Invest cash or pay down debt?

Question

Good morning!

Currently have $50k in cash. I have debt on a boat and on one vehicle. This $50k would pay off both. Trying to decide to pay off debt, then start saving and invest the cash afterwards, or invest the cash now and continue to make payments on these loans.

I currently own 4 SFD and 1 commercial property. The 4 SFD’s are averaging approximately $285 in cash flow per door and the commercial unit is cash flowing $800 per month. In my market there are quite a few 1.5%-2% deals out there to be found with a little work.

Trying to decide whether to invest the cash and purchase 2-3 more of these type deals, or payoff my remaining debt.

Thank you guys for all your help!!

Brian

Todd Rasmussen · Answer

@Brian Jones

What is the total interest remaining if you repay as agreed? That's the opportunity cost of NOT paying your car and boat off now. What is the total return on the $50,000 from now until the term of your loan expires? That's the opportunity cost of NOT investing that money right now. Go with whatever costs you the least. Do a separate cost analysis

Jessica Brennan · Answer

What are your interest rates on your debt? If its high I would pay that first since cash is so cheap to borrow right now, if they are low I would use the 50K to purchase more properties. Not too helpful I know, I personally like not having any debt etc for mortgages on my investments, so I would most likely pay everything off first and then start adding to my portfolio.

Andrew Weiner · Answer

This is a highly subjective and personal question that I think has more to do with your comfort and feelings than an objective numbers response.  That being said If it were me and the interest rates are relatively low on those loans then I would invest.  I can get much better returns and hedge against inflation by buying property today.  Since I finance properties and I am in a higher cashflow/lower it takes a few years before I get much equity so every extra year counts for getting into new properties.