Pay off Debt or Save Cash (by Roy [AL]) Feb 20, 2018 6:53 AM|
Pay off Debt or Save Cash (by S i d [MO]) Feb 20, 2018 7:07 AM
Pay off Debt or Save Cash (by WMH [NC]) Feb 20, 2018 7:11 AM
Pay off Debt or Save Cash (by Roy [AL]) Feb 20, 2018 7:43 AM
Pay off Debt or Save Cash (by gevans [SC]) Feb 20, 2018 7:48 AM
Pay off Debt or Save Cash (by Busy [WI]) Feb 20, 2018 7:50 AM
Pay off Debt or Save Cash (by Still Learning [NH]) Feb 20, 2018 7:55 AM
Pay off Debt or Save Cash (by Busy [WI]) Feb 20, 2018 8:08 AM
Pay off Debt or Save Cash (by Johnny B. [MA]) Feb 20, 2018 8:10 AM
Pay off Debt or Save Cash (by Roy [AL]) Feb 20, 2018 8:11 AM
Pay off Debt or Save Cash (by JAC [OH]) Feb 20, 2018 8:26 AM
Pay off Debt or Save Cash (by WMH [NC]) Feb 20, 2018 8:39 AM
Pay off Debt or Save Cash (by Sisco [MO]) Feb 20, 2018 8:41 AM
Pay off Debt or Save Cash (by razorback_tim [AR]) Feb 20, 2018 8:46 AM
Pay off Debt or Save Cash (by S i d [MO]) Feb 20, 2018 8:48 AM
Pay off Debt or Save Cash (by Coplin [CA]) Feb 20, 2018 8:49 AM
Pay off Debt or Save Cash (by LeePookie [IN]) Feb 20, 2018 8:57 AM
Pay off Debt or Save Cash (by Steve [TN]) Feb 20, 2018 9:58 AM
Pay off Debt or Save Cash (by LindaJ [NY]) Feb 20, 2018 10:10 AM
Pay off Debt or Save Cash (by Landlord ofthe Flies [TX]) Feb 20, 2018 10:20 AM
Pay off Debt or Save Cash (by RB [MI]) Feb 20, 2018 10:46 AM
Pay off Debt or Save Cash (by Nicole [PA]) Feb 20, 2018 11:15 AM
Pay off Debt or Save Cash (by Beth [WI]) Feb 20, 2018 11:16 AM
Pay off Debt or Save Cash (by Busy [WI]) Feb 20, 2018 11:32 AM
Pay off Debt or Save Cash (by Roy [AL]) Feb 20, 2018 11:46 AM
Pay off Debt or Save Cash (by Robert J [CA]) Feb 20, 2018 12:38 PM
Pay off Debt or Save Cash (by Roy [AL]) Feb 20, 2018 12:46 PM
Pay off Debt or Save Cash (by LisaFL [FL]) Feb 20, 2018 1:31 PM
Pay off Debt or Save Cash (by MMIT [VA]) Feb 20, 2018 2:10 PM
Pay off Debt or Save Cash (by Lynda [TX]) Feb 20, 2018 2:59 PM
Pay off Debt or Save Cash (by gevans [SC]) Feb 20, 2018 3:24 PM
Pay off Debt or Save Cash (by Kyle [IN]) Feb 20, 2018 3:57 PM
Pay off Debt or Save Cash (by Robin [WI]) Feb 20, 2018 4:19 PM
Pay off Debt or Save Cash (by GKARL [PA]) Feb 20, 2018 5:15 PM
Pay off Debt or Save Cash (by Busy [WI]) Feb 20, 2018 6:30 PM
Pay off Debt or Save Cash (by RR78 [VA]) Feb 20, 2018 7:51 PM
Pay off Debt or Save Cash (by Roy [AL]) Feb 21, 2018 6:34 AM
Pay off Debt or Save Cash (by RB [MI]) Feb 21, 2018 9:38 AM
Pay off Debt or Save Cash (by Chris [CT]) Feb 21, 2018 10:25 AM
Pay off Debt or Save Cash (by NC INVESTOR [NC]) Feb 21, 2018 12:14 PM
Pay off Debt or Save Cash (by Shelby [IA]) Feb 21, 2018 2:03 PM
Pay off Debt or Save Cash (by pmh [TX]) Feb 21, 2018 2:32 PM
Pay off Debt or Save Cash (by baman [AL]) Feb 22, 2018 4:09 AM
Pay off Debt or Save Cash (by LisaFL [FL]) Feb 22, 2018 5:51 AM
Pay off Debt or Save Cash (by ChrisB [OH]) Feb 25, 2018 8:55 AM
Pay off Debt or Save Cash (by Ray-N-Pa [PA]) Feb 25, 2018 3:46 PM
Pay off Debt or Save Cash (by Pmh [TX]) Feb 26, 2018 2:07 PM
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 20, 2018 6:53 AM
This is a money management question. I will try to make it as simple.
