The decision to scale or pay off debt

John MorganPro Member

Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes

9mo

I’m 54 years old and my strategy goes back n forth with paying my primary and secondary home off. I worked really hard to pay off my first two rentals 8 years ago. I was a Dave Ramsey guy and wanted peace of mind having zero debt. Then I pivoted after reading Rich Dad to leveraging my way to much more cash flow and wealth. I do have 13 cheap properties paid off now, but won’t ever pay off my primary. It’s got 7 more years to go on a 15 year mortgage with a 2.125% interest rate. I told my wife she can sell off some rentals off to pay off the remaining balance if I die. And I owe 313k on our condo in AZ we use only for fun, not a rental. It has a 7.5% interest rate. I thought about paying it off, but I can make much more than 7.5% from other rentals I’ve acquired recently. I sleep like a baby not worrying about the 2.5 million I have in good debt. But the cash flow right now is about 25k/month net (not counting vacancies or things breaking) which is probably enough to live off if I retired early. So I’m in the camp of letting my tenants pay off the rentals and not pay off our home mortgages so I can buy good cash flowing rentals.

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @John Morgan:

I’m 54 years old and my strategy goes back n forth with paying my primary and secondary home off. I worked really hard to pay off my first two rentals 8 years ago. I was a Dave Ramsey guy and wanted peace of mind having zero debt. Then I pivoted after reading Rich Dad to leveraging my way to much more cash flow and wealth. I do have 13 cheap properties paid off now, but won’t ever pay off my primary. It’s got 7 more years to go on a 15 year mortgage with a 2.125% interest rate. I told my wife she can sell off some rentals off to pay off the remaining balance if I die. And I owe 313k on our condo in AZ we use only for fun, not a rental. It has a 7.5% interest rate. I thought about paying it off, but I can make much more than 7.5% from other rentals I’ve acquired recently. I sleep like a baby not worrying about the 2.5 million I have in good debt. But the cash flow right now is about 25k/month net (not counting vacancies or things breaking) which is probably enough to live off if I retired early. So I’m in the camp of letting my tenants pay off the rentals and not pay off our home mortgages so I can buy good cash flowing rentals.

Thanks for sharing this, I appreciate the transparency and the context. It’s helpful to hear how your thinking evolved over time and how you’ve landed where you are now.

I don’t think we’re actually that far apart philosophically. You’ve clearly built a portfolio that supports the leverage you’re carrying, and with rates like 2.125% on a primary, it makes total sense to let inflation and tenants do the work. In that scenario, I’d be hard-pressed to argue for paying that loan off early either.

For me, the decision is less about a belief that debt is bad and more about where leverage sits on the balance sheet at this stage. Our primary is our longest-term hold, our highest emotional attachment, and the one property we’re least likely to ever sell or refinance. Paying it off doesn’t eliminate leverage from the portfolio, it just concentrates risk elsewhere that’s more directly tied to income-producing assets.

The AZ condo example is a good illustration of how situational this really is. At 7.5%, that’s a very different conversation than a low-rate primary, and I think most investors would underwrite those two decisions very differently.

I also think personal temperament plays a bigger role than people like to admit. Some investors genuinely sleep better with leverage and others sleep better with simplicity. Neither is right or wrong as long as the numbers and risk tolerance align.

It sounds like your strategy is working extremely well for you, and that’s ultimately the goal. I appreciate you sharing a real-world example of how different approaches can both lead to strong outcomes depending on timing, rates, and personal goals.

[email protected]208-600-2814
1 Reply

Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

9mo

I see no reason a high net worth, well diversified RE investor would not use leverage except that the debt was bothering them for some reason. Note, I am not recommending over leverage. Note high leverage is not the same as over leverage.

Vtxax and S&P have recently provided better returns than unleveraged RE. I do not invest in RE unless my projected return is far greater than vtxax or S&P. This would be rare on unleveraged RE. It is very rare to get 25%+/year return unleveraged.

Let’s say you have a 1% monthly rent ratio and a 50% sustained expense ratio. Your return from cash flow is 6%.

The return produced from tax savings varies significantly by situation, I view the use of accelerated depreciation in the first year as a reducer on the down. For example if I can purchase at $500k with $100k, but achieve $25k 1st year accelerated depreciation savings, I choose to treat it as if I used $75k down and purchased at 85% LTV. Standard depreciation typically is fairly small impact on the return of an unleveraged asset. For example even on a condo where structure is 90% of purchase price, the tax benefit on standard depreciation is less than 3.3%.

Average appreciation per FRED is 3.8% for this century. With no leverage, there is no leverage multiplier. https://fred.stlouisfed.org/series/ASPUS

6% from cash flow + 3.3% + 3.8 is 13.1% which is less than recent history of the S&P and less than half what I expect from RE investing.

RE is a lot of work. If I can get a similar or better return via something passive like S&P, why would I invest in RE.

Different people have different goals but the numbers do not advocate for unleveraged RE investing.

Good luck

Marcus Auerbach

Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes

9mo

Let me challenge your mentor. This feels like something he would say to be relevant as a mentor. Especially since you are financially very educated and acomplished, it's hard to give you lifechanging advice. And it was not something that felt important to you before, so maybe you are putting a little too much weight on your mentor's input?

