In short
Real Estate Rookie Reply answers three listener questions about starting investing with limited cash, choosing flipping vs buy-and-hold (including BRRRR), and whether to sell a high-equity primary home to redeploy capital for better cash flow.
Guests
No guest interviewees are present in this episode. Hosts are Ashley (Real Estate Rookie) and Tony J. Robinson. Mentioned: Tim Delaney (from episode 603) and Dean Pinhass (episode 602) as examples.
Key claims
Start by identifying your “why,” pick one strategy, and take action to beat analysis paralysis. With little capital, prioritize house hacking/co-living to reduce expenses and generate rental income. Flipping vs buy-hold isn’t black-and-white: time, taxes, cash needs, and management burden matter. For high equity, consider an “and” approach (HELOC/line of credit) to keep a low-rate mortgage while investing elsewhere.
Notable examples
Andrew’s $10K savings, $75K student debt, and $2K–$3K/month expenses; Mike’s duplex buy-and-hold ($300/month cash flow) weighing BRRRR flipping; Colby’s Bend, Oregon property ($180K mortgage at 3.1%, $700K–$750K value, ~$1,700/month cash flow) and suggestion to use a HELOC/line of credit rather than sell.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOListener Question: Analysis Paralysis
0:28 to 2:49
Discussion of Andrew's struggle with analysis paralysis and financial challenges.
“Flashback to my glory days at 16, slinging pizzas and dreaming of real estate riches.”
Strategies for Building Capital
2:49 to 4:35
Exploring strategies like house hacking and flipping to build capital.
“Do I gamble my last dime on a single family cash cow or do I roll the dice on a flip and hope lady luck is on my side?”
Identifying Your Strategy and Why
4:35 to 7:18
Discussion on defining investment strategies and understanding personal motivations.
“Yeah, so it also says like we've got expenses So I'm assuming this is a two-person household.”
The Importance of Knowing Your Why
7:18 to 8:19
Understanding personal reasons for investing is crucial to success.
“Because once you get your strategy and your asset class identified, then that's where you need to go down and be like, okay, what's my buy box?”
Taking Action and Overcoming Fear
8:19 to 9:35
Advice on overcoming fear and taking actionable steps in real estate investing.
“I think once you've answered that question for yourself, Andrew, of like, okay, why am I doing this?”
Taking Action and Overcoming Fear
11:26 to 12:03
Advice on overcoming fear and taking actionable steps in real estate investing.
“A lot of property managers think their job is answering tenant emails and coordinating repairs.”
Flipping vs. Buy and Hold Strategies
14:00 to 22:43
Learn about the pros and cons of flipping houses versus buy-and-hold real estate investment strategies.
“as a buy and hold with about$300 of cashflow per month.”
Investment Property Decision Analysis
26:36 to 28:01
Explore the considerations for selling an investment property versus keeping it for better cash flow.
“So we are here with our final question of the day.”
Evaluating Property Equity and Investment Strategy
28:01 to 32:32
Learn how to assess property equity and decide on the best investment strategy based on cash flow and appreciation.
“And I think the answer is potentially yes.”
Real Estate Investment Insights from Experience
32:32 to 36:28
Discover insights from experienced investors regarding handling equity and making strategic decisions in real estate.
“And Dean was actually intentionally losing money on properties, but he was doing so because he believed in the asset and he had them on 15-year notes.”
Show all 12 chapters
The Tinder for Real Estate Investors
36:28 to 37:35
A humorous take on how low-interest rates can be as attractive as dating profiles for investors.
“But I think the thought process we're talking about for however much capital you have, it still applies, right?”
Real Estate Investment Insights from Experience
37:51 to 38:15
Discover insights from experienced investors regarding handling equity and making strategic decisions in real estate.
“That's why leading insurers run on Adyen.”
Transcript
Automatic transcript. May contain errors.0:00Ashley Kehr:What if your hesitation is the only thing holding you back from financial freedom? Today, we're diving into three listener questions that could be the difference between paralysis and profit.
