I wanted to poll the board to find out everybody's general consensus on financing properties.

I have a small portfolio, many of which are paid for. Given my current income and occupancy rate I can buy a new property approximately every 18 months outright should I choose to, but this is largely dependent on my 9-5 income and general availibility.

I started paying cash for properties a few years ago because I had grown tired of the hoops that the mortgage companies make us jump through. However, I'm wondering about the feasibility of taking out HELOC's on my "paid for" properties so that I can aquire new properties exponentially.

My end goal is to ditch the 9-5 and live my life.

I do like the thought of having the properties paid for in case anything ever happens to me, but leveraging has its benefits as well.

Yep. Leverage works both ways.

In a rising market you can look like a genius.

When things turn around, you can lose it all in a heartbeat.

Caveat emptor!

A lot depends on your age, prices, income, etc.

Old school was: when you are young, use banks's money, collect the rent and take the write off.

When you are older than young, you refi to buy more.

When you are close to retirement, pay off any debt.

Jason, you said, "my goal is to ditch the 9-5 and live my life."

When you borrow money, yes you can buy a lot more property much more quickly, but you trade a boss for a lender.

Great cash flow will pay off your homes, if you have a sufficient period of great cash flow. "The tenants will pay off my houses" only works as long as you are a) finding good tenants b) in good health c) keeping an eye on things and d) the economy doesn't go into a tailspin forcing you to lower rents. Any one or more of those factors means you could be paying off your own mortgages using your savings and/or W-2 income.

I wish it were as simple as "If I buy 100 houses with loans then tenants will always pay off the mortgages." That is sometimes but not always true.

Ask one question of the folks who say that's how it works: "Will you co-sign this loan with me in case something goes wrong?" Their answer will tell you what their true feelings are, regardless of what they say here.

You're also thinking about doing this during a time when many folks here have noted that values are peaking. The best time to go "all in" is when values are down.

In my view, stockpile cash. Get ready to buy when there's blood in the streets and you're in tip-top financial condition to cash in!

SID spelled it out for you.

Taking on mortgage debt in order to quit your 9-5 job doesn't make sense to me unless you are 25 and have time to lose your shirt and make it back again. We've done that a few times in our lives.

With age comes maybe more wisdom, but certainly more caution, as time is against us if we needed to recover from a disaster.

I've done it, but I'm done doing it. I'm working to Snowball all my mortgages, with a goal of total freedom!

Focus on paying on the rest of the houses, then focus on paying your home off. Save up, then when the market's down, go HELOC, but don't go for broke. Only get enough that the current cash cow houses can make the payments and have leftovers for repairs. I'd try to do a 5-10 yr payback by paying ahead. If you get in trouble, just make the regular payment. But if 2/3 of your houses are paid for, and only 1/3 are mortgaged, how much trouble could you get into?

I have operated using a LOC in one way or the other from the time I had enough equity to have one. Early on it was buy on the LOC with cash, refi as soon as I had it rented, and do it again.

Today it is buy on LOC with cash and pay LOC down with extra cash flow. Unless I wind up purchasing several and getting the LOC close to full before I get it paid down. Then it’s refi and pay down LOC.

In between there were times when the availability of the LOC was the only thing that kept me afloat.

As others have said being over leveraged is dangerous. I’ve been there. Based on your post it sounds like you already know this and are pretty conservative financially.

I am a great believer in leverage. My main benefit from investment properties is the tax deductions and benefits to my other businesses. And the benefit of not paying recapture or cap gains when I sell the investment properties. My sense is, and I could be totally wrong, that those who advocate for "free and clear" plan to leave their properties to their children.

If investment properties were my only source of income I might feel very differently about it and I would probably be more conservative in my use of leverage.

It is possible over leverage very easily. As someone else stated you cannot be totally dependent on the rental income to pay your mortgages. A slower market, unexpected repairs, higher or longer vacancy rates will kill you if you can't afford the carrying costs. You need to have cash reserves. Most will say a minimum of 6 months for every property but having experienced the housing crash I'm more comfortable with 1 year.

"Depending upon your local market for most of us buying now isn't a viable option. At today's prices it could take years, if ever, to be profitable."

Another vote for leverage. Try building a relationship with a local bank. The nation-wide banks are too rigid for our own good.

I have a 20+ year relationship with a local bank. They keep their loans in house. They offer me 100% LTV loans, minimal paperwork, no junk fees, closing in 24 hours, no BS. Rates in the 6% to 7% range, three year fixed rate, floating thereafter, amortization any period I want up to 30 years. I file financial statements and provide income tax returns annually. And my banker always buys me lunch.

Those who espouse the no debt philosophy generally have made their fortunes already. They are more concerned with losing what they have than in making more.

Financing properties was the only way I could grow my business in the beginning.

If you are comfortable borrowing money at 5% rates and don't get behind the

Three ways to go:

1) Refinance a property and take the proceeds and buy another property. This way you have no sales load!

2) Sell a property and exchange up to a larger one using the proceeds as a down payment and getting a smaller purchase loan.

My Billionaire Real Estate Boss, when I was a broker in NYC office buildings, repeatedly told me...." Real Estate is a game in which you always play with somebody else's money"