing to remind you about your insurance needs.

[@davidpreston1811]

Another Video with Great Information. Thanks Phil. I'll definitely have to watch this one a couple more times. A lot of good information to digest.

[@Michael-qy1jz]

Great points. I look at my risk tolerance also, which admittedly is very low in this economic environment today. Paid off to me means that when the market tanks in Florida here again fairly soon, then I can survive a 50% loss in rents like 08/09 etc where others can not, and then I just buy more when the prices get near the bottom again with in reason.. 4 months rent reserve is a great rule, but I almost never see anyone do it..lol. People should follow your rule on that minimum if they want a bank loan.

[@robmoffit4970]

I can't imagine this Florida insanity lasting another year myself. These are great videos and information though and I really enjoy them especially the reality that you own nothing in America..lol. Irs, property tax, Hoa, insurance you pay for that barely covers any situation anymore..lol. There are more exlusions on my insurance and umbrella than there are inclusions. lol. They could write a policy on 1 page and state we only include these 2 precise incesedents and anything else your screwed. lol

[@r2r324r431r4r4]

Nice video thanks for breaking it down But you forgot to mention closing costs on the bank loans and also the time spent applying for the loan which can sometimes be huge.

[@404TRUCKERTV]

man that depreciation pro....blew me away. you really pay no tax!

[@johnwallace1729]

Thats how The Donald Does It

[@tankercrewchief]

John Wallace bump!

[@serioushamster]

If you have cash own assets outright, factor property taxes, insurance etc into the equation.Set aside some money for 'reserves' and you will have a piece of mind.Cant put a price on that.

[@twis7edsoul378]

If you had $300k and you put $60k down (20%) on 5 houses you would get a 25% return, instead on the 20% that you would get back if you paid cash for one house. Plus there would be 5 house getting $50k cash flow plus Depreciation on 5 house $8,700 X 5 =$43,500 not one $8,700. If you could get the five loans at 5% and make them get 10% return. Five houses would go up in value in stead of just one.If we used this example. Am I right?

[@PantaFootball]

That would be one very lucrative investment portfolio...

[@stevenupton7825]

look what happened to dave ramsey

[@TempleoftheSon]

@@stevenupton7825 I feel like there's more to Dave's story than what he tells. I feel like Banks don't normally call a lone unless the borrower did something stupid like didn't have it under an LLC or commingled their personal finances with their business finances.

[@buildingbuildercip8292]

The 1% rule doesn't work. The rule of 15 is best to go by. Say a 2 bedroom house avgs $1400 in said neighborhood. Take $1400 x 12 x 15= $252,000.00. That would mean that house is prolly worth that much. Same formula backwards to understand what the rent should be. $252,000.00 / by 12 / 15 = $1,400.00. Works almost every time. That's the formula I use to purchase or rent my properties.

[@DrJuanAMcKenzie]

what does the 15 represent?

[@egwenejs]

15 is the number of years that the total rents collected will equal the purchase price. Also, the inverse is the cap rate. So, 1/15 = 6.67% Cap Rate.

[@TheCaptain773]

Thanks

[@mypharmacistondemand8321]

Building Buildercip I wouldn't say the 1% rule doesn't work. Seems the 2 calculations are determining different things. From what I know the 1% rule determines what the least amount of rent you can collect each month in order to cover all your monthly expenses in comparison to what you pay for the property. Thanks for the explanation of the rule of 15. I will add it to my arsenal!!

[@DeanCF1]

@@egwenejs 6.67% is not the cap rate because you haven't figured in any expenses. With expenses you should be at about 5% or less which is a terrible cap rate. You can do better on a commercial REIT.

[@powelldiesel7422]

i like what he says at the end if you are buying high cap rate properties then it makes more sense to just pay cash.

[@filmaker256]

Buy "subject to" I believe keeps the previous owners on the hook for their loans especially if you bought with seller financing

[@billstephens5472]

In some states (example: Virginia...) you will be exempt from paying property taxes if you are 65 years old or older.

