Need advice on paying off mortgage and being debt-free

[Chootar Laal]

Sorry if this is in the wrong area of the forum, mods.

So I have a 2-family investment property (financed via bank) and a single-family home (primary residence) in the same city. Here are the expenses and rent rolls that I owe monthly. I am seriously thinking about selling the 2-family property because I realize the appreciation will help me pay off the single-family home in full or ~95% of it. In the end the balance will be about the same as I currently end up with. I realize if I sell I dont take advantage of the appreciation in the future the property may get me but being debt-free is very appealing to me currently, its just a mind-set I'm craving.

Just need some help with the model below. Is there something else I am overlooking? Any other expenses etc?

-INVESTMENT property

monthly rent: $5200

monthly water/sewer, property taxes, insurance: ~$540

monthly mortgage and HELOC: $2925

.

.

-PRIMARY residence

monthly mortgage : $1800

Any suggestions?

[Jason Hull]

The long-term math behind the invest/pay off mortgage decision, historically speaking, says that investing the difference makes you better off about 2/3 of the time.

That said, there's a very strong psychological bias we have called loss aversion. Basically put, the pain from losing an amount of money is much greater than the happiness we get from gaining the same amount.

In other words, if you invest the difference and get a lower return than the after-tax interest rate, you'll have a lot more heartburn from the loss than you will happy dances if you do better.

Additionally, if you do perform worse for having invested in the market, you'll be more likely to take additional risk in subsequent investments to try to make up for the loss. You'll be doubling down.

So, from a mathematical perspective, the correct answer is usually invest the difference. From a psychological perspective, the answer is usually pay off the mortgage.

Perhaps there's a happy medium?