Hypothetical question: If you are over the age 50, how important is it to YOU, to have all of your short term and long term debt paid off by age 65?
My real question is this: If you have $300,000 in liquid assets (retirement nest egg) and $250,000 in short/long term RE debt,...how much of that (if any) nest egg are you going to sacrifice to pay off (or pay down) your debt load?
Again, how important is it to YOU to be debt free in your retirement years? Age 50 and beyond,..time is not your side anymore.
Pay off Debt or Save Cash (by S i d [MO]) Posted on: Feb 20, 2018 7:07 AM
I'm not over 50....foiled again by age.
I'll give thoughts if you want from a young whipper snapper who is the tender age of 42. I do plan to be "retired" by age 50, if that changes your mind... --173.17.xx.xx
Pay off Debt or Save Cash (by WMH [NC]) Posted on: Feb 20, 2018 7:11 AM
Depends on the debt. We are in our 60's and LL full-time. We have one remaining mortgage we *could* pay off. But it does not seem to make sense to do it - the place generates about 4x the monthly note, and the payment is now 50/50 principal vs. interest so in the not too distant future it will tip over to mostly principal. It's a 20 year fixed interest mortgage. The $8k a year in interest that we are paying is written off on taxes as a rental expense.
So we keep the money we could use to pay that off in our pocket, in case we want to buy OTHER properties cash-only.
But if we had short-term or scary debt (commercial loans, variable interest or whatever) or if having an empty month would be a huge hit to the personal pocket, we would pay them off as quickly as possible. --50.82.xxx.xx
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 20, 2018 7:43 AM
Anyone at any age can answer this question because it addresses your 'personal feelings' about carrying large amounts of debt into your golden years.
When you are young (under 50) and you have the luxury of TIME on your side,...can afford to make mistakes in trying to plan for your future. However, there will come a time when you realize you have lived more years than you are going to live (usually at age 50) and this can have a sobering effect on your perspective. Beyond age 50, you can't afford to make money management mistakes and end up being a broke retiree statistic on the evening news.
Pay off Debt or Save Cash (by gevans [SC]) Posted on: Feb 20, 2018 7:48 AM
Roy, you know me....
I "retired" at 58.5.
Debt free was important enough to me that I paid off my last two remaining loans, even though the interest rates were 3.875 and 2.875. I can probably never borrow money that cheap again... but I no longer have any debt to service.
Sweetie has reminded me of this a few times. I've found that "magical deal" which would require borrowing again. And she's shut it down by simply reminding me one of our goals was debt free, and we have met that goal.
2 years in to retirement and i'm still happy with this decision.
Pay off Debt or Save Cash (by Busy [WI]) Posted on: Feb 20, 2018 7:50 AM
Me, I'd keep the $300k, work my butt off to pay down the $250K. Keeping the vacancy rate low, turnovers quick would be key, for me. I tend to have way too long turnovers, but, now that I've had the houses a few years, that shouldn't be the case, as much of the neglect that was present when purchased has been fixed.
If the properties, (not just those represented by the $250K debt, but all in the portfolio are cash flowing, ) if it were me, I would just tighten spending by continuing to find efficiencies. I'd also work to increase length of good tenancies, more quickly terminate the tenancies that are dragging things down.
For me, keeping tenants who are occasionally, or even frequently, late, but communicate, and pay late fees and rents within the month, AND, are not causing any other issues, keep the place relatively well kept, those are my sweet spot. (I do allow tenants to use their discretion at having others stay with them for a while. As long as the guest behaves...I figure if my tenant occasionally helps people out, they'll have someone to help them when jammed up.)
