EP043: Should I Pay Off Debt or Invest in Real Estate?

Should you pay off debt before you begin investing in real estate? Is being debt-free a requirement for investing? On today’s show, Natali and I are answering these questions, and sharing how you can make the right decision for your particular situation.

This topic is one of our most frequently asked questions, and we’re excited to address the topic. Many people understand the value of real estate investing, but are concerned about approaching investing when weighed down by debt. Listen in to this episode of Investing in Real Estate to hear how to address your debt, assess your expenses, and how to be creative in real estate investing!

More About This Episode
Deciding how to approach real estate investing when you have debt is not always simple and straightforward. There are a few factors to consider. This is a decision you’ll have to make for yourself, but we want to help you weigh your options.

The first thing you should do is write down all of your debts, so you have a clear picture of where you stand. Assess the kind of debt, as well as the interest rate for each. Then calculate how much money you have each month to allocate toward paying off debt. 

Sometimes, debt is necessary. Perhaps you had to take out a loan to buy a car, or maybe you have some student loan debt. Typically, anything under 4% interest is not a priority to pay off immediately.

For us, all of our real estate investments accrue a minimum of 10-12% return on investment. It's all about determining which rates are higher. For example, if you have a store credit card with 22% interest, you will likely want to consider paying that off as quickly as possible. 

Next, weigh what you’re paying monthly in interest against a potential investment. For example, if you have $500 each month to allocate either toward paying off debt or investing, you’ll have to assess how quickly that $500 can help you reach your goals.

You should also consider that it’s not an all-or-nothing approach! You can split the money up and approach the situation creatively. Investing is not black and white, it’s about what finding what works for you and benefits your specific situation.

To learn more about achieving financial freedom through real estate, find your Freedom Number! It’s a simple step-by-step process to help you find the exact number of properties you’ll need to obtain. This idea changed the way our family looks at finances, and helped us find financial freedom.

If you're ready to take the first actionable step toward building a passive income,

We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What is the difference between good debt and bad debt?
  • What does it mean to treat your interest rates like a teeter-totter?
  • What is high interest status debt?
  • How can you stop accruing more debt?
  • And much more about real estate investing!  

Episode Resources
Using a Home Equity Loan to Buy Your First Rental Property
Should I Pay Off Debt or Use Those Funds to Invest? on BiggerPockets
How to Approach Your Debt with Creativity by Natali Morris
Find Your Financial Freedom Number
Like Morris Invest on Facebook