The math also does not work for me: at 30% of your living expenses your mortgage must be substantial. If you'd pay that off over 3 years, what sacrifices do you have to make for the next 3 years? Seems mathematically impossible?

Paying off real estate sounds much better than it actually is. The endophine rush is very brief, the sense of liberation much smaller than might you think.

You also never own a home (in the US), the land is rented from the government (property taxes) - and you have ongoing maintenance expenses. I am not much of an insurance-user, but I sure you have considered life insurance instead, to protect your family.

My personal conclusion is that paying off mortgages with a small balance is the way to go. And rental properties come before the primary. This is typically after about 15 years, real estate values have doubled after 15 years, the remaining balance has been paid down already. At that point inflation has decimated the principal substantically. Letting inflation work to your benefit is a key principal. This makes paying off the remaining balance relativley easy and it frees up cash flow, not only the interest portion, but also the principal portion of your payment. During the first half of the mortgage your payment is mostly interest and the goal is to defer the payoff into the future, when money is worth less.

If you want to sleep better at night, increasing your cash position will probably do much more for your mental well-beeing than paying of mortgages.

5 Reply

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @Marcus Auerbach:

Let me challenge your mentor. This feels like something he would say to be relevant as a mentor. Especially since you are financially very educated and acomplished, it's hard to give you lifechanging advice. And it was not something that felt important to you before, so maybe you are putting a little too much weight on your mentor's input?
The math also does not work for me: at 30% of your living expenses your mortgage must be substantial. If you'd pay that off over 3 years, what sacrifices do you have to make for the next 3 years? Seems mathematically impossible?
Paying off real estate sounds much better than it actually is. The endophine rush is very brief, the sense of liberation much smaller than might you think.
You also never own a home (in the US), the land is rented from the government (property taxes) - and you have ongoing maintenance expenses. I am not much of an insurance-user, but I sure you have considered life insurance instead, to protect your family.
My personal conclusion is that paying off mortgages with a small balance is the way to go. And rental properties come before the primary. This is typically after about 15 years, real estate values have doubled after 15 years, the remaining balance has been paid down already. At that point inflation has decimated the principal substantically. Letting inflation work to your benefit is a key principal. This makes paying off the remaining balance relativley easy and it frees up cash flow, not only the interest portion, but also the principal portion of your payment. During the first half of the mortgage your payment is mostly interest and the goal is to defer the payoff into the future, when money is worth less.

If you want to sleep better at night, increasing your cash position will probably do much more for your mental well-beeing than paying of mortgages.

I appreciate you taking the time to write this out. There are a lot of fair points in here, and I agree with more of it than I probably disagree with.

Just to clarify one thing up front, this wasn’t something my mentor pushed on me or tried to “sell” as a life-changing idea. It was more of a question than advice, and it forced me to re-examine what I’m optimizing for at this stage. The conclusion ultimately came from me and my wife, not from any single conversation.

On the math side, I should have been clearer. Paying off the primary over three years doesn’t require us to radically change our lifestyle or stop investing altogether. It’s a function of redirecting existing excess cash flow and being intentional with deployment for a defined period of time. That trade-off feels reasonable to us given where we are financially, but I completely understand why it wouldn’t pencil or feel right for many people.

I also agree that paying off a mortgage doesn’t eliminate housing costs. Property taxes, insurance, and maintenance don’t go away. The goal isn’t a false sense of “no expenses,” it’s removing the largest fixed obligation and increasing flexibility. That distinction matters to me.

You’re absolutely right that inflation and time are powerful tools, and in many cases deferring payoff makes the most sense mathematically, especially later in the amortization schedule. That approach has worked extremely well for a lot of investors. For us, this is less about maximizing inflation arbitrage and more about simplifying the balance sheet and reducing dependency on leverage tied to our primary residence.

On the peace-of-mind point, I don’t expect a dopamine hit or some dramatic sense of liberation. I’m not chasing a feeling. It’s more about resilience and optionality. We already carry significant liquidity, have insurance in place, and have income-producing assets that more than cover our needs. This decision just shifts where risk lives.

I think your broader point is the important one. There isn’t a universally “correct” answer. Timing, rates, family situation, temperament, and existing assets all matter. What works well for one investor can be suboptimal for another at a different stage.

I appreciate the thoughtful challenge. Conversations like this are exactly why I shared the post in the first place.

