Buy More, Wait, or Reinvest Cash Flow? (2025 Buyer’s Market)

15:51James Dainard:So I'm going to ask you a question, Dave. You spend a lot of time looking at data and analytics about the market, about economics, about policy, look into your crystal ball and you tell me if interest rates in the next 12 months are going to go up or going to go down, or if you think housing prices are going to go up or going to it on. And you have to be right. If I asked you that, would you be able to answer it?

16:15Henry Washington:No, of course not.

16:16James Dainard:Right. So the future is uncertain. I feel pretty confident. Right. And you are paid to do this for a living. So for the normal person, we have no freaking clue what's going to happen in the future, but we know right now there's opportunity. So if you have the means and you have done the proper amount of research, then taking advantage of what we know now is better than taking advantage of what you think may happen in the future because nobody freaking knows. Well said.

16:46Henry Washington:We decided we needed an on the market employee of the month before we started recording today, just so everyone knows. I think Henry just won with that answer. And here's what I've learned over 20 years of buying and selling stuff. And we've been involved in a lot of deals. I have never once sold at the top and I have never once bought at the bottom. Yeah, that's true. You have to just ride the wave. And I think that's important for anybody who's on the fence right now. If you're on the fence, make sure you have clarity before you buy or don't buy. But stop listening to everyone else, whether they're going to buy or sell right now.

17:17You have to go, hey, I have a certain amount of cash here. This is my savings or this is my money to put wherever I want, whether it's real estate, Bitcoin stocks, whatever you want to do. And there should be a magical number for growth in there for you. Like if I'm going to leave money in a deal, I want to make 10%. And if I know that number, that tells me to buy or sell. It doesn't matter about marketing timing. It's what can I make on that money in the short term or the long term? And is it hitting my minimum? And if it doesn't, don't buy the deal. Yeah. And if you're investing for the long term, it really doesn't matter because you have no idea what's going to happen in five or 10 years.

17:52But you do know that people will always want a place to live. John Schaub is one of my early mentors. He's just like a godfather of real estate. He's like, just buy a house every year. Don't worry about timing. in 10 years, you're going to be super glad you did it. Because over 10 years, even after the Great Recession, where prices went down in a lot of areas in Vegas, in California, in Florida, they were down like 70 % in some cases. But you know what? After 10 years, they were back up. So if you're thinking long-term, even with the worst recession, in that 10 years, guess what? You've paid down your mortgage, or you haven't, your tenant has.

18:28So time is on your side, more than timing. Huh, I'm going to coin that.

18:33Henry Washington:There you go. Kathy's making a run for employee of the month also. I'm trying, man. It's hard. I got tough competition here. I'm just going to put all your pictures up on the wall behind me with little stars. For the record, I agree with you. I'm just trying to play devil's advocate because I do think it's an important question. I do think it is something that a lot of people are probably thinking about, that if you have the money to make one, should you wait because prices may drop more? I guess the only reason you would do that, right, is if you actually think there's going to be a crash. Like if it's more than a modest correction or slowdown like we're seeing.

19:08Henry Washington:If you thought prices were going to go down 10 % or 20%, you might want to wait. But personally, I don't think that's going to happen. So I don't know. That's kind of up to you. Yeah, my thing is, does it matter? Not if you're holding. I would think it matters. I mean, like it matters, right? Like if you were to buy right before a crash or right after a crash, that certainly matters. And your return matters. I feel like that happens to me every time I buy a stock or crypto.

19:29James Dainard:anyway. So yeah, you know, whether the thing goes up or down, if you're making your 10 % or your 12 % or your 18 % or your 5%, if that's what you've identified that that's what you can grow with, then like, does it matter? I guess is the question. Now it matters if you're flipping, it can be painful when you time it wrong. It matters with flipping, but yeah.

19:49Henry Washington:But I guess, you know, I agree with you, James, like I target a certain ROI or IRR. And if I get that, I'll buy things. But certainly someone who just has one deal, if you bought a deal at 400 grand and then, you know, two months later, it's worth 350 grand, that matters. You know, like you'd rather buy it at 350 because again, I agree it's going to grow again, but that's a question of whether it just comes back to your original price or you actually make 20%.