0:11Tony Robinson:From breaking through analysis paralysis to deciding between flipping and buying and holding to cash out almost half a million dollars, this episode could be exactly what you need to make your next.
0:27Ashley Kehr:this is the real estate rookie podcast i'm ashley care and i'm tony j robinson and with that let's
0:33Tony Robinson:get into today's first question now this first question comes from andrew and um andrew is a bit of a uh i don't know a bit of a poet a bit of a comedic writer uh so bear with us as we get through this question but he says i've dove deep into the realms of real estate wisdom heard every guru spiel and read more how-to guides than I care to admit, yet here I am, stuck in the bog of analysis paralysis, feeling more confused than when I started. Flashback to my glory days at 16, slinging pizzas and dreaming of real estate riches. Fast forward to now, a fresh 24-year-old recently booted from my cushy W-2 job paying 80K a year, left to ponder the meaning of life and the potential of my bank account.
1:17Tony Robinson:Now I find myself in the trenches of self-employment at my buddy's small business lending firm with a$1099 in one hand and$75 ,000 in student loan debt in the other. Oh, the joys of adulthood. But as Frank Sinatra said, that's life. I'm determined to achieve financial freedom and live the life that I've always dreamed of. Now let's talk numbers. We've got expenses dancing around$2 ,000 to$3 ,000 per month and a modest$10 ,000 stash and a student loan payment of$725 a month, the size of a small country's GDP. I also have$58 ,000 invested in an individual brokerage account and$22 ,000 in my Roth IRA.
1:57Tony Robinson:Although this may impress some, I feel so far behind. Now onto the multi-million dollar question. How does one embark on a real estate journey with pockets as empty as my social calendar on a Saturday night? Do I burr? Do I do single families, section eight, small multifamily, large multifamily, flipping, sub two, wholesaling, slow flips, storage facilities, car washes, laundromats. The possibilities are as vast as my confusion. But wait, I hear you say, what about flipping? Cash is king, right? Only if it were that simple. Sure, I've scoured Zillow like it's my job, which let's face it, it sort of is.
2:32Tony Robinson:But the only properties I find are nestled snugly in the heart of Midwest, a land as foreign to me as quantum physics. I think this is where I would get the most value and it definitely has the most opportunity, but again, as foreign as a flip phone. So what's a broke, bewildered, aspiring real estate mogul to do? Do I gamble my last dime on a single family cash cow or do I roll the dice on a flip and hope lady luck is on my side? Even just reading through that, I felt like a lot. What do you think?
2:58Ashley Kehr:I just Googled how much does a country songwriter make? And they actually make around on average$103 ,000 annually, which is more than when he made it his$80 ,000 day job.
3:10Tony Robinson:There you go.
3:11Ashley Kehr:So I would say country songwriter might be in your future.
3:16Tony Robinson:Yeah. So to paraphrase Andrew's question here, because I know it was a long one, but basically he lost his W-2 job, making 80K a year, picked up a job with a buddy working in a lending firm, 1099. He's got student loan debt, payments at$725 a month, total debt at$75K. Between his different retirement account, he's got, it looks like, close to about$70K or$80K there as well. And he's just confused on what to do next. Does he take this little bit of money he has saved up, plop it into something like a long-term buy and hold? Or does he try and maybe go after something more active like flipping? A lot to unpack.
3:53Tony Robinson:I think the first thing that I'd say is in your position, I think my focus would be to try and build a little bit more capital to begin with. Or I would try and find a way to – and he didn't get into like his living expenses. He just said like$2 ,000 to$3 ,000 per month. But I would assume maybe a good portion of that is your living expenses. So I would either a go after something that's going to build up your cash like flipping or b I would go after house hacking where you can take maybe some of the money you have saved up Get the asset that's going to build value over time While also reducing that two to three k per month that you're spending to kind of keep your your lifestyle sustained But I think one of those two options jumps out at me is maybe the the best path forward What are your what are your initial thoughts for and you ashley?