The last of our debt is the $55k of credit card debt on my rentals. Most at 0% interest, paid fees (up to 3.5%) when originating the debt. As the 0% rates expire, I may have to juggle into higher rates , or pay 5% origination fees, as interest rates are higher. But, that debt is being paid off at a pretty good clip. Of course, my next house purchase would mean another cash advance on CC for purchase, then rehab --172.58.xxx.xx
Pay off Debt or Save Cash (by Still Learning [NH]) Posted on: Feb 20, 2018 7:55 AM
At right around the 50 year mark, we are aggressively paying down the rental mortgages out of rental income, not sacrificing the nest egg to do so. My spouse's job supports us so we don't need income. If the rental market stays strong and there aren't huge unexpected expenses that pop up we should have both paid off in 6 years allowing for full income if I continue to manage them or less income if I hire a management company. --24.61.xxx.xx
Pay off Debt or Save Cash (by Busy [WI]) Posted on: Feb 20, 2018 8:08 AM
Reading your question again, offering another angle. If the nest egg was $50K or $990k, me, I'd still keep the debt, just work to pay it down to maybe under $100K.
That nest egg protects against all the big, bad, unforeseen calamities, but owning real estate also provides another huge protection against big, bad, unforeseen calamities. Especially real estate on the low end. If things get really rough out there, and people want to downsize, what is more downsized than a 680 sq foot Roy handy man special? Well insulated and snug.
IMO, as long as the neighborhood doesn't slide into class D, I'll always have a wait list of interested applicants.
As long as the debt has manageable interest rates, I'd keep the debt, keep all the properties, keep the nest egg. I'd work on developing my brand, so that wait list a good potential applicants grows.... --172.58.xxx.xx
Pay off Debt or Save Cash (by Johnny B. [MA]) Posted on: Feb 20, 2018 8:10 AM
Iím well below 50, but my thoughts would be that it depends on the type of debt. If you have variable rate loans or HELOC, I would work to pay those off. A HELOC that you pay off can always be tapped into again in an emergency. If you have fixed rate mortgages at the low rates that we have been getting the last few years, Iíd keep those. Write off the interest and save your money. The rates from the last few years are as close as possible to ďfreeĒ money as you can get. --166.137.xxx.xxx
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 20, 2018 8:11 AM
One reason I posted this question is because I would like to have this same discussion at the next Mr. LL convention in St. Louis. I think it would make a great Round Table discussion. Would anyone else agree? Seating at Round Tables is always limited,...would anyone like to make a reservation now,..LOL ? --68.63.xxx.xxx
Pay off Debt or Save Cash (by JAC [OH]) Posted on: Feb 20, 2018 8:26 AM
Unless you want to add to your real estate investments I would keep the cash. There is no shame in using someone else's money if you are flowing positive. --74.83.xx.xx
Pay off Debt or Save Cash (by WMH [NC]) Posted on: Feb 20, 2018 8:39 AM
Still Learning/NH, DH's plan is to use our SS benefits - if any ;( - to hire a property manager of our own training. We aren't using the money now anyway, and the rental income is enough, so using the SS money to pay someone could work. --50.82.xxx.xx
Pay off Debt or Save Cash (by Sisco [MO]) Posted on: Feb 20, 2018 8:41 AM
How much cash does the lack of debt service add each month to the owners take? --72.172.xxx.xx
Pay off Debt or Save Cash (by razorback_tim [AR]) Posted on: Feb 20, 2018 8:46 AM
Given the scenario you have presented of $300K liquid and $250K RE debt and assuming this represents your situation, and remembering what youíve said in the past about some of your liquid assets generating dividends....
I would not give up $250K liquid to pay off the $250K real estate debt. Yes, I want to be debt free in retirement, but I have also been cashless before and it is no fun. If you have some of the liquid assets that are underperforming you might sell enough to pay off one note and then snowball what you were paying into the other notes. I think the answer is to aggressively pay off the debt but donít put yourself in a situation where you donít have liquidity in case you need cash. --166.137.xxx.xx
Pay off Debt or Save Cash (by S i d [MO]) Posted on: Feb 20, 2018 8:48 AM
I think this would be a great round table. Save me a seat...
For now, my answer won't be a surprise. I think one of the most important things we can all do as we get older is to reduce the risk to one's financial state. A very wise man once wrote that an investor is infinitely more concerned about getting his investment BACK vs. growing it to the maximum. I think that's true, although we could argue forever about the "risk" of not growing one's investment enough being just as bad. Growth is great and should be pursued, but loss of capital is more crucial because it takes twice as much growth to replace lost capital from a decline.