20:15James Dainard:Let's ask that differently though. So I'm going to play devil's advocate from the outside looking in is the person that bought at 400 and then 90 days later or six months later, the house has gone down to 350 and they hold onto that house. Are they in a better position than the person who decided not to buy because they were worried about a crash and then the market came down and they didn't buy anything?

20:39Henry Washington:Well, assuming they didn't buy anything, it depends on the numbers, but let's assume someone's buying something here. That was the question, right? Like, is it better to buy before a crash or after a crash? A pretty simple answer.

20:52James Dainard:No, the question was, should they buy or not buy based on if they think a crash is coming? I would argue that if the person bought at 400 and they're going to hold for a long time and 10 years are in a better position than the person who bought absolutely nothing. And Dave, what if it goes to 450 in a couple months and they're like, dang it, I didn't buy. Now it's more. It bounce back is real. I'll see. I'll see. Yes. Buying at$350 is better than buying at$400, but buying at$400 is better than not buying at all. Or buying at$450. Yeah. But I think what people really need to step back and look at is don't confuse yourself because that's what happens.

21:26James Dainard:Listening to this podcast may not be helping.

21:32You know, like there's more risk in the market, right? Like if my number is 10%, if I will buy a rental, if I can get a 10 % return on my cash. If I think that the market's going to go from 400 to 350, or there's a possibility that it could, my new number is 12 % or 13 % or 14%. Yeah, that's a good way to put it. Just don't say I'm either buying or not buying or waiting. Adjust the numbers. Yeah, that makes a lot of sense. That's how investors work. And I think that's where people get so confused and they lock up. Don't get confused. Just adjust your number. Be greedy.

22:05Henry Washington:Yeah, that makes sense. All right, this has been a great debate. we have more questions coming up to argue over, like, is it a good time to pay off your mortgage or maybe even sell some properties? But we do have to take a quick break. We'll be right back. You know what changed the way I invest? Realizing that scaling rentals shouldn't mean creating more work for yourself. If you're trying to build that kind of system, Baseline is giving away$10 ,000 to help investors build rentals that run themselves. I own and manage dozens of properties. I travel a lot and I still work a W-2 job. And there was a point where I was checking multiple bank accounts, chasing rents and updating spreadsheets just trying to stay organized.

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26:03Henry Washington:Welcome back to On The Market. I'm here with Kathy, James, and Henry talking about should you buy, pay off, wait, sell? What should you be doing right now? We're having a fun conversation right now. I want to turn our attention to a question about paying off your mortgages Because I see actually a lot more people doing this or even buying rentals with less leverage than they were in the past, putting 30 % down, 40 % down. Henry, is there any scenario that you would think about doing this?

26:30James Dainard:Well, as somebody who's actively focused on paying off my portfolio now, I can tell you that, yeah, there is a scenario where you do that. But I can also tell you that my decision to start paying off my real estate has nothing to do with the timing of the market. It has everything to do with what I want for my real estate business and how long I plan to be there in. And so I have to execute this strategy in any given market. Now, how aggressive I am in selling a property will have to do with the market. Because if the market is hot and things are selling over asking, if we hit a 2021 again, 2022, I'm going to be super aggressive and I'm going to try to sell as much as possible.

27:12James Dainard:And in the market that we're in now, I'm not super aggressive on what I'm selling. I'm super strategic on what I'm selling because I'm not going to get the most amazing top dollar for certain properties. So what I choose to sell to pay off other things matters based on what's happening in the market. But the fact that I'm paying off my portfolio is not about market timing.

27:35Henry Washington:Yeah, I totally agree. I sort of went through this recently with thinking about paying off some of my portfolio. That's just, it's more of like a, what stage you're in and you're investing career than it is about market timing. I think it's, you know, there's a certain point where most investors want to take risk off the table. They want to simplify, you know, after you go through this growth expansion stage that a lot of people go through, this just naturally happens. I think it makes a lot of sense for some people. The only way I would say that, you know, I sort of went through this equation for myself is like on my primary residence, like, should I pay down my mortgage?

