Q&A: Use Cash to Invest or Pay Off Mortgage? – Episode 855

Should you use funds to invest in real estate? Or is a better financial move to pay off your mortgage, instead? This is a nuanced and personal decision, but I’m attempting to answer on this Q&A episode.

On today’s show, I’m answering questions from my voicemail. Today’s callers have questions about deploying funds, non-recourse loans, and turning a townhouse into a rental property. Click play to hear my answers to your questions on this episode of Investing in Real Estate!

On this episode you’ll learn:

• What to consider about paying off debt vs. investing.
• The pros and cons of non-recourse loans.
• How to approach turning an old primary home into a rental.

What to Consider About Paying Off Debt vs. Investing

In this volatile and uncertain time, I think it’s important to ask yourself what security means to you. Would you feel more secure if you had less debt, or would it feel better to have passive income coming in every month? There’s no wrong answer—it truly comes down to your values and goals.

That being said, I don’t believe you have to pick a lane. There is definitely room for a dual strategy. You could use a chunk of funds to buy a rental property or two, and then use the remaining funds to pay down your mortgage. For more tips on an accelerated mortgage payoff strategy, read my book, How to Pay Off Your Mortgage in 5 Years. 

The Pros and Cons of Non-Recourse Loans

I believe that the non-recourse loan is one of the best wealth building vehicles in our country. With a non-recourse loan, there is no personal guarantee, meaning the loan is tied to the merit of the asset. Since conventional financing limits you to ten properties, non-recourse financing can be a useful method for growing your portfolio. Another benefit of non-recourse financing is that it must be held in an LLC. However, major drawbacks include higher interest rates and higher down payments. Personally, I think the pros outweigh the cons, but it’s really going to depend on your personal situation. We believe in a tailored and personalized approach to real estate investing. I’d suggest booking a free call with my team to see if a non-recourse loan is a fit for you.

How to Approach Turning an Old Primary Home Into a Rental

There are two main questions you need to ask yourself before turning a home you own into a rental. 1) Do I have an emotional connection? 2) Do the numbers make sense? In my experience, when you’re honest about these two questions, you might find that it’s smarter to sell the home and buy a better performing asset. You may even be able to buy more rental properties in a more landlord friendly state, but again, it all comes down to the numbers.

Ask Me a Question at morrisinvest.com/clayton

Episode Resources
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How to Pay Off Your Mortgage in 5 Years 
The Power of a Non-Recourse Loan for Building Wealth 
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.

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