[@ziarehman8057]

People like Phill are very rare in the world! Thanks Phill keep posting 💟

[@kavabean]

Great content. I wonder though about your comment about great CAP rate as reason to not finance. Even if the CAP rate is huge if you can arbitrage the financing on the property in question into another deal it is still superior to finance. The comparison is between paying 5% and what ELSE you can do with that money. In fact great CAP rate properties are exactly the ones to finance to the MAX to find other great CAP rate deals, while selling lower CAP rate properties. This is especially true when you start getting into portfolio loans and you have exposure to interest rates.

[@frvb913]

Phil, thank you for your advices, but let me ask you a question. I have some properties free and clear, why I need to borrow money from them, what kind of benefit is on it?

[@marcelw1203]

love the humor you throw in!

[@samkhay741]

Yeah this guy is the best I can't believe he has free stuff

[@KyokushinNidan]

BUT, if you pay off the conventional loan, you still get the depreciation plus you get a better cash flow with no debt service. Using your example, with a 25% tax bracket, the paid off property gives you $16,050 in your pocket where the property with the loan will only get you $9,500.

[@freedom_mentor]

But your return on investment plummets.

[@betterhomesnc2437]

You also need to consider scale. You can aquire 1 property and cashflow $16,500, or you can leverage two and be pulling in $19,000.. and only have half the amount of your money tied up. Or you could possibly purchase 3 leveraged and be pulling in $28,500 properties.

[@Tactical_DZ]

Respect sir, thank you for helping out a fellow investor; I am an active Realtor in Utah for Keller Williams and I invest in properties on the side and I am working on some flip projects as well at the moment; this video is highly accurate and very applicable knowledge. Thanks for the knowledge! Peace!

[@MrMasterpain96143]

One other benefit of all cash is you could probably get on good deals quicker and with lower prices right? Ex) you run into a property that's a good deal, "ill give you 5% lower than purchase price right now all cash"

[@freedom_mentor]

Sometimes. But sometimes they owe more than what you would be willing to pay cash for.

[@jeansoo-learngrowserve3266]

Thank you for the in depth explanation! The thing with the depreciation blew my mind! You broke it down perfectly. Look forward to watching more videos :)

[@Longtran19874]

I can watch your videos all day long ! thanks

[@buildingbuildercip8292]

This formula was shown to me by my brother years ago. I'm not sure who came up with it but it's the divisible or multiplayer number that makes the formula work out pretty accurately.

[@dennisnoone7427]

great video, can the property be transferred from a personal name to a llc? thanks

[@freedom_mentor]

Yes.

[@josef6999]

I'm sorry for the late question but I'm living in the UK and here you can get insurance to cover your rent when payments that are made late by tenants , and cover expenses with when evicting as well as emergency insurance which covers costs if a boiler breaks down . Im wondering if such insurance exists in the USA ?

[@freedom_mentor]

I am not aware of "non-payment" insurance but even with that, the reality is that insurance companies are in the business of collecting premiums and issuing policies, NOT paying claims. So the issue with insurance is that when you really need them, they are typically working hard not to pay you.

[@josef6999]

Phil Pustejovsky I agree becuase I have read about some of these companies making you pay for the first months' rent until they make payments. Really appreciate the time you've taken to reply to my question :)

[@cshiner7919]

In the UK, we have the same system as Canada where you can only get 5 year fixed rate maximum. Have found best thing to do is to a) make sure the property is still positive cash flow at Bank of England 15% base rate. b) have more like 12 months reserves to give yourself more breathing space if interest rates rocket. What else do you suggest? Thanks for another great video!

[@TempleoftheSon]

Sounds like the UK doesn't really want people investing ok real estate.

[@B1GJOHNSTUD]

key word: leverage

[@flamencoartsandmusic4487]

great lessons on real estate. Phil is an expert in real estate - by far the best teacher too.

[@FrancisRodgers]

Hey Phil, apart from your tax leins video, I think this is one of the most valuable videos you have created. That's not saying your other videos are not good too, they are. Anyways, thanks for sharing all this.