28:13Henry Washington:Should I put less down? But ultimately, the way it came out to is like, you know, my mortgage, I was able through a relationship with the bank, with my brokerage account, get a pretty good light. I'm in the fives, which is pretty solid. That's pretty awesome. Yeah, it's great. And so like the way to think about it is like I could pay down that mortgage, but if I can get higher than a five and a half percent return on that money, why would I pay off my mortgage? And even with deals the way they are, like I could get five and a half on market in almost any market right now, you know, that kind of return.

28:47Henry Washington:So there's like, there's no reason why to pay it off from a market timing perspective, unless, you know, you have a 9 % mortgage rate, right? And then you can only find a, you know, a 6 % cash on cash return, then maybe you pay off your mortgage. I think it's a hard no. I don't know why people do this. Pay off your mortgage? Don't do it. Now, if you're rich, then do that, right? But like if you're trying to grow, I mean, it doesn't take much to beat the interest rate on the bank. Exactly. And it offers asset protection a bit because if you, people can so easily search and see if you own a property free and clear and then go trip and fall on your property.

29:24Henry Washington:Oh, I never even thought about that. Oh, yeah, Dave, do you got any properties that I could go trip and fall in front of? You got to leverage them to the hill. And yeah, if it's even 6%, there's lending funds, right? That pay 10%. So now you've made 4 % on your money. You're doing better than the banks. And I don't necessarily agree with leverage it to the hill. Like we're not maxed out on our loan values on our portfolio. From 2008, I don't like to have too much debt on me. But I'm not paying it down once I get that loan. There's so many other things I'd rather pay off than my housing mortgage interest rate, which is typically going to be cheaper than any other kind of line of credit, credit card, car loan, whatever it is, the debt, right?

30:07If you want to pay down your debt, focus on the most expensive. Who cares if it's housing or not? I get the concept because it pays you money over time. But, you know, if you really want to pay down your debt, increase your equity, I just, you know, like the deal I was talking about, you can buy and sell things, pay it down, and still leave your cash on hand to grow.

30:23Henry Washington:I mean, I guess the reason sort of what Henry's saying And what I would say is that at a certain point, I just don't care that much about growing. I would rather try and reduce my risk and just simplify my portfolio. So I think that's like the that's the why I'm saying it's like a timing of your investing stage.

30:44James Dainard:I think that's where James and I are different as investors. James, it's like we're growing. We're getting as big as possible. Yeah, I want no part of that. Like, I want no part of growth for growth's sake. I don't need to wake up in the morning and feel like I'm a better human being because I'm going harder. I just want to protect the assets I have. I want to get to a point where I never have to work again and I can live off my cash flow. And then after I get to that point, if I decide I want to go do more real estate, if I decide I want to go build a skyscraper, then I'll go do it. But I'll always have those assets paid off free and clear, taking care of my family forever.

31:20I got a question for you, Henry. Yeah, I'm here. You borrow hard money through flipping houses, right? Right. Absolutely. So if you take a thousand bucks a month, 500 bucks a month, pay down your rental, right, that you're getting at six and a half, which eats up cash. And now you have to borrow money at 12. It's a net loss. That's how I look at that. If I'm borrowing money short term at 10 to 12 percent and I'm taking that cash that I could just take less leverage on on the short term money and I'm paying down my rental, not only am I paying a higher rate, I'm paying off a loan that is just a lower more like it's that's a good point.

31:52I disagree with you, Henry, unless you're done flipping houses or accessing short-term capital. Because why pay down to pay more over here? That doesn't make any sense.

32:01Henry Washington:So you're saying if you had access to that capital, you would just use less debt on your flips to lower your interest costs? Yes. Okay. That makes sense. That's cool. Yeah. And then also, let's just say you really don't want to grow and you just want to live on cash flow and you leverage your properties at 6 % and you take a million cash out of all the properties and you invested at 10 % elsewhere, that's$40 ,000 more a year in cash flow just by reinvesting that money passively. That is totally true if you want to grow. Not grow, but just cash flow. If you just want to make money on your money.