So with that in mind, I would use the vast bulk of the $300K to knock the debt down, thereby reducing risk, while keeping reserve a fat cushion (emergency fund). Maybe $200K paid off and keep $100K in the bank? That should reduce a ton of risk, and it is also consistent with the philosophy my financial mentor Dave Ramsey uses when he talks about paying off rentals after one's personal residence in Baby Step 6. I mention that because someone usually comes along here and incorrectly says that to be a true Dave follower you have to pay off all your rentals right away or sell them. He doesn't say that, never has said that, and it's certainly not in any of his teaching or materials that I have ever listened to or read. Most times, if someone is not in crisis mode (and a person with $300K in the bank is certainly NOT in crisis mode), he would encourage them to get rid of a size-able chunk while keeping a cushion intact, then work like crazy to pay off the debt in 3-5 years.
Caveat: if the $300K is in a tax-favored retirement account (IRA, 401-K), then you don't touch that except to avoid bankruptcy or foreclosure. Penalties are too stiff otherwise.
So that's what I would do too. Keep enough cash on hand to fully fund your emergency fund (Baby Step 3, beefed up for rentals), then move on to Baby Step 6 (pay off personal house early, then rentals). --173.17.xx.xx
Pay off Debt or Save Cash (by Coplin [CA]) Posted on: Feb 20, 2018 8:49 AM
I'm well over 70 & have well over your RE debt, generating well over 12% net cash return & with well over 2X liquid assets. After factoring in tax benefits its not at all important for me to be debt free. As long as the net over all cash return is positive, no worries. In fact a couple of what if tax scenarios show net worth stagnation if there is no debt and a long net worth recovery time.
My criteria is obviously not yours, but leverage debt doesn't disturb me. --47.157.xxx.xxx
Pay off Debt or Save Cash (by LeePookie [IN]) Posted on: Feb 20, 2018 8:57 AM
I would like a seat as well. --209.239.xxx.xxx
Pay off Debt or Save Cash (by Steve [TN]) Posted on: Feb 20, 2018 9:58 AM
I question why 65 is your target age for this query. 65 is only a magic number as far as Medicare is concerned.
Historically, 65 was considered retirement age. But that's just not true anymore. My definition of retirement age is that age by which one is no longer in the full-time workforce.
So if you are a full-time LL, I would say retirement age is the age at which you decide that you don't want to be a full-time LL and you do something about it.
In any case, carrying no debt into retirement is my goal and I advise the same for everyone. --68.156.xx.xx
Pay off Debt or Save Cash (by LindaJ [NY]) Posted on: Feb 20, 2018 10:10 AM
If that debt is in rental property, I would probably not pay it off with the reserves available. If the debt were in my own house, I would pay it off, or at least most of it.
My house was paid for when we built it. That was important to us 25 years ago. Not having the mortgage allowed us to put money into our retirements, savings, purchases. I certainly want to not have debt on my own house in retirement so I don't have to worry ever about making that payment.
Rental houses generate income to cover those mortgages. They can also be sold to close the mortgage and give a chunk of cash. If I had to sell them, I could still be in my house. --96.236.xx.xx
Pay off Debt or Save Cash (by Landlord ofthe Flies [TX]) Posted on: Feb 20, 2018 10:20 AM
Why not do both? Keep the cash in retirement and invest it in funds/stocks/bonds and sell your worst house or houses to pay off the debt. Then start saving for future purchases.
I like debt free, but I also like not putting everything into one asset type. --108.69.xxx.xxx
Pay off Debt or Save Cash (by RB [MI]) Posted on: Feb 20, 2018 10:46 AM
Its a Personal Decision.
All I know is its tough to Have and Keep
Age, Health, Money and Time on Your Side.
And that is how the Ball Bounces. --47.35.xx.xx
Pay off Debt or Save Cash (by Nicole [PA]) Posted on: Feb 20, 2018 11:15 AM
there is no way I'd use that cash to pay off debt. if something "goes wrong", you can still make the monthly payments from your principal ... in other words, you'd be paying down that debt slowly out of your liquid funds, rather than a great but gush down the drain.
I actually am working some math this morning along these lines ... but not those numbers. I have a mortgage with an escrow account. I haven't figured out what they did but they just raised my payment $123 a month for the escrow. Pi$$e$ me off that I've got to sit and figure this out. My loan balance is just under $5500. Mortgage is scheduled to be paid off April, 2019. To take $5500 liquid funds out of my pocket to save $228 in interest makes ZERO sense to me ... other than I really don't want to give them the extra $$$ each month nor do I want to figure out what they did ... and then get a refund check next May. That $322 per month in P&I is nothing compared to the cash flow of this building.
