Paying debt vs. investing

Member since 2025 · 19 posts · 3 votes

At a cross road in our life. We live off my husband’s income and have been saving my income from being a real estate agent. Investing wise, we have bought 1 foreclosure property & plan to flip it by the EOY. Other than that, we’re stuck on the idea of paying off debt verses buying our first 1 or 2 rental properties. I’d love advice or tips!

2 Reply

1,037 views

Most Popular Reply

Jon K.

Rental Property Investor · Perry Hall, MD · Member since 2016 · 590 posts · 605 votes

A counter-point to Greg's post and that is risk vs reward. Paying off debt provides guaranteed returns. It is risk free in a way that no investment ever will be.

5 Reply

See this reply in the discussion

40 Replies

Jump to latestLatest

Sort by

Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4d
What is the cost (interest rate) of that debt? 6%? 7%?
If you can find an investment property and safely make 10% or 15%, what is the smarter path?
Meanwhile, your cash can sit in the bank and earns 3%, while your mortgage interest is tax deductible.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  4d
  Some is 8% and some is 6% on leisure toys, when we were young and dumb!
  I could see finding an investment property that makes us 10-15% as an asset even with the debt we have, but it wouldn’t outweigh it currently where we sit. You have put it into more perspective though, thank you!
  0 Reply
- Jon K.
  Rental Property Investor · Perry Hall, MD · Member since 2016 · 590 posts · 605 votes
  3d
  A counter-point to Greg's post and that is risk vs reward. Paying off debt provides guaranteed returns. It is risk free in a way that no investment ever will be.
  5 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  I think after hearing from so many investors, we’re leaning towards paying the leisure debt down first. I appreciate your input!
  0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  1d
  Yes- we are leaning towards this after hearing from all of yall experienced investors!
  0 Reply
- Dan H.Pro Member
  Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
  3d
  There is no way I pay off 6% to 8% debt early in this environment. There are so many ways to likely achieve returns in excess of 8%. Even sp500 has lifetime return of ~10%, and much higher in recent years. For more risk the Fab 5 or Magnificient 7. Value adds in RE. I do not invest in RE unless I project 20%/year near term with goal of recovering investment in no more than 4 years. There are a lot of opportunities out there. Granted there is risk, but I have played the long game knowing sometimes investments go up and sometimes down, but in the long run most things go up in value.
  I definitely would invest rather than pay off debt that is 8% or less.
  Good luck
  0 Reply
- Jay HinrichsBusiness Member
  Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
  3d
  Dan I think the issue with many is they just cant find the deals like someone with your knowledge and experience can. The other is paying off the unsecured debt is fine but then just going out and buying the next thing and running your debt right back up.. Rentals are the LOOONG game if the OP can do more flips to create a repeatable income pattern that allows them to stack after cash tax and have zero debt.. Then maybe a rental does not look that appealing with minimum down I mean cash flow is next to nothing and now your tying up debt that could be used buy and flip your next deal..
  Podcast Guest on Show #222
  JLH Capital Partners51 Review
  Website View Page
  1 Reply
JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
4d
Depends on the nature of the debt. In general you should not have any consumer debt before trying to be an investor in anything. That would be credit cards, personal loans, car loans, things of that nature. Mortgages for your personal home are probably unavoidable but not ideal. Loans for business investment property, reasonable student loans that are either subsidized or at super low interest rates are probably OK if the payment levels are manageable. Bottom line - financially speaking, all debt should be related to pursuits that generate more income (short or long term) than they cost in interest & principal.
Always remember that any consumer debt you pay off is a guaranteed return of whatever your interest rate is minus your opportunity cost. Meaning if you have a credit card at 15% APY and you could make a 10% return by investing that money, you have a real return of 5% by paying off the credit card. In reality the return is usually higher because few people have the discipline to invest dollar-for-dollar money that would have paid off debt and fewer people have the investing knowledge to consistently make those kinds of returns.
Podcast Guest on Show #243
Skyline Properties
View Page
2 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  4d
  Thank you for taking the time to reply! That definitely opened my eyes on the situation we’re in and where we want to be. The main ones are our mortgage and then a couple leisure loans from when we were a bit younger. I appreciate the advice!
  0 Reply
Ametria Chaney
Realtor · Memphis, Shelby County · Member since 2026 · 85 posts · 24 votes
4d
Congrats on being at a crossroads most people never reach — living on one income and saving the other puts you way ahead. Here’s how I’d think about it: that 8% and 6% debt is a guaranteed return when you pay it off, and “leisure toy” debt has a way of hanging around and limiting your options. I’d knock out the highest-rate balances with your saved income and the flip proceeds, then channel the freed-up monthly payments toward your first rental. Running investments with high-interest consumer debt in the background makes every deal feel riskier than it is, and lenders notice it too. What does your emergency fund look like — would buying a rental leave you with enough cushion to sleep well at night?