32:35Henry Washington:But there's something about a paid off rental to me that is one of the lowest risk investments that you can make. And so if you're trying to create an overall balance in your portfolio, to me, some rentals with low or no leverage, it just provides like a backstop that is just allows you for me, a certain peace of mind that is like great. And honestly, allows me to take risk, allows me to like put money into syndications because like I got some paid off rentals and that it's not going anywhere.

33:05James Dainard:I do not claim to be the smartest businessman. And I am in no way saying that my plan is the smartest or best way to get there. But I can tell you this, I'm going to pay off 25 to 50 of my rental properties, and then I'll move on to something else. And if it takes me a little longer to get there, it takes me a little longer to get there. That's just how I'm going to do it. I'm going to do it. That's the least stressful way I can think of to get to where I want my family to be. I think Henry's getting that award again. This is what you call the tortoise in the hair scenario. Okay.

33:38Henry Washington:The only reason I would say it's not a tortoise in the hair scenario is because my strategy and Henry and I've talked about this. I think Chad Carson talks about this really well too, is that it's not that you're not growing. It's that a certain point you've grown enough. Like it's not going slow on purpose. There's a time to go fast, but once you have a certain level of growth, then there's a time to say, all right, like I've, you know, I've worked really hard to get ahead. I'm ahead. So like now it's time to like maybe take some risk off the table to make sure and sort of lock in some of that gains that you work so hard for.

34:14James Dainard:What James is saying is pay down the debt in a way where you're not paying as much interest to get there. Right. And I'm open to that. James, you want to come sit down and be my financial advisor and tell me how to get there faster? Let's hear it. I mean, I'm down for it, for sure. But as long as the plan is to de-leverage, I'm in. Yeah. And I think, yeah, it goes into a ride situation where you're like, hey, I want to get this down. And then there's, how do you get to that pain down that balance the fastest, right? Yeah. I'm with you. Look, I told you, I tell everybody, I am not the smartest businessman in the world.

34:50James Dainard:So if you got a better idea for how I can get to my goal, that's going to get me there faster. That's not going to make my brain explode. Let's hear it. Well, and it is what I just said, where banks borrow money and then they lend it out and they put a 3 % margin on that. So if you think banks are smart and some are and some aren't, but if you're able to borrow money and lend it out again for 3 % more and do it passively, why would you not do that?

35:18Henry Washington:Because there's risk to it in lending out money. There is risk to lending and that's true. That is true. But I mean, it is a great way to make money. But yeah, I guess that would be the only counter argument. But this is a perfect example. There's no right answer here. You're going to have to just figure out what's right for you.

35:34James Dainard:Pick your plan and stand on business.

35:35Henry Washington:Yeah, exactly. I think it's different people have different objectives in real estate, which is why we have a whole panel here to talk about different perspectives about how to go about it. But do talk to your asset protection attorney, because that is one of the things, you know, they talk about three different ways to protect yourself. of course, umbrella insurance, of course, LLCs, and then leveraging the property so that it's really not interesting for somebody to try to take it from you. That is a really good point. I have never thought about that. I didn't even know that was a thing. All right.

36:04Henry Washington:Well, this was a very fun conversation. Congratulations. You all had the employee of the month for at least one or two minutes. I think James ended with it though. So it's like the fantasy football trophy, Like he holds on to it until next time. And then someone else can win it from him. I have an award like this since I was 21 and I was Red Robin server of the year. And they got me a letterman's coat with a big bird on the back.

36:31James Dainard:Please, dear God, tell me you still have this. I can't find this. How many pieces of flair did you put on that thing? Oh, I crushed the promo competition. and the review card competition nationwide i smoked it like this is my favorite fact it was for the whole country right like top server of the year whole country and then they tried to get me to move to colorado to work in corporate red robin america and i ran this is funny but

37:02Henry Washington:i'm not even joking that is legit impressive that you won that you won that's their best server for though. That is really a pretty impressive accomplishment. Well, this was a lot of fun. Thank you all so much for being here. We appreciate it. And thank you all so much for listening to this episode of On the Market. We'll see you next time. I see you.

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