One Year Update:
Still going strong. My wife and I have been maxing our 401k, and Roth IRAs. I sold one of our unnecessary cars (we had three...don't punch me, I said I got rid of it) and ended up making a little money on it. And I had bought a 2012 VW Golf TDI for $9k before we found MMM and ended up getting $23k for it. (recalled from dieselgate) and replaced it with a 2007 Nissan Versa with 150k miles for $2k. I've been riding my bike daily, so I'm putting very few miles on the car. We have purchased two rental properties (a condo and a duplex) with plans for 1-2 more before the year is up. And we are in the process of selling our first property (I can't wait to be rid of this leech. 1500/month with mortgage and HOA, would be lucky to rent it for 1200.). My wife volunteered for temporary relocation for a work project, so she got a 10% bump in pay, her employer is paying us an allowance for rent (which of course we are pocketing the excess because we found a cheaper place), and they are paying per diems for both of our food. So we are coming out ahead on being flexible and willing to move. Our next goal is once we sell the terrible property, to put the profits into another property, once we have 5 individual properties we will use the mortgage snowball strategy and pump all the profits from the rentals into paying off one mortgage at a time. At that point we will assess the rental income vs our yearly expenses and purchase a few more properties if needed. I honestly think we could pull the trigger on RE before I'm 30, which will be 4 years from now.
I do want to say that the forums have had a huge impact on the progress we've made. I haven't posted a ton...mostly done a lot of lurking. And I've been a little more active on the facebook groups recently, but they don't hold a candle to the invaluable information on here.
good work.
not paying down your rentals in a mortgage snow ball and either investing in index funds or more property will lead to a faster FIRE.
I'll look into my options when I get the properties, but right now, my return would be better with paying down the mortgage on one of my properties. I owe a little over $30k and at that point without my mortgage the current rent will net me ~$225 more a month. If I invested that $30k the 4% SWR would net me $100/month.
this is an incorrect way to think about the math. you have to consider the full return on the 30k + the return on the house after the mortgage.
Sorry, I misread the part where you said I could purchase more properties instead of paying down the mortgages. Right now in my accumulation phase, I'm very risk tolerant, but at a certain point (Likely when I become FIRE) I think I will be a little more risk adverse. I am continuously debating whether it would be better to have 7 or 8 paid off properties generating a lump of my income, or if I should continue acquiring properties and having 10-12+ properties with a few mortgages. Honestly, I've been acquiring them at a faster rate than I expected, so I think I'll end up with 10+ before I really start focusing on paying all the mortgages off, and I think I could still have them paid off in a pretty timely manner considering the low cost of most of the properties I'm getting.
I think you are missing the idea of leverage.
A simplistic explanation:
Say you have $100,000 to invest.
You buy one house for all your cash and it generates 10% or $10,000.
vs, leverage, you buy 5- $100,000 houses with 20% down at 5%.
Because of the interest payment, you are only earning $5,000 per house,
But you have 5 houses, so you have 5 x $5,000 = $25,000 vs the $10,000 if you paid of the mortgage on one house.
Plus if you have 3% price appreciation on one $100,000 house you gain $3,000 a year vs
3% on 5 -$100,000 house is $15,000.
If you combine those two, you get a yearly gain of $13,000 for one house or $40,000 for 5 houses.
Also, if you can raise the rent 3%, on one house that might add $360 a year, 5 houses is $1,800 a year.
And then there are the tax benefits of 1 vs 5 houses.
Many RE investors would say leverage is more magical than compound interest!
The point-- don't pay off a Mortgage if you can earn more than the interest rate you are paying on the mortgage.
Note: owning rentals is a job, it's not passive investing.
Over leveraging can get you in trouble.
My two cents, after I had kids, I got tired of the job, sold my
properties and moved to Florida!