0 Reply
Aaron Zucker
Realtor · New York, NY · Member since 2019 · 58 posts · 16 votes
4d
Camryn, I'd sequence this differently than just debt first or rentals first — because the flip changes the order.
Right now you have an unsold foreclosure flip. Until that sells, I would not buy rental #1, and I definitely would not buy two. A flip is the least liquid, most surprise-prone thing you own. Roofs, holding costs, a slow buyer — any of that eats the exact cash you're thinking of deploying. Finish the flip, get the proceeds actually in the bank, then decide with real numbers instead of projected profit.
Second, separate the mortgage from the leisure loans. They're not the same decision. Extra principal on a primary mortgage is trapped equity you can't easily get back, and it does nothing for your monthly flexibility. The toy loans do the opposite: killing one frees a real monthly payment, improves your debt-to-income picture for the next loan, and — worth asking honestly — could selling the toy itself do the job faster than paying the loan down month by month? Sometimes the clean move is sell the toy, clear the loan, and also lose the insurance and upkeep that came with it.
So my order would be: 1) keep cash liquid until the flip closes, 2) use the flip proceeds to clear the leisure debt, ideally by selling what secures it if you don't use it enough to justify it, 3) then buy ONE rental, underwritten conservatively, and live with it for 6-12 months before buying the second.
You live on one income and save the other — you have the discipline part most people lack. Don't undo that advantage by owning a flip, two new rentals, and toy payments all at the same time.
1 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  3d
  I think we needed to take a step back and look at the big picture. This helped a lot. Thank you!!
  0 Reply
Hossein Sharifi
Investor · Member since 2023 · 115 posts · 58 votes
3d
I'd sort the debt by interest rate and let that decide. Anything above about 8%, like credit cards or a car loan, I'd pay off first. That's a guaranteed return a rental will struggle to beat after vacancy and repairs. Under 5%, I'd leave it and invest.
I'd also let the flip sell before buying a rental, so you're deciding with your real profit and real reserves instead of projections.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  3d
  Thank you, that’s a good outlook. We needed some experienced investors inputs on this as we’re definitely still new to investing. Thanks so much!
  0 Reply
Adam Summerer
Lender · Franklin, TN · Member since 2026 · 110 posts · 26 votes
3d
One thing to factor in from the lending side: since you're living on your husband's income, that's probably what a lender would qualify you on, and agent commission income usually needs about 2 years of history on your tax returns before it fully counts. So paying down whatever debt is eating into his DTI might be the thing that gets the rentals approved, it's not always either/or. Worth having a lender look at your numbers before you decide which debt to knock out first.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  3d
  Good idea! Thankfully, I have 4 years under my belt tax return wise. That’s a good idea though, thank you!!
  0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3d
Mortgage is one thing (and fairly normal). You mentioned the other was leisure toys when you were younger, so it was a one time purchase and (based on how you presented it) not something you will do again. Flipping is risky. If you want to do rentals, then go in it for the longer term. High risk, high rewards....but remember the risk is higher with flips. Slow and steady is not a bad strategy (ie longer term rental, tenants pay down your mortgage over time). Different options depending on what you are comfortable with. If you do a long term rental, think about a duplex or something with a legal in law suite or basement suite where you can rent out two separate units.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  3d
  Great tips. Thank you, I appreciate it!!
  0 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
3d
I'd zoom out a bit from the next few months: where do you want to be in 10 years? Buy a rental property every year, you will have 10 worth 300k each, that's 3 million, paid off by the time you retire. Also, you are an agent, so you qualify for REP status: cost seg and write offs all the way!
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  Taking a step back is important. We keep looking at right now, but you’re right! I appreciate your input!
  0 Reply
Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
3d
It'll be a preference. If your debt is 6-8% you can achieve higher returns investing. Personally I don't like any consumer debt and am very conservative with that. For me I don't like that risk hanging there. On the other token investing more and doing minimum payments grows your portfolio. If that debt stresses you out then pay it off. If you can continue to invest and do the minimum do that.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  After seeing everyone’s advice and suggestions, I think the debt is stressing us out with the thought of having rentals. Everyone has helped so much. Thank you!
  0 Reply
Madox Miller
Real Estate Agent · Atlanta · Member since 2026 · 8 posts · 6 votes
3d
Congrats on the first flip! Saving one income while living off the other puts you in a great spot either way.

The biggest factor is probably the interest rate on the debt:

- High-interest debt (credit cards, loans at 7%+): paying it off is a guaranteed return at that rate, which is hard for a rental to beat right now with mortgage rates around 7%.

