PID's Mortgages

Hi all,

I'm excited to share this page with you titled, "PID's Mortgages"

First, I love the picture to the left because I think it can be interpreted two ways:

1) Your mortgage is literally about to crush you, like an ant.

Or, 2) You are using mortgage debt to make a TON of money and are now Superman proudly showing it off by lifting an entire house, made out of money, over your head.

On this page I will show you why I believe having rental properties helps you achieve the second interpretation. Specifically, I will highlight the major benefits of buy-and-hold rental property real estate, the current market value of Passive Income Dude's rental properties, as well as the current mortgage values against them, and why I am so thankful to have this option as a wealth creator.

To start, one of the biggest benefits of real estate is being able to lock in fixed rate debt for a very long period of time. Primarily because of the following four key reasons:

1) Inflation slowly erodes your mortgage debt for you. Without you doing anything.  This is the hidden wealth creator of real estate - borrowing whole, real dollars TODAY that become very cheap to repay 20 or 30 years from now. Do not miss this powerful wealth creator.

2) You can highly lever your initial investment, resulting in massive gains over time.

3) Mortgage debt, or as I like to call it, cheap capital for you, is very, very inexpensive to obtain and to lock for decades.

4) Finally, once you 'outsource' your mortgage payment to your tenants, you receive the three benefits listed above and literally have a gold mine investment on your hands that gets stronger and stronger each month.

Let me give you an example of its "strength" increasing, passively each month:  my 'mortgage debt paydown' total, just to show one of the benefits of real estate, has now increased more than $40 per month since the start of this year, 2016.  Without doing anything. To be clear - what I am saying is that every month, literally forever, my mortgage debt paydown will be $40 more than it was at the start of this year, without me doing anything, and it will only get bigger and better, each month. Forever. Without doing anything.

All of that said, listed below is the current status of my mortgages, home values, etc., in detail:


Note that the ' monthly mortgage debt' and 'debt reduced' columns listed above are PER MONTH. EVERY MONTH my mortgage debt is lowered by over $1300, with zero dollars paid for by me; and all of it by my tenants.  What a benefit!

I'll continue to update this page, once a month, so be sure to check back and watch it grow.

That said, here is my aggregate "Mortgage Debt Paydown" progress since Passive Income Dude was launched:




In closing, and I don't think I can't say it enough: Lock in as much debt, for as long of a term structure as you can, outsource this debt to a tenant, and then watch your wealth (and cash flow) grow massively, with very little work on your part.  

If you haven't read my article on leverage, please do that here for a real-world example from one of my properties.


So, which perspective do you want to take?

What do you think? I'm always looking for others' perspectives and new ideas. Feel free to comment below.  Thanks!

Passive Income Dude


4 comments:

  1. I have yet to dip my toe into the real estate game but I have been noticing that a few of our fellow dividend bloggers are getting into the game by liquidating most or all of their dividend portfolios in favor of real estate. Always love to follow a journey in this space and see the good and bad about these types of investments. Thanks for sharing.

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    1. Hey Keith, yea I tend to think that returns are much higher in real estate. Do not get me wrong, I LOVE dividends and was a strict dividend investor from 2008-2011. But I finally learned the many benefits of RE that aren't available in equities. For example, unless you use futures to leverage yourself, you probably can't get the same returns in equities due to the power of leverage alone. Real estate poses other challenges for sure, but being a more 'direct' investor (compared to simply owning stock, for example) suggests higher returns as well. Anyway, I am greatly looking forward to seeing what happens over the next five years. Thanks for commenting,

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  2. Great post and nice job managing three properties! Leverage can definitely help you build wealth much faster. The real beauty, as you pointed out, is that the mortgage debt is non-callable and can be fixed at a low rate for a long time, unlike margin debt with buying stocks on margin. I agree RE investing is the fastest path to wealth. I just don't have the right temperament for it, unfortunately. It would scare me to have to deal with tenants, local laws, and being locked into an illiquid asset.

    How do you deal with mortgage debt paydown reducing your leverage every month? Do you take out home equity loans to try to maintain the same amount of leverage? Or do you save the money toward down payment for another property?

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    1. Hey JTF! Thanks for the comment! I agree that real estate is the fastest way to wealth. A huge % of millionaires all got that way through real estate.

      I'm moving rather slowly and am seeing increases in net worth much faster than with equities, so I believe it is true...I'm just still in the middle of the process. And don't worry about your temperament for dealing with tenants, etc. Just get a property manager! They will do that for you. You are the investor, not the manager.

      As to your leverage question, no, I don't maintain my leverage. I tend to lever up a lot with a new property, and then slowly de-lever over time, and then repeat the process with a new property. I've never done a home equity loan either. Perhaps in the future, but I don't like debt that isn't fixed for 30 years! Thanks for stopping by!

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