4:37Ashley Kehr:Yeah, so it also says like we've got expenses So I'm assuming this is a two-person household. So I'd also be, unless he's just using weave as in part of his country song lyrics, but I would be interested to see what the, you know, we is another person, what their, you know, income is and what they're contributing to the household too. And if there's some more stability there to be able to take a risk. And also, as far as did it say if there's if they're renting or if they actually own a property now?
5:16Tony Robinson:It doesn't say just they've got expenses, but it doesn't say the breakdown of those expenses. Okay.
5:21Ashley Kehr:So the first thing is if there is an extra bedroom, whether you are renting or it's a property you own, I would look at co-living and house hacking the property to bring in that extra money right away. Because there you are, you become an instant real estate investor by collecting rental income and you're increasing your income that way. So that would probably be my first step to do. And then as far as like, what strategy should you get into is to think about what are, do you have an advantage or opportunity in anything? So like, are you, do you have the skill set to do a rehab? Do you have, you know, a connection or a referral to a really great contractor you already know that could handle the flip for you and do all the rehab that you really wouldn't have to, you know, oversee a lot and you feel like you could trust this person.
6:18Ashley Kehr:person? Do you know someone that owns a self-storage facility that is already willing to be your mentor? What are these things? But I think, like, Tony, as you said, you have to save up a little bit more maybe, but also, like, identify one strategy. So in order to do that, you need to know your why. What do you want out of it? Is it that so you never have to go back to a W-2 job? Is it that you want to build wealth in the future and you're not so much worried about income right now, but really identify why you're investing, what you want out of it. And then you can kind of narrow things down. If you would prefer to have a steady W-2 income job, then maybe flipping or maybe doing something like wholesaling isn't something you want to do because wholesaling can be a whole job in itself.
7:08Ashley Kehr:So I think you have to identify how much time you also have to put into the property. and then what advantage or opportunity do you have in these different strategies and really narrow down your list from there. Because once you get your strategy and your asset class identified, then that's where you need to go down and be like, okay, what's my buy box? How much do I have for a down payment? What kind of financing is available out there? Are you going to only try to get seller financing on a property and what does that look like? So I think from there, you got to take these baby steps. I actually have a really great book that you could check out called Real Estate Rookie.
7:49Ashley Kehr:And it literally goes through these steps one by one to really help you identify what strategy is for you. And then how do you find the market? You're actually going to do this. And what kind of financing do you need? And it takes you through all of the great steps.
8:03Tony Robinson:Yeah, I think being able to identify the why, as you said, Ashley, is probably the most important first step because it's easy for Ashley and I to say, like, hey, here's the tactical piece of how you get your first flip or how you get your first rental or whatever it may be. But unless we know why you're actually doing this and what's most important to you, it's hard to really prescribe the right plan. But here's what I will say. I think once you've answered that question for yourself, Andrew, of like, okay, why am I doing this? What's most important to me? Is it the cash flow? Is it the equity bill?
8:35Tony Robinson:Is it just big chunks of cash? Once you've identified that, I think being able to move to a point where you actually are taking action is the part where a lot of folks get stuck. And I think my general advice for rookies who are stuck in that analysis paralysis is once you've gotten to a point where you're listening to the podcast, you're reading the books, you're seeing the stuff on social media, and you know most of what it is you're being told, you know most of what's being discussed, that's typically a sign that it's time for you to jump in and take action. because if you can listen to the majority of the real estate rookie podcast at this point and say, man, I've actually heard that this strategy before, or yeah, I've heard this term or yeah, that, that idea makes a lot of sense.
9:20Ashley Kehr:When we start to get boring, when we start to get boring,
9:23Tony Robinson:right. That that's the sign that, uh, that it's time for you to jump in and get started. So I, I think that's my final word to you, Andrew is knowing, knowing how to push past that initial fear of getting started and just jumping in and taking some action.