[@workingshlub8861]

just one extra payment a year will knock off around 5 years off the total...take your monthly payment divide by 12 and send that extra each month..more if you can.. build equity quicker to get the next property.

[@Rose-fj4jw]

Thank you Phil. I will be checking out your other videos and books.

[@MSHairCandy]

Phil thanks so much for you value!! Can you talk about building a 4plex residential with a construction to permanent loan? Is it worth it?

[@mktgguy23]

How do you find the cost basis of the property for depreciation? No idea how much the land costs 🤷‍♂️

[@freedom_mentor]

Use the tax assessor's land value.

[@adamgottfried6038]

I don't understand bank loan benefit #4. Whether you use debt or not doesn't change your cost basis (other than some costs from closing the loan which get added). Whether you use debt or not, you as a property owner can use depreciation to determine profit for tax purposes. Am I missing something? - thank you!

[@freedom_mentor]

With debt, you can buy more with the same amount of cash, which allows you to get more depreciation per dollar of cash you have.

[@DoctorRempel]

You're the best Phil! I'm making it a point to watch every single one of your videos!

[@michaelevans9521]

So I have 4 investment properties. 2 have loans at 5.375% and 1 with 5.875% and the other is paid off. My primary is paid off so I’m doing a cash out refinance at 3.625% and paying off my investment properties. In turn I will have a total of 4 investment properties that I can do cash out refinances from in the future to buy my next deals

[@freedom_mentor]

I would recommend not paying off the investment loans (assuming they are 30 year fixed rate loans) since those interest rates are VERY low for non-owner occupied loans. Instead, cash out refinance the 4th investment property the next time you know you can get a great loan, and then, between your primary residence cash out refinance and your 4th investment property cash out refinance, you'll have the capital to buy more investment property!

[@kentharris7427]

I wish I knew about putting 30% down instead of 20% down. In the Houston area the rent rates have gone down 15%. So a house that was leasing for $1,750 in 2016 is now leasing for $1,495 a month. My Mortgage is $800 per month. My taxes went from $3,600 a year to $4,500 per year. By putting 10% more down would have reduced my Mortgage by $85 per month which would have covered the increase in taxes. Now instead of making $500 per month net I am down to $252 per month. The tenant is moving out next month so I will be selling the house.

[@freedom_mentor]

Watch this video: kzbin.info/www/bejne/rarSoHxrf55ki68

[@thomasreto2997]

You definitely have to keep an eye on your homeowner insurance co. They let my policy lapse unknown for me...I caught it...set a reminder on your phone...

[@almamagalit4247]

Thanks alot i learned so much..im a Real Estate seller here in the philippines..God Bless..

[@lisdanydelgado281]

Hi Phil, I'm learning English to get in your program. I really appreciate your videos and I''ll like to say thank you. With you not only I'm learning about Real Estate business also I'm learning English LOL. I like to ask you something Should someone who is looking for a house to live (just one house) take your program?

[@davidunderwood4341]

I started investing 20 years ago and became obsessed with buying rental houses. I borrowed from banks, family, friends and some people from rental meetings. I got way over leveraged. I fought so hard through all the vacancies and high monthly bills and barely made it out alive! As time went on and land contract and mortgages started getting paid off I found myself in a better situation. As more time went on, I found myself and a really good financial situation. Now I feel like I can start leveraging again because now I'm paying more in income taxes because it's hard to not show all the rent I collect with only a few mortgages left over. I guess right now I'm torn between just paying heavy on the last few or borrow and buy more real estate. I constantly dwell on this over the last few months. I guess there's no right answer I'm starting to realize. I'm only 45 so I still feel pretty young. Thoughts?

[@freedom_mentor]

Although I don't have all the information necessary to provide you with my best advice, my first reaction to what you have shared is that your problem with borrowing in the past stemmed from poor investments. Leverage is incredibly safe if you have a well performing investment and if you have 3-6 months of debt service payments saved up in reserves. My recommendation is to not own lousy real estate investments. But instead, only own good ones that throw off a ton of cash each year so that leverage doesn't hurt you, but helps you. However, if you are going to own real estate that cash flows poorly, then definitely don't borrow against it.

