Pay extra/invest the extra?

2 Replies

I've listened and watched a lot of podcasts and webinars and I've read a few BP books so far. I'm still learning a lot. 

I've heard @Brandon Turner talk a lot about investing any positive cash flow to buy more properties. I know I've heard him mention that some folks like to pay extra on their mortgages, but he prefers to invest to buy more properties. 

I'm currently reading @David Greene great book on Long Distance Real Estate Investing.  In it, he mentions the benefits to paying extra on the mortgages to pay them off quicker. 

I sort of like the idea of paying a small amount extra on each mortgage, such as $25-50 or so. But, I'm also tempted to put much more towards one of them in hopes of paying it off a lot earlier. 

The other side of me says to save all extra funds by not paying extra and to accumulate more cash so I can buy another property. 

Is there any advice from all of you here about the best way to do things? 

Leverage is the path to riches when investing in income properties starting out. Paying down a mortgage that tenants are paying for you is hoarding not investing. You should only do that when you have more money that you have any possible use for and are approaching full retirement after age 60. Once you are rich it does not matter any longer how much money you are losing.

Based on the opportunity value of cash every dollar in equity will lose you a minimum of 5% annually sitting as dead equity. Cash hoarders are the most extreme conservative investors. Dead equity also attracts lawsuite vultures.

Borrowed from Investor Cody Reilly from one of the facebook groups I follow. This was an answer to the question of what to do with $1million in cash - buy a property outright or leverage it? 

"If we both have 1mm and we both want to find a property with gross rents of 20% and you pay for yours cash and now have 200k a year in cashflow.
I take my million and park it in a property that's 5m with 20% gross rents at a million a year is grossing what you paid for your whole building.
So in two years I've bought back that million, had larger appreciation because its a larger property, higher depreciation, and in 20 years ill own that whole property with less money down.

Does that make sense? Both short and long its a better play. "

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