9:34Ashley Kehr:Yeah. I, I still think like the number one thing you should be doing besides like identifying that strategy is like renting out a room or like figuring out a way to house hack because you're paying living expenses anyways you might as well use that as an opportunity to start being a real estate investor know what it's like to have a tenant collect rent things that can come up but also you're decreasing your living expenses by having that offset and that will help you save more money because now you have somebody paying you 500 bucks a month or whatever it is to rent that room that's more that you can save every single month.
10:08Ashley Kehr:As long as you can avoid that lifestyle creep, get that 500 bucks in your pocket, take your wife out for a fancy dinner that eliminates the walloping.
10:18Tony Robinson:I think a lot of us grew up believing that if the bills are paid, we're doing okay. And honestly, that was my mindset for years. But as I got older, started investing and had more financial goals, I realized I didn't just want to know my account balance. I wanted a clear picture of where my money was actually going. That's what I love about Monarch. It brings all of my accounts, investments, saving goals, and spending into one place, so I always know exactly where I stand. One thing that really surprised me was seeing how quickly little expenses were adding up each month. Having that visibility made it much easier to stay on track with my goals.
10:52Tony Robinson:My favorite features are the AI Insights and AI Weekly Recap. AI Insights helped me spot things I wouldn't normally look for, like is my spending really going up or is it just inflation? The AI Weekly Recap points out spending spikes and upcoming expenses before they become a problem. So it feels like having a financial advisor right in my pocket. Write your own money story with Monarch. Use code ROOKIE at monarch.com to get your first year of Monarch core half off at just$50. That's 50 % off of your first year at monarch.com with code ROOKIE. A lot of property managers think their job is answering tenant emails and coordinating repairs.
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13:53Ashley Kehr:Okay, welcome back. Today's next question is from Mike in the BP forums. For some context, I purchased a duplex last August as a buy and hold with about$300 of cashflow per month. As I've been learning and developing some interest in the BRRRR method, I became intrigued with the possibility of flipping, but wasn't sure if one is better than the other as far as what you actually walk away with in, let's say, a year. The way I'm looking at it is if I flipped four houses a year with$25 ,000 profit each, I'd only need to flip four to get my first annual financial goal of$100 ,000 per year, which I'd obviously have to repeat annually to continue that method.
14:35Ashley Kehr:With buy and hold at$100 per unit average cash flow, I'd need 84 units. Would love to hear your thoughts on the pros and cons of flipping versus buy and hold with or without the BRRRR strategy. Okay, so the first thing that took me a long time to realize is that this is not black and white. There are a couple factors that come into play. Like that math is correct. Yes, that is the difference. You'd flip four houses a year or you need 84 rentals. So there is a difference. And first is time, okay? So you gotta look at your time, the value of your time. How much time would you put into doing each of these things, buying and managing 84 rentals or flipping four houses every year, okay?
15:25The next thing is the tax advantages.
15:31Ashley Kehr:So this took me a long time to realize, but like you're by really, really being intentional about your taxes and how you're filing and what deductions or strategies you're using, legally of course, instead of making X amount additional income, you can just be strategic about your income for your tax return or your expenses so that you are keeping more of your money in your pocket. So for example, if I make$100 ,000 W-2, but I just bought a short-term rental this year, Tony goes out and flips houses and makes$150 ,000 flipping houses. It could end up that at the end of the year, after paying taxes, I could have more money in my pocket even though I got paid less, but the way he got more taxes taken from him because he didn't have the short-term rental loss or the depreciation or doing a cost to actually offset any of his income.
16:47Ashley Kehr:So even though he made more money on paper, at the end of the day, after paying taxes, I had a bigger lump sum than he did over the year. And that was like, that takes less work than having to work harder to increase your income. If you can decrease your taxes, that's just more money in your pocket. And I think we get so overwhelmed of thinking it through as to like, I need to generate more income, more income, more income. But if you focused on the tax strategies of some of the ways you can invest in real estate you'll actually make out in the long run and you didn't have to do any more work except hire a tax planning CPA.