- Low-interest debt (an older mortgage or student loans at 3–5%): many investors keep it and put the cash to work in real estate instead.

A couple of other things to weigh:

- Lenders look at your debt-to-income ratio. Paying off a monthly payment can actually make it easier to qualify for rental loans.

- Keep solid reserves. Your commission income can vary, and rentals come with surprise repairs.

0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  You’re right! Thank you for the insight! Everyone has helped so much!
  0 Reply
Camryn Thompson
OP
Member since 2025 · 19 posts · 3 votes
3d
Thank you for your input and comparing multiple routes! I am very surprised and grateful for all of the responses from experienced investors!
0 Reply
Gregory AcsPro Member
Lender · MD · Member since 2025 · 226 posts · 87 votes
2d
I'd look at the interest rates on your existing debt before deciding. Paying off high-interest debt can put you in a stronger position financially and may also improve your borrowing options for future rentals.
Since you're already working on a flip, I'd also consider how much cash you'll need to finish that project and maintain reserves before purchasing another property.
Are you planning to use the profits from your flip toward the rentals, or would you be financing those purchases separately?
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  Thanks for Your input! We’d like to take any proceeds from the flip & invest them into a buy & hold rental!
  0 Reply
Thomas Cruz Fragoza
Member since 2020 · 8 posts · 2 votes
2d
@Camryn Thompson, one way to settle it is to stop asking "debt or rentals" and ask what a lender and your cash cushion will look like after each move.
Those 6% and 8% toy loans hurt you twice. They cost interest, and every monthly payment counts against your husband's debt-to-income when you apply for a rental loan. Paying one off doesn't just save 8%. It can raise what you qualify for.
Second, reserves. Most lenders want about 6 months of PITI in the bank for each rental, and you'll want your own repair fund on top of that. Until the flip sells, that money is tied up in the flip, so I'd hold off on buying until you have the proceeds in hand.
Then run any rental you're considering at full price: rent minus PITI, about 5–8% vacancy, maintenance, and capex. If it only cash flows a little, compare that return to the guaranteed 8% you'd get by paying off the loan. A rental has to clearly beat that rate to be worth the added risk.
Living on one income and saving the other is a great position to be in. Don't let toy payments cut into it.
0 Reply
Mark Cruse
Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
2d
No right or wrong answer, just personal preference. For me, I'd buy the property. The sooner I buy, if I buy right, my equity and cashflow begins. I can pay my debt as I go. I've had amazing investments that helped me pay off debt. Again, just depends on your style. However, for me it would also depend on the kind of debt as well. If I had tens of thousands on very high interest credit cards, my decision would be modified, but in general, I go the investment route. The debt will be gone eventually provided you don't add to it.
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  I like this mentality. Thank you for your input!!
  1 Reply
Divin KanyamaBusiness Member
Accountant · Seattle, WA · Member since 2025 · 520 posts · 216 votes
2d
@Camryn Thompson This is a great crossroads to be at—you’ve built flexibility by living on one income, saving the other, and gaining hands-on experience with a foreclosure flip. Rather than viewing debt payoff and rental investing as an all-or-nothing choice, I’d consider a balanced approach.
First, protect your foundation: keep a solid emergency fund, set aside a separate reserve for the flip, and avoid counting on its projected profit until the property is sold and all costs and taxes are known. Then review your debts by interest rate. Paying off high-interest consumer debt is usually a strong, low-risk return; lower-rate debt may not need the same urgency if a rental opportunity is genuinely attractive.
Before buying one or two rentals, run conservative numbers that include the mortgage, taxes, insurance, repairs, vacancy, capital expenditures, property management, and closing costs. The property should still produce acceptable cash flow when rents or expenses are less favorable than expected. I would favor one well-underwritten rental over two marginal deals, especially while the flip is still underway.
A practical next step could be to create three scenarios: pay down debt aggressively, buy one rental, or combine partial debt payoff with one rental purchase. Compare each option based on monthly cash flow, liquidity, risk, and your five-year goals—not just the potential return. If the numbers are close, choosing the option that preserves more cash and reduces stress is often worthwhile.
You’re already doing many things well. Move deliberately, keep reserves strong, and let the actual numbers—not urgency or fear of missing out—guide the decision. A CPA and a real-estate-focused lender can also help you evaluate the tax impact and financing before you commit.
[email protected]
WEMBO CPA532 Reviews
Website View Page
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  Thank you for your advice!! I truly appreciate all the input I’ve been getting from well experienced investors!!
  0 Reply
Paul A CalbonePro Member
Member since 2025 · 4 posts · 2 votes
2d
Hi Camryn, was the process of buying a foreclosed property more difficult than most? Also, would you recommend it if you had to do it again, and why?
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  2d
  I didn’t think it was difficult. We just did as much due diligence as we could for prospective properties & went to the auction. It’d probably be smarter to communicate with the owners before it sells, but we liked the simplicity of bidding and clearing title. We plan to do it again once we get this property sold!
  0 Reply
Ryan SpathBusiness Member
Real Estate Agent · Boise, ID · Member since 2017 · 577 posts · 379 votes
2d
Sounds like you guys are in a pretty good position being able to live off one income and save the other. I think the first thing I’d look at is what kind of debt you have and what the interest rates are. There’s a big difference between paying off debt at 20% versus 4%.
Personally, I’ve always been a fan of acquiring assets that produce income and appreciate over time. When I started investing, my goal was 10 properties cash flowing $500 a month each. That gave me something to work toward, and if a property didn't meet my criteria, I moved on.
I don't think it necessarily has to be one or the other. You can pay down debt while continuing to build your portfolio. What kind of debt are you carrying, and how much are you expecting to make on the flip?
[email protected]208-600-2814
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  1d
  That’s a good point! I believe the interest is around 6-8% on a couple loans. No high interest credit card debt, thankfully. The flip may give us a return of $10k-20k ish.
  0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
1d
Early in my career, I used credit cards to fund acquisitions and rehabs.
Then refinanced and paid everything off.
I was younger and willing to accept the risks involved.
Later, I tapped the HELOC on my primary many times to do the same strategy.
Being older and more knowledgeable now, I wouldn't do the high-risk credit card route, but would do the HELOC one. Of course, I haven't had to because I usually pursue seller-financed deals.
Just something to think about.
We all should take on the risk we're comfortable with at "this" point in our lives.
[email protected]248-209-6824
Logical Property Management4.9465 Reviews
Website View Page
0 Reply
- Camryn Thompson
  OP
  Member since 2025 · 19 posts · 3 votes
  1d
  Very good points. Thank you for your insight!
  0 Reply
Gerald Ryan
Member since 2024 · 3 posts · 0 votes
1d
there are four types of liabilities in my mind
1) general liability (tail risk, responsibility of providing tenant habitability and code compliance etc as well as claims, suits). insurance helps with this
2) loan shark high interest debt
3) mid term heloc debt
4) long term fixed debt