[@davidunderwood4341]

@@freedom_mentor Thanks for your response! I had short term high payment Land Contracts that had me struggling. Now I find myself with no more pet Alligators! Haha! A lot of my tenants are becoming real long term ones so my management is low. I guess it's more of a personal thing I need to decide. Now that I have everything paid off, I have no tax shelter but have to decide what life I want to live now that I'm in my mid 40's. Just keep my high cash flow and pay the Feds, or work harder to accumulate more and leverage out for more tax shelter and wealth! I see it as two separate lives I can choose to live but don't know which one to pick. I think I need a shrink! Haha! Love your videos!

[@freedom_mentor]

Short term, high payment loans (or land contracts) is not what I deem as effectively leveraging real estate. Long term (30 year), low (6% or less), fixed interest rate loans is what you should be doing.

[@davidunderwood4341]

@@freedom_mentor You're absolutely right! Looking back, I actually did the opposite of leverage! I love Real Estate though. I share your passion!

[@davidunderwood4341]

@@freedom_mentor So many people don't understand that long term fixed loans you benefit in a big way from inflation alone!

[@buildingbuildercip8292]

I own a rental in California. It's worth $295k paid off. I can only rent it out for &1700 a month. That is a far cry from 10% ROI. Looks great on a white board but not the reality here in California. That's a house in the hood too. Family's are a bit rougher on things in the hood so my maintenance is higher than avg. bought it off a friend 3 years ago for $105k cash. Best deal in my portfolio.

[@FlipAnythingUSA]

It was a good return when you paid $105k Its a terrible return on investment now. I think you have to ask yourself Would I pay $295? If you don't sell it then you are basically buying it when you choose to keep it.

[@JamesDeanStudiesLanguage]

@Will Buy It I think he is saying that if the house is truly worth 295k and can be sold for that much, instead of renting it out he should sell it and then use the money to buy more properties with low down payments, which will net him far more returns than simply renting it out now.

[@TempleoftheSon]

@@JamesDeanStudiesLanguage looks to me that sense he paid $105k for it and is renting it for $1700/month, he's getting a ROI north of 12%, that's far better than the sub 10% he's claiming he is getting.

[@martymar242]

Wow, this is great! I learned so much here. Will definitely be following

[@Tykoon25]

Does a living trust protect you at all from any lawsuits? Also with a living trust when you pass away an your kids get the home is the property re assessed for property taxes?

[@freedom_mentor]

Not at all. A living trust, what my asset protection attorney calls a "revocable management trust", is simply a tool to help your heirs avoid probate. If you want to protect your assets from lawsuits, that requires offshore trusts in tiny Caribbean island/countries and a whole lot of legal fees to set up.

[@siangvang3567]

I am new subscriber. I love your video. Thanks!

[@samlyons3552]

What about depreciation recapture ? when selling

[@1973superdad]

Interesting....never understood depreciation.

[@elainechambers8913]

Hi Phil just had a question for you what do you think my chances are of getting a house that has already been bid on and contingency that they sell theirs in two weeks or it goes back on the market I really want to get this house what do you think my chances are do you think I have a good chance of possibly getting this house. Oh by the way I live in Michigan your videos are very informative I've learned a lot thank you you're very smart

[@renatanorcia1275]

What about depreciation recapture?

[@freedom_mentor]

That only is triggered if you sell your rental property. And I always do a 1031 exchange when I sell a rental property to continually defer all taxes, including depreciation recapture.

[@jodiewilson5456]

hello, Phil if you have a property that you obtained subject 2, and it has equity can you pull the equity thru a bank loan?

[@freedom_mentor]

If you can qualify for the bank loan, you can. But then the deal will no longer be a subject to.

[@sheltzshelton1454]

Do these principles apply to Australian market too.?

[@hannahcastello5392]

Phil Pustejovsky have you done a video on non recourse loans

[@ZapMartin]

For anonymity, can you buy cash (in an LLC), then look for banks that loan to LLCs and to a cash out refi?