Use liquid funds to pay off managed debt? Never. --72.70.xxx.xx
Pay off Debt or Save Cash (by Beth [WI]) Posted on: Feb 20, 2018 11:16 AM
I want little or no debt at age 65.
300k in debt is not much if the assets are worth 3 million. I would be comfortable with that. But if my assets were only 500K, then I would do what I could to get that debt load down. I would not blow through all of my liquid assets to do that, as it can be very useful to have cash/liquid assets around. --24.177.xxx.xx
Pay off Debt or Save Cash (by Busy [WI]) Posted on: Feb 20, 2018 11:32 AM
I wish I could ask for a seat, but, alas, probably not going to make it. One of our beautiful beagles hasn't been feeling well, had laparotomy last week. Diagnosis: aggressive cancer. So, 1.) if she makes it that long, I won't be leaving her side 2.) I've spent so much time at home with her that I have to get cracking on my rehab.
I was really looking forward to being able to say I got that house done by this year's convention. And, wanted to meet Roy.
This is an excellent topic for a round table!
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 20, 2018 11:46 AM
This post has nothing to do with my personal financial situation as some of you all have assumed. I just made those numbers ($300K/$250K) up to make an example of holding a combination of assets and debts.
I do know people (my own father) who carried large debts (and created new debt too) well into his retirement years and after he died, left a financial train-wreck of debts that his surviving spouse was unprepared to deal with. She is now virtually destitute. My father use to say "there is nothing wrong with debt,..as long as you can make the monthly payments". That was probably true until my father's death in 2015. --68.63.xxx.xxx
Pay off Debt or Save Cash (by Robert J [CA]) Posted on: Feb 20, 2018 12:38 PM
When I turned 50, I made sure that all of my debt was gone. This was a mistake! With 80 percent of my assets in real estate, I was not leveraged for disaster. So I took our a few small loans on some properties and balanced my portfolio. --47.156.xx.xx
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 20, 2018 12:46 PM
Why was being debt-free at 50 a mistake? Not being leveraged for disaster? Huh? I need some details here.
Pay off Debt or Save Cash (by LisaFL [FL]) Posted on: Feb 20, 2018 1:31 PM
I would do/have done exactly what Sid said.
If I were not debt free it would be my goal to become debt free. But I wouldn't sacrifice my entire nest egg to accomplish this.
When I became debt free I also established lines of credit in case I ever needed them to the point where the need exceeded what I was willing to spend from the nest egg. Eventually the nest egg was large enough to not bother with the lines of credit anymore either.
Saved a lot of hassle dealing with the lenders. Having to prove to them I had insurance in the property (even though no money was drawn on the LOCs), an annual hassle, etc....
Leverage allows you to grow and can be a great tool but I like the simplicity and piece of mind that comes with being debt free. --173.170.xxx.xxx
Pay off Debt or Save Cash (by MMIT [VA]) Posted on: Feb 20, 2018 2:10 PM
Pay the loan off tomorrow!
Cash flow is great without debt. Financial Freedom!
After 6 months, if you do not being debt free, go borrow some money.
I got tired of the bank running my life and having control over what I do. I have been debt free for 14 years.
Being debt free, I have not grown my business as fast others, but, I cannot be foreclosed on!
Do not think that interest is a good tax deduction. If you pay $10,000 a year in interest, you get a $2500 tax deduction. That means you paid $10,000 to the bank to save $2500 in taxes?
I would prefer to pay $2500 in taxes and keep an additional $7500.
The biggest buildings in my town are the bank buildings - because of all the interest people pay.
With no financial help from me, one of my kids (32 years old) owns 3 paid for properties. They are looking for another property to buy with the cash they have saved from rentals. It will not take long before they can give up their corporate jobs and have freedom.
Good luck with the decision. There are a lot of interesting points in the above discussions.
See you in St Louis and save mea seat! --70.188.xx.xx
Pay off Debt or Save Cash (by Lynda [TX]) Posted on: Feb 20, 2018 2:59 PM
Hello from the beach of the Dominican Republic!