I am paying down 3. I have 4 but low rate which is good to have (inflation wealth generation). We all have #1. i am trying to reduce my exposure to one- being on call and being at risk for tail risk- low probability high cost.

It sounds like you are at the beginning. there is a time to grow and time to contract or consolidate. that is where i am at. I am feeling wealthier and freer (slowly) as i pay down my debt and not expand (plus i want to leave this city. i want to become an absentee landlord- especially given the city and state i live in. the properties are fine if the culture was good to me in my personal life)

I know people who keep expanding- in business and real estate. i sold a prop to one of these guys- and it dawned on me, they never feel rich. Their income and passive income is massive but they are stretched.

I want to be prosperous but also have freedom and time. you can be your own judge but the principle i extracted is those who keep expanding keep expanding their debts to pay, their collections to make, their doors to manage and marginal gain diminishes.
that says i love having the extra ~5k/mo cash flow compared to just depending on my ~5k active earned income (heavily taxed)

So i'm in a good spot- inflation wealth protected
but i'm burdened by a culture i don't like
the tenant needs are not bad- normally but it all does fall on me. i could get a manager. i haven't done this yet.
i mentioned making ~5k/mo passive but right now from several months ago all that goes to pay down helocs monthly so i don't feel it, feel the gain. they also have the right to not renew- which they threatened if my balance is too high. even if unrealistically you have a 1% or 0% rate, it does have a due date and it is debt- unless it's 30 year fixed amortizing or sth. I'd rather have 3% of this than 0% due in a year maybe. So paying it down is like getting lean and calorie restricting- worth it but costs sacrifice. it's when you're getting richer that you don't feel rich and vice versa but it's a process: it's like a snake swallowing a larger animal. that is acquisition- leveraged purchasing and then digesting. this is normal and i have done it a lot but the type of debt matters and if you use mid term debt, make a plan to pay down. also factor in maintenance and management costs in terms not of dollars but time. choose your property carefully. not all things are monetary. some costs are time and energy. i am doing alright though i got a bad property last year and sold it and i was not alright.

Learn to see things on a portfolio level. i watched devil's advocate as a kid and i always remember him pacino saying 'absentee landlord' and it had a negative feel to it for these years but now that's what i want to be more than anything- not because i'm lazy or i want my tenants to have a bad experience. i'm not lazy and i'm a good landlord but i want to decopule and have more freedom. that said, these are (a large part of) my (early?) retirement and decoupling from the 9-5. most people can't afford houses these days. pick your poison. think in terms of the portfolio, and types of risk and liability and keep asking questions. you got this
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.