[@freedom_mentor]

Maybe. But most lenders will have the managing member of the LLC sign the loan documents and the notary section will show the person's name!

[@ZapMartin]

Thanks... in our case, the LLC is managed by a C-Corp... and the C-Corp has multiple members. Thus, the treasurer (of the C-Corp) would be the named person for the loan to the LLC? This may be too complicated of a question for KZbin :)

[@freedom_mentor]

That could work! Next will be finding a lender to fund it in an LLC.

[@familyministry777]

Thanks Phil, I appreciate you taking the time to teach.

[@RhondaSuhrie]

If you already have a property that you originally paid cash on, how do you get the property to be anonymous to the public? There are so many web sites out there that now tell people how much property you own and where.

[@freedom_mentor]

Buy each property in an individual LLC and be wise in who the participants for public records are for that LLC and although people may know what they purchase price is; they won't know who actually owns it

[@RhondaSuhrie]

Phil Pustejovsky Thank you. I have really enjoyed your videos. You give good advice.

[@aubreyjohnson1906]

Thank you for making this so clear

[@deapexx3893]

I love this Phil, Your videos has helped me a lot... thanks for this!!!

[@felixcastro8821]

Good information to apply, wish I knew before owning rental property

[@stevechui1427]

Very good lecture I ever take. Maybe I need to study indepth further on the subject when I move on. Thanks.

[@remotecont888]

I am a bit confuse about how you treat the cost basis. Unless the IRS treats the real estate assets different from other types of fixed assets, the costs of the property should be the same whether bought it with cash or loans - 300K if it has no land value on your example.

[@freedom_mentor]

That is correct. The cost basis is the same, whether you paid cash or got a loan. The difference is that borrowed money amplifies your depreciation in relation to the cash you put in and the cash flow you get out because you can buy so much more property than with cash.

[@mrj-charles6383]

I have a low tolerance for debt. All o my homes so far have been cash. Although now I want to accelerate my portfolio so trying to get a HELOC to buy 3 homes. Problem is living a cash only life and now 47 hard to get a loan. My credit history is only 2 years old.

[@mrj-charles6383]

@@sandimarielavati2354 My comment is from a few years ago now. My credit is A+ with no issues. Just for someone my age,I have a limited history. That what happens when you start with a zero credit score in your 40s. No bad credit just been blessed and paid cash for everything my whole adult life until recently.

[@Frankiep72]

Solid, right to the point information! 👍👍

[@vikramrulesrox]

Phil you are a great teacher

[@alfordmorriss5261]

Thank you for sharing so much knowledge! u r the man!

[@Thejasonrogers]

At the end of the day why would I pay off a loan at 6% when I can invest that money at 15% that’s what a lot of people don’t understand, when your paying off a loan your max roi is the interest rate at which you borrowed it from. PLUS the more you pay the loan down the more leverage your giving the bank.

[@AaronCMounts]

3:00 - for a $300k house to get you 10% annual net ROI (cap rate), it would have to rent for over $4000/m. Where the hell are you getting $300k houses that rent for $4k/m?

[@freedom_mentor]

Marvelous question! Watch this video to find out: kzbin.info/www/bejne/gZ22aX6mjbyBmKM

[@chrismccormick1675]

I am not sure about this but I have heard that you have to pay taxes on the Depreciation you have claimed on the house when you sell it.

[@freedom_mentor]

It's called Depreciation recapture.

[@MrMogulMoney]

Hey Phil, in the example, shouldn't it be $1300 and $21300 for the depreciation? $10000 - 8700 =$1300 and 30000 - 8700 = 21300? I didn't understand where the extra $400 came from in the scenarios but I do understand how depreciation is a tax deductible item.

[@freedom_mentor]

Correct. I noticed the same thing when re-watching.

[@ericbrown1484]

Would you treat a primary residence that you plan to live in the same way? Say there is a $350k home that you were interested in and you had the funds available. Would you pay cash or would you put 20% down and finance it on a 30 year fixed rate of 2.75%, and then invest the remaining cash?