17:33Tony Robinson:Yeah. The taxes, I think actually are a super valid point because you'll probably need to make, assuming you don't have any of the other tax benefits, you know, called 35 % is what you're going to get taxed on whatever you make. So you need to add that on top of whatever it is you're actually making. But I think the other part of flipping versus buy and hold is that flipping is a cash intensive business. And unless you're in a position where you're getting your deals fully funded, you're going to need some amount of cash to cover your down payments, even if you're getting hard money, to cover maybe floating your construction costs.
18:07Tony Robinson:So even if you're netting 100K, you probably need to net maybe 200 or 300K for you to personally have 100K to take home every single year because that other 150 to 200, you're just going to need to leave that set aside to cover EMDs, to cover down payments, to cover floating construction costs. So I think there's some more that goes into flipping than just like, okay, I'm going to net$25 ,000 on each deal and call it a day. I think the other piece too is, and I guess we can kind of say the same thing about the rental side as well. 84 units is a lot. That is a lot to manage. So again, again i think it comes down to how you choose to build your portfolio but could you maybe go a slightly different strategy where instead of 84 traditional single family rentals could you have 12 you know uh co-living properties could you have five sober living facilities could you have uh you know i don't know the list self-storage right the list goes on and on but i wouldn't put yourself into just this box of, I just want to buy a single family home to give me a hundred dollars a month in cashflow because managing 84 units, even if you have a PM, managing 84 units is going to take, there's going to be a lot that goes into that.
19:29Ashley Kehr:Yeah. The asset management piece.
19:31Tony Robinson:Exactly.
19:32Ashley Kehr:There's so much that a property manager does for you, but there's so much they don't do for you too. They could not quote out your insurance every year. You know?
Read the full transcript
19:42Tony Robinson:Yeah. I think, you know, I think the last thing I'll add to this, Ash, is that you don't necessarily have to choose. I remember one of the first books that I read on real estate investing. It wasn't a BiggerPockets book, but it was still a foundational book for me. But his whole strategy was flip one, flip one, flip one, hold one. Flip one, flip one, flip one, hold one. So he would flip three properties, hold the fourth. Flip three properties, hold the fourth. And that strategy gave him the best of both worlds because he was able to build up big chunks of cash, but still make sure that every so often he was going back to add some passive income to complement the active income.
20:24Tony Robinson:And it's almost like working a traditional W-2 job and saving in your 401k, right? Like your paycheck is paying you today, but the 401k is going to pay you tomorrow. The flipping is going to pay you today. The long-term rentals are going to pay you today and tomorrow. So maybe the best solution isn't choosing either or, but it's creating a plan that incorporates both. It's the and. How can I flip and get long-term rentals?
20:52Ashley Kehr:And we just interviewed Tim Delaney. So this would have been episode 603 that just came out on Wednesday. So if you guys want to go back and look at it, he was doing that. He was buying properties to hold as long-term rentals, but also he flips a couple of properties and he's built his way up to 50 rentals. And still, I think he said like he flips like maybe four houses a year. And he also does this while owning a wine and liquor store and running a business. So you can go back and listen to his episode too.
21:26Tony Robinson:I think the last thing that I'll add to this is there's a difference between active income and passive income, right? flipping is more active. Rentals are more passive. And you've just got to ask yourself, which one of those helps you really achieve? And we say this for a lot of the rookie reply questions, but which one is actually going to help you achieve your goal? Do you want big chunks of cash right now? Or do you want the steady drip of cash that comes with rentals? So I think answering that question could help you also make a better determination on which one makes the most sense for you.