I'm 67 this year and I still have 2 properties that have @ $24K and 23K outstanding. But that's OK w/me because *I'M* not paying that out. The tenants are paying off my mortgages and have been since the beginning. So far, as each mortg is paid off, I sell the property and put that lump of money into my retirement fund. So, I have cash, an Ameritrade acct with dividend paying stocks, a gov pension and now SS. I have plenty of income to serve any needs I may have. My tenants are paying off my Mortg-debt. That's the only debt I have and its not coming out of my hand. It is money that I really don't even see. The rents go into that acct and the mortgage payments get drawn from that acct automatically. The excess rent sits there and builds up.
I look at it this way: If I paid off those mortgages, it would eat into my retirement money by $47K! Then I would have to wait YEARS for the resulting higher incoming rents to make that money back s-l-o-w-l-y month at a time. I may die before that happens. My plan is to keep what I've got, and let my mortgages get paid off by OPM (other people's money)ie, the tenants. --148.103.xx.xx
Pay off Debt or Save Cash (by gevans [SC]) Posted on: Feb 20, 2018 3:24 PM
Some further details on our debt free decision:
We did not touch our retirement 401k to become debt free. We still have at least as much in the market and bonds as in RE.
Paying off our final two very low interest mortgages increased our monthly income by over $1k. We could have left the funds in another place, but we feel really good about debt free living. That's worth something.
And it has greatly simplified our lives. --98.122.x.xx
Pay off Debt or Save Cash (by Kyle [IN]) Posted on: Feb 20, 2018 3:57 PM
What is the interest rate? What is the debt to interest ratio? If the net income from the rentals after vacancy, repairs, insurance, taxes, and long term capital expenses still easily covers the debt payments and the interest rates are low, I would keep the debt. If the rate is high or the payment is difficult to cover when the property is vacant and needs some repairs for a turnover, I would probably pay it off.
I have a ways to go before 65 and most of my debts are already on amortization schedules that will have them paid off well before, but I am continuing to borrow as I grow my business. --73.102.xxx.xx
Pay off Debt or Save Cash (by Robin [WI]) Posted on: Feb 20, 2018 4:19 PM
The question is a little too simplistic for me. It depends on the numbers. Having paid-off rentals with no cash reserves is, to me, far riskier than having a mortgage to pay on.
I'm over 50, but 65 still seems young to me. I can see still buying properties at that point.... --204.210.xxx.xxx
Pay off Debt or Save Cash (by GKARL [PA]) Posted on: Feb 20, 2018 5:15 PM
I think as long as one isn't heavily leveraged and cash flow is sufficient to cover, debt isn't huge issue. Debt is like fire; useful if judiciously used, but can burn you alive if you use it unwisely. --208.54.xx.xxx
Pay off Debt or Save Cash (by Busy [WI]) Posted on: Feb 20, 2018 6:30 PM
Roy, I made the assumtion that the hypothetical was roughly your position, as the numbers mean absolutely nothing without knowing where in the country the retiree would be living, and roughly the value of the properties leveraged.
So, perhaps my answer should have been ....it depends. --172.58.xxx.xx
Pay off Debt or Save Cash (by RR78 [VA]) Posted on: Feb 20, 2018 7:51 PM
Without knowing exact numbers I also say depends.
But it would be more important to me to have enough liquid assets to more than take care of any emergency's. And even that one more killer deal you might run into.
Dont let what happen with your father influence your decision.
The important part is you know you have more cash than debt.
Something happens you know the cash is there to pay off any debt.
Knowing that would make me feel about as good as debt free. --73.177.xxx.xx
Pay off Debt or Save Cash (by Roy [AL]) Posted on: Feb 21, 2018 6:34 AM
Thanks for all of the answers here. I posted this as a Primer for the upcoming Mr. LL convention /Roundtable.
During a round table discussion involving a sensitive subject (which may need to be held in a private room), I would hope all people at this table will feel free to discuss your own personal situation in regards to using leverage and when too much is too much. Borrowing money is not the problem, paying it back is the real issue here. --68.63.xxx.xxx
Pay off Debt or Save Cash (by RB [MI]) Posted on: Feb 21, 2018 9:38 AM
All that, for that ! --47.35.xx.xx
Pay off Debt or Save Cash (by Chris [CT]) Posted on: Feb 21, 2018 10:25 AM
I'm 32 my mortgages will start to be paid off when I'm around 50. I think that's a good age to be "retired."