[@freedom_mentor]

I would finance the purchase and re-invest the cash you have in a high return on investment asset. You can get a stronger than 2.75% return in so many different asset types that it would be foolish to pay cash. Another important part of this decision is that your interest is tax deductible up to $10,000 per year, so that is even further incentive to finance rather than pay cash for your primary residence.

[@tomatobrush3283]

I would like to hear what you have to say specifically about the London UK market or similar very high priced residential property markets like Seattle or New york.

[@freedom_mentor]

Flip rather than hold long term, real estate in very high priced areas that have an extremely low cap rate.

[@tomatobrush3283]

Phil Pustejovsky Ok thanks Phil and thanks for all your videos. Does this still apply for a first house purchase? Should I be looking at buying a flat (in a nicer area) that has a higher chance of increasing in value or should I be looking to buy a house (further out and cheaper) where I can rent out rooms to lodgers?

[@freedom_mentor]

Watch this video: kzbin.info/www/bejne/f6DQl3yVnqtne68

[@polarbearliver]

I know you can deduct depreciation, but can you also deduct the mortgage interest as well for even more tax savings, or are they exclusive?

[@freedom_mentor]

Correct. You can deduct interest as an expense too

[@justinholmes7827]

Love your videos. Do you have any videos specifically for brand new real estate agents/realotors on how to succeed at being an agent and using those Commision checks to support being an investor.

[@markd2667]

Saw you at Disney on the Carousel! Was like where did I see that guy before? Ha ha Didn't want to bug you with your family. Thanks for the great videos!

[@freedom_mentor]

Very cool. We have season passes so we go there a lot with the kids. Thanks for watching.

[@michaelbeck5514]

🤔 there is 2 sides to this sword... 1 where I live you her a tax breake on a loan to buy propperty... 2 if you buy a house in cash you will get better cash flow back into you bank account....monny that you can save and use on downpaymeny on a New house you can rent out....well thats just my take on it ,dont know if its wrong or right guess thats up to pepole self how you do buisness... Good video 😉👍

[@loveRP_Penasco]

Great content as always. Thanks 😊

[@chrisbaczynski4456]

Thank you for the pros and cons in getting a bank loan for real estate investing. I've been a real estate broker for over a year now and have sold my parents 10 investment properties. I'm only 20 and I've been telling my father to get loans out so he wouldn't have to use all his cash. These are very good points and maybe we can get more. I've watched your videos for awhile and you have taught me a lot especially in property management. I'm young and full of energy and I want my dad to purchase more properties. Can I become to aggressive and bite off more then I can chew??

[@freedom_mentor]

So long as you keep the commandments; you'll be fine.

[@poornimaedirisuriya3880]

Hi Phil. Great advice.

[@jorgevelasquez9955]

Phil, What are ur thought on getting equity money from your rentals for other investments? What are the numbers that make it worth leveraging property when one ones it free and clear?

[@freedom_mentor]

I leverage all my properties at about 70% LTV with long term, fixed, low rate loans and use that money to buy more real estate. That's how I have amassed a net worth in the tens of millions.

[@AprendizAdulto]

Great video your videos are so helpful! Correct me if I'm wrong I"m new to this but did you mean 1300 a year (not 1700) at 8:36?

[@freedom_mentor]

Correct. I noticed the same thing when I watched it back during editing. Whoops!

[@AprendizAdulto]

hehee ... Keep making these videos they are so helpful for us!

[@LuisJEspinal]

thank bro for all the information, you are the best..

[@ironpiggy3475]

If I have a rental property that is already 10 years into its 30 year amortization should I pay it off? FYI - The rental income doesn't cover mortgage and all expenses.

[@freedom_mentor]

Why own such a poor performing asset to begin with?

[@ironpiggy3475]

Phil Pustejovsky was thinking more long term investment, to own a property at the end of the road. Rent misses all expenses by 200/monthly. Thinking was 200/month and I can own a property. Based on your response, payoff property as soon as possible is the way to go so it can be income positive, right?