21:59Tony Robinson:All right. We're going to take a quick break before our last question, but while we're gone, be sure to subscribe to the Real Estate Rookie YouTube channel. So if you're watching this on YouTube, hit subscribe. If you're listening on your favorite podcast player, just know we also do video versions of this. So if you want to see, you know, mine and Ashley's beautiful faces, you can find us at Real Estate Ricky, and we'll be back with more after this. Finding a strong rental property usually takes time, research, and calculated risk. Lenar Investor Marketplace helps simplify all of that. With a free account, investors can browse new construction homes built for rental potential alongside real-time data showing estimated returns, expenses, and local market insights.
22:37Tony Robinson:It's all in one dashboard, making it easier to compare opportunities and move when the right deal shows up. Go to biggerpockets.com slash Lennar to create a free account and take a look. That's biggerpockets.com slash L-E-N-N-A-R. Sign up for free and start exploring this smart investing opportunity today. Please consult your own legal and tax advisors to help evaluate the risks of any real estate transaction. Lennar is an equal housing opportunity builder. If you think property management is expensive, try mismanaging a vacancy or an eviction or a maintenance issue that turns into a five-figure problem because no one caught it early.
23:16Tony Robinson:That's expensive. A good property manager isn't overhead. They're protection against small mistakes turning into big losses. And that matters more than ever in this economy. That's why I like Mind. Unlike other property managers, Mind manages your property like an investment. They obsessively measure the things that matter for your bottom line. Things like occupancy, delinquency, and net promoter score. And they have the results to prove it. Go to mind.co slash show me to see how Mind performs and get your first month free, which is much cheaper than learning the hard way. What is Toyota affordability?
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25:58Ashley Kehr:And when a customer is ready to buy, Shopify checkout keeps it simple. Their info is saved. They checked out in one click and you get to hear that little cha-ching before you've even finished your coffee. If you're on the fence, here's my advice. Stop waiting for the perfect moment. It doesn't exist. So just start. All you need is the idea. Shopify handles the rest. If you're serious about hearing your first cha-ching, start your free trial at shopify.com slash rookie today. You heard that right. Start your free trial today at shopify.com slash rookie. That's shopify.com slash rookie.
26:36Tony Robinson:All right, guys, welcome back. So we are here with our final question of the day. And this question comes from Colby. And Colby says, I have an investment property that I bought as my primary home a while back in Bend, Oregon. I have$180 ,000 on the mortgage and the property has accrued a good amount of equity. I could likely sell for$700 ,000 to$750 ,000, leaving me with about$500 ,000 in cash. I'm considering selling the property to invest in an out-of-state market as the cash on cash return isn't great. I net about$1 ,700 a month in cash flow. My thought is that I could reinvest this money into a few other rentals in better markets to gain better cash flow.
27:17Tony Robinson:One kicker of the equation is that I have the loan on the property at 3.1%. And obviously things have changed a lot since then. My goal is increasing cash flow with my investment property so that I can turn this into a full-time gig. All right, first, let me say how amazing of a position to be in to be searing down the barrel of half a million dollars in equity from a property that you bought less than a decade ago. I think that is a fantastic spot to be in. But to answer your question, Colby, and I think this kind of goes back to question two about not focusing on or, but how can we focus on an and solution?
27:53Tony Robinson:Is there a way where you can keep this property and have funds to go invest into some of these other markets that you're considering? And I think the answer is potentially yes. You said it used to be a primary residence. And so I think going back and getting like a traditional HELOC on that one may be a little bit more difficult to do. A lot of banks want you to live in the property, but there are definitely kind of the smaller local regional banks who will entertain lines of credits on investment properties. And I think with the amount of equity you have, that's probably a proposition that a lot of small local regional banks and Bend, Oregon might be willing to take you up on.
28:30Tony Robinson:So my initial thought is, can you get a line of credit using that half a million dollars of equity? And maybe you don't get the full 500K, but maybe you get 250. Maybe you get 300. And is that enough for you to go out and buy some of these other properties in these markets that are maybe giving you better cash flow? So that's what comes to me first, Ash, is can you keep that property, keep that sweet 3 % interest rate, and still access those funds to go buy something else?