IMHO 50ish is when you shouldn't be as aggressive with debt and investing, you don't have time to recover. --24.45.xxx.xx
Pay off Debt or Save Cash (by NC INVESTOR [NC]) Posted on: Feb 21, 2018 12:14 PM
CHRIS(CT): Your plan to have your mortgages paid off by 50 is good planning. But you make it sound like 50 is the beginning of the end.
Truth is my aggressiveness with business and investments didn't kick in until I hit 50 and I get more aggressive as each year passes.
There is a difference between being aggressive and gambling. The trick is managing risk and knowing how much you can afford to lose in the event it doesn't work out. It also means realizing that everything is cyclical especially in real estate and stocks. A good investment today, over time, can go either up or down so you need to know when to double down or get out.
Pay off Debt or Save Cash (by Shelby [IA]) Posted on: Feb 21, 2018 2:03 PM
Iím not in my 50ís but my husband is 53 today. I feel like paying down debt is very important, I would still want a cash reserve though for emergencies. I think about being debt free with Hubby getting older. Obviously anyone can die at anytime, but Iíd love to NOT leave a bunch of debt for my 3 kids. Iíd like them to inherit our properties debt free. Thatís what I think about. My mom always bought her stuff with cash, never got a loan so itís the example I follow. My dad was the same way although he charged a vehicle once on his credit card and paid it off the next month. Right now we are working at a fast pace to pay off everything (but my interest rates arenít the greatest either). I plan on being done buying rentals by the time Hubby retires, guessing at 70. We want to then be debt free and travel. --173.26.xx.xxx
Pay off Debt or Save Cash (by pmh [TX]) Posted on: Feb 21, 2018 2:32 PM
why have everything paid by 50 ? you will live to 80 plus...I see no reason to pay off my mortgages all between 3.75 > 3.95. Use funds for other investments. the AVERAGE return on stocks is plus 8% after inflation. obviously there are peaks & valleys. let me do the math. yes. I come out ahead...everyone should be basing requirements on 30 years after retirement age.... --104.218.xxx.xx
Pay off Debt or Save Cash (by baman [AL]) Posted on: Feb 22, 2018 4:09 AM
Full speed ahead with a new credit line of 300K. 90% of RE Portfolio is debt free. At 59 just couldn't sit idle with all this equity not earning anything. Buy with loaned capital for the acquistion and then cash flow the repairs and maintenance with passive income (not borrowed). You then can attack the principal and your cash snowball is rolling.......... --108.93.xxx.xxx
Pay off Debt or Save Cash (by LisaFL [FL]) Posted on: Feb 22, 2018 5:51 AM
This whole conversation isn't really helpful because there is too much information missing. As well as different personify types.
I got rid of debt but I also have a ton of reserves. Had I not had a level of savings I felt comfortable with I would have continued to use debt to my advantage.
So much of the answer starts with. "it depends..." --173.170.xxx.xxx
Pay off Debt or Save Cash (by ChrisB [OH]) Posted on: Feb 25, 2018 8:55 AM
I'm 42. Retired from my 9-5 job of 18 years last year. Have 23 units and only 2 small mortgages. I could liquidate 20% of my retirement savings to pay off the notes, but will instead just use rents to pay them off in the next year. Assuming I dont buy any more properties. --24.223.xxx.x
Pay off Debt or Save Cash (by Ray-N-Pa [PA]) Posted on: Feb 25, 2018 3:46 PM
I am in my 50's.
I agree that time isn't as friendly as it used to be, but 50 is still rather young. So should you consider increasing the debt load or not would be my concern.
What your question appears to be is what is better $250,000 in cash with $250,000 in debt or to have the two offset one another.
That depends largely on age and your risk tolerance level. Knowing where we are at in the real estate cycle should also factor into that too.
A quarter mill in debt is not that much at all. You have over a decade to work it off so I would work it off myself - but at the same keeping a closer eye on that real estate cycle.
In 2008, I was doing a deal once every 3 weeks and running the rentals. You want to be flush in cash when crap hits the fan. So if that means using leverage - as long as there is a short term and long term cash flow plan - you should be good.
CASH FLOW is the #1 reason why small businesses fail according to the SBA, yet I submit, most LL don't have a cash flow plan --24.101.xxx.xxx
Pay off Debt or Save Cash (by Pmh [TX]) Posted on: Feb 26, 2018 2:07 PM
always better to have the cash and just svce debt. debt so cheap. use opm and use cash on cash as driver. --104.218.xxx.xx