[@ironpiggy3475]

Also, another reason for the investment is its located in a neighborhood with a slow but steady rise in real estate prices.

[@freedom_mentor]

Losing money each month for the sake of owning real estate is almost always a bad idea. Real estate is supposed to PAY YOU money; not COST YOU money.

[@slokytheone]

you sound like my boss he bought a condo with a $770 hoa fee and rent it for $1200 but his mortgage was $800 how whould that make any sence? he sold it 2 years later for 20k more than what he bought it for but at the end he lost money on the deal because the managment company evicted 4 people in 2 years lol

[@oldschool8253]

Thank you Phil, love the vid🤗

[@a1no1x]

So NOI doesn't incorporate mortgage?

[@freedom_mentor]

Exactly. Mortgage payments is called "debt service" in the world of real estate finance.

[@a1no1x]

Thanks, on a side notes it's nice to get direct answers from you man. A lot of popular youtubers don't take the time to answer directly. I appreciate it.

[@moizkharodawala5932]

Are the Depreciation tax benefits in Canada the same as the ones in the US

[@freedom_mentor]

I don't think so. I think that is a US tax provision.

[@moizkharodawala5932]

Thanks Can you tell me more about Canadian tax provisions

[@freedom_mentor]

Your accountant is a better resource for such wisdom.

[@razadaza9651]

any tax shields on interest?

[@buildingbuildercip8292]

Egwenejs, thank you for that info. Makes sense and now it's even more absolute to me. Thanx again.

[@ahura-mazda465]

I am planning to buy a property. i have the money for down payment loan to value is very good. loan to income ratio is good, credit score is excellent. Property needs minor rehab and may not qualify for conventional loan. However, i am using someone as if he is the hard cash lender. Its a short sale and BPO is 200k. i am using the 85% rule and offering 170k. My uncle the so called hard money lender is loaning me 170k+30k for rehab, with no points or interest for a month for total 200k and putting a lean on property for 200k. The property all fixed up will appraise for at least 300k. Then I refinance with a bank. this way I have no skin in the deal. Is it a good idea. My ROI in paper is infinite.

[@freedom_mentor]

Under what circumstances would it be a bad idea?

[@stevehotsex966]

$300,000 house. in phils example does this home meet the 1% rule? $3,000 in rent a month?

[@egwenejs]

No, it doesn't meet the 1% rule. In the example it's a 10 cap -- aka 10% of purchase in rents a year or $30,000 a year in rent like he said which is 2500/month or "0.83% rule". The 1% rule would be 12 cap.

[@stevenupton7825]

one problem if interest rates rise, they can go reverse , also look what happened to dave ramsey, if interest rates were 15% this would interest me, because they would only go down but interest rates at 2% can only go up, i doubt you could fix 5% for 15 years minimum

[@isaiahduren]

Good stuff thank you phil

[@aznluvr7]

Thanks for the video, but I always prefer to pay my properties off quickly, especially since I'm in my peak earning years now. That way for my retirement the properties will flow without the huge chunk for the mortgage. Even if you're winning the Abritage game, doesn't it make sense to stop paying interest and soon as you can? I mean that would make the total purchase price of the house go up, even though it would be spread out more.

[@freedom_mentor]

It makes absolutely no financial sense to ignore the ability to obtain extremely low, fixed rate 30 amortized loans on stabilized investment property. While it makes no financial sense, people do it all the time and some will continue to do it even when educated on why it's so financially irresponsible.

[@aznluvr7]

@@freedom_mentor Doesn't 4 to 5 percent add up over a long 30-year period? I mean I get it your returns outpace the interest rate, but it seems like a more limited amount of interest would make the property turn more of a profit sooner. Also would leave you less exposed to disaster. I know that's where the 4 month cushion comes in. I wonder how many people execute with that safety valve, since they are playing so aggressively with credit. Not trying to say your method is not good, just saying that I'm a bigger coward when it comes to leverage and I don't like to have too much debt.

[@LG123ABC]

@@freedom_mentor Dave Ramsey would like to have a word with you.

[@keithdufour8264]

WoW, very good info....love the videos