28:56Ashley Kehr:Yeah, and I think I'd also like to know, do you need cash flow right now? Like, what are you doing? It's netting$1 ,700 per month in cash flow, and you want to reinvest into other rentals to get better cash flow. Well, since this has appreciated so much, is it better to just hold this property, keep it as is, let the mortgage eventually be paid off, and in 10, 15 years when you want to retire, then you sell the property? Because if it is appreciated this much, yes, this is like during COVID time where we saw lots of appreciation. And if you'd get the same amount of appreciation over the next 10 years, would that be possible?
29:38Ashley Kehr:But I would look at, okay, what do you estimate this property will be worth in 10 years? If you kept it, held on to it, kept paying off the mortgage, how much equity would you have? Then I would go and look at, okay, say you bought three rentals in a better cash flowing market. We're going to use Oklahoma City because that's where Tony is looking to invest. And I'm assuming you're looking to invest there because there's good cash flow. Actually, you're flipping there, right?
30:04Tony Robinson:Yeah, mostly flipping. Same idea.
30:06Ashley Kehr:A Midwest market. They just did the cash flow roadshow. So the Midwest market you're looking to invest in and say you're going to take that $500 ,000 and you're going to buy three houses with it. And you're going to increase your monthly cash flow using that. So I would look over the next 10 years, how much money will you make in cash flow and how much appreciation and equity will be built up in those properties over that 10 years. And after 10 years, which one has the higher dollar amount? So is it the property in Bend, Oregon, just keeping that one property, having one property to worry about?
30:44Ashley Kehr:You don't have to sell it. You don't have to go and find three other properties to acquire. What is that dollar amount it will be worth in 10 years. Then look at the other thing. You put in the work, you sell that property, you go and buy three other ones, you get a property manager in place, you have three properties now where you have three roofs, you have maybe two vacancies at one time, whatever it may be. What is that dollar amount that comes out after 10 years? And let's just say we're not factoring in CapEx, vacancy, things like that. We'll just say we were not doing that. Just everything goes perfect.
31:20You haven't rented perfectly all of the properties
31:23Ashley Kehr:over 10 years, no expenses, just your mortgage payments. Ideal situation, they become the best situation. What does that number look like after 10 years? Because if it comes out to like, even the pretty close as to what you're actually making, then maybe it's just worth sticking with it. But then also factor in what are you doing with your cash flow. So with the cash flow from each of those properties, like if you're going to get more cash flow, are you going to reinvest that? And now we've got to take compound interest and as a factor, being able to reinvest a higher amount every year and you start investing more now, that's just adding to the compound interest.
32:05Ashley Kehr:So I think really sit down and do the math and use like 10 years as a metric or whenever you think it would be that you'd want to cash out of your properties or an exit strategy or just a game plan to see how they performed over the next five, 10, 15 years, whatever that may be. But I think sit down and run the numbers on each scenario.
32:27Tony Robinson:Yeah, Ash, we just interviewed Dean Pinhass on episode 602. And Dean was actually intentionally losing money on properties, but he was doing so because he believed in the asset and he had them on 15-year notes. And he knew that by the time all these are paid off, he's going to be netting $20 ,000 per month every single month on these paid off properties. And that was his strategy. So I get that maybe you feel you can get a better return. But even still, I mean, you said you're netting$1 ,700 a month on a single property. That's pretty good for a single family home to net you almost two grand a month is a really good position to be in.
33:11Tony Robinson:But I get that you also, you know, your return on equity is probably sub 5%, right? You know, you got half a million bucks in equity making roughly 20 grand a year, give or take. Like, return on equity isn't great, but what's more important to you, to Ashley's point, is that the peace of mind, right? And saying, like, I just have to worry about this one deal. Don't have to worry about searching, managing all the headaches that come with scaling. and I'm just going to do really well with this one deal? Or is it, hey, I just want the best return on the equity that I have available? And you've got to answer that question for yourself.
33:40Tony Robinson:Because could you deploy that capital? Absolutely, right? I'm sure you could go out, take that half a million bucks and maybe end up with more than$1 ,700 a month in cash flow, right? But it's like, does that align with the goals you actually have?
33:52Ashley Kehr:And I love the idea of not being over leveraged too. You know, like what was your plan for that$500 ,000? Was it to go and use that as down payments across five different properties where you're putting 20 % down and now you have 80 % debt on each of those properties where not like on this$700 ,000 property, you only have$180 ,000 of debt and$500 ,000 of equity. So it really changes how much you are leveraged in your portfolio too. So like what helps you sleep at night? But going back to Tony's original idea of how can you use the and and tap into maybe getting a commercial line of credit on the property, that maybe is only for$200 ,000 instead.
34:40Ashley Kehr:So you still have$300 ,000 of equity or something like that in the property. You're taking that line of credit. You're going to use it to purchase a house in the Midwest. You're going to rehab it. You're going to add value to it. And then you're going to do a cash out, refinance, pay off the line of credit, and you've got the mortgage on the new property. And then you use that line of credit to just keep deploying it to add more rentals. So back to Tony's original idea, I think that after you run the numbers, that probably will be your best bet. And go to small local banks and their commercial side of lending in Bend, Oregon, where that property is, and ask about how can you tap into the equity on an investment property without having to change the current debt that's on it because you want to keep that 3.1 interest rate.
35:32Tony Robinson:Yeah. And just to highlight or to maybe drive home the point of what Ashley just said, I think it would be best to deploy that capital on a short-term basis. So what I wouldn't do is go pull this line of credit. You get 200K and you plop that 200K as a down payment on turnkey rentals because then it becomes a little bit more difficult to repay that line of credit. Now you've got to use the cashflow from these new deals to pay it down. But if you're burying, if you're buying one property at a time and you're burying these properties, well now, every time you refinance, you can pay the line back and then go redeploy that capital into the next deal and redeploy it into the next deal.
36:07So just a small distinction or nuance of what
36:10Tony Robinson:Ashley was saying that I want to make sure we highlighted. But either way, I mean, what a what a unique and a problem that I'm sure a lot of rookies wish they had was, hey, what's the best way for me to deploy this half a million? And obviously, we know that for a lot of you who are listening, you're not in the same position as Colby to have that much equity. But I think the thought process we're talking about for however much capital you have, it still applies, right? He's just maybe doing it with a slightly larger number.
36:39Ashley Kehr:This is something I thought of while we were talking about like interest rate, like how he has a 3.1 % interest rate is like, you know, for April Fool's one year, they made a joke that they were starting like a dating matchmaking website for real estate investors. Like it was an April Fool's thing on BiggerPockets, whatever, but people were super into it. Like, yeah, let's do that. And it just like made me think of like how me and you even get so hyped when someone has a low interest rate. Like, oh, that's so exciting. It's like the dating profile for real estate investors, like one of the key things you'd put on a dating app is to like, I have a 3.1 % interest rate.
37:14Ashley Kehr:It's one of the things that's a billion.
37:17Tony Robinson:There's a billion dollars here right there. We need to create the Tinder for real estate investors or for entrepreneurs.
37:25Ashley Kehr:BPCon this year, we'll set up some little hacky app or whatever.
37:34Ashley Kehr:Well, guys, thank you so much for joining us for this episode of Real Estate Ricky Reply. If you have a question, you can join us in the Real Estate Rookie Facebook group, or you can post it in the BiggerPockets forums. I'm Ashley, he's Tony, and we'll see you guys on the next episode.
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From the publisher
Welcome to another Rookie Reply, where HOST and HOST answer questions from the BiggerPockets Forums and Real Estate Rookie Facebook group.
This time, we’re covering questions like:
How do you break free from analysis paralysis and finally start your real estate journey?
Buy-and-hold vs. flipping: Which strategy is best for rookies looking for reliable wealth?
Should you cash out half a million dollars from a property to scale faster, or is holding onto equity smarter?
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