[email protected]208-600-2814
1 Reply
Adam Odom
Columbia, SC · Member since 2014 · 133 posts · 190 votes
8mo
Quote from @Marcus Auerbach:

Let me challenge your mentor. This feels like something he would say to be relevant as a mentor. Especially since you are financially very educated and acomplished, it's hard to give you lifechanging advice. And it was not something that felt important to you before, so maybe you are putting a little too much weight on your mentor's input?
The math also does not work for me: at 30% of your living expenses your mortgage must be substantial. If you'd pay that off over 3 years, what sacrifices do you have to make for the next 3 years? Seems mathematically impossible?
Paying off real estate sounds much better than it actually is. The endophine rush is very brief, the sense of liberation much smaller than might you think.
You also never own a home (in the US), the land is rented from the government (property taxes) - and you have ongoing maintenance expenses. I am not much of an insurance-user, but I sure you have considered life insurance instead, to protect your family.
My personal conclusion is that paying off mortgages with a small balance is the way to go. And rental properties come before the primary. This is typically after about 15 years, real estate values have doubled after 15 years, the remaining balance has been paid down already. At that point inflation has decimated the principal substantically. Letting inflation work to your benefit is a key principal. This makes paying off the remaining balance relativley easy and it frees up cash flow, not only the interest portion, but also the principal portion of your payment. During the first half of the mortgage your payment is mostly interest and the goal is to defer the payoff into the future, when money is worth less.

If you want to sleep better at night, increasing your cash position will probably do much more for your mental well-beeing than paying of mortgages.

Was coming here to say life insurance - if that's the main thing keeping you up at night that's a much cheaper way to hedge your bets. I'm a big believer in paying down debt myself just FYI - but something for sure to consider. At your age it wouldn't be terribly expensive either.
1 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

9mo

Yes, I can attest to the ultimate fact that 'life does get in the way'. You will never see it coming. Ever.

Mr. Murphy lurks around every corner... :-)

Based on my experiences with this, I like little or no debt. Although I do agree with everyone that says it is not a great 'business strategy'. Some people seem to avoid Mr. Murphy better than others, sometimes it's just dumb luck, or God is smiling on you.....

Tough decision but I personally think you're on the right track.

Just my $.02....

[email protected]208-600-2814

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @Bruce Woodruff:

Yes, I can attest to the ultimate fact that 'life does get in the way'. You will never see it coming. Ever.
Mr. Murphy lurks around every corner... :-)
Based on my experiences with this, I like little or no debt. Although I do agree with everyone that says it is not a great 'business strategy'. Some people seem to avoid Mr. Murphy better than others, sometimes it's just dumb luck, or God is smiling on you.....
Tough decision but I personally think you're on the right track.
Just my $.02....

Well said. Life has a way of introducing variables you never modeled for, and usually at the worst possible time.

I agree it’s not always the “best” strategy on paper, but there’s something to be said for building in margin when you know uncertainty is inevitable. Sometimes that margin comes from leverage done well, and other times it comes from simplicity and fewer obligations.

I appreciate you sharing your perspective. That $.02 carries a lot of lived experience.

[email protected]208-600-2814
1 Reply
Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
9mo
Quote from @Ryan Spath:

Quote from @Bruce Woodruff:

Yes, I can attest to the ultimate fact that 'life does get in the way'. You will never see it coming. Ever.
Mr. Murphy lurks around every corner... :-)
Based on my experiences with this, I like little or no debt. Although I do agree with everyone that says it is not a great 'business strategy'. Some people seem to avoid Mr. Murphy better than others, sometimes it's just dumb luck, or God is smiling on you.....
Tough decision but I personally think you're on the right track.
Just my $.02....

Well said. Life has a way of introducing variables you never modeled for, and usually at the worst possible time.

I agree it’s not always the “best” strategy on paper, but there’s something to be said for building in margin when you know uncertainty is inevitable. Sometimes that margin comes from leverage done well, and other times it comes from simplicity and fewer obligations.

I appreciate you sharing your perspective. That $.02 carries a lot of lived experience.

I appreciate you sharing your perspective. That $.02 carries a lot of lived experience.

Yessir. The people in your life are more important. You lose people that you thought would always be there, and then all of a sudden your perspective will change. Real damn quick.
2 Reply

Ryan SpathBusiness Member

OP

Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes

9mo

@Dan H.

I appreciate you laying this out so clearly. I don’t disagree with the math, and I think your framework is directionally correct when the goal is maximizing returns on deployed capital.

Where I think we may be talking past each other is that I'm not making the case that unleveraged real estate outperforms the S&P on a pure return basis. In most scenarios, it doesn't. If the objective is to chase the highest possible IRR, leverage combined with equities or leveraged real estate will almost always win.

For me, this decision is less about optimization and more about risk alignment at this stage of life. I already have meaningful exposure to leverage through the rest of the portfolio, exposure to equities, and enough cash flow to cover our needs. Paying off the primary doesn’t eliminate leverage from my balance sheet, it just reduces concentration in the one liability that directly impacts my family’s day-to-day stability.

I also think primary residences sit in a slightly different bucket than rental real estate. I don’t underwrite my home the same way I do an investment property because its purpose isn’t to maximize returns. It’s shelter, stability, and optionality. Removing that fixed obligation materially changes how I can deploy risk elsewhere, even if it’s not the mathematically optimal move in isolation.

I completely agree that real estate is work and that if someone can achieve similar or better returns passively through equities, that’s a very rational path. For me, the “return” I’m prioritizing right now includes reduced downside risk, simplicity, and flexibility, not just CAGR.

I don’t view this as an argument against leverage or market investing. It’s more a rebalancing of where leverage lives on my balance sheet given age, family considerations, and already having surpassed my original financial goals. Different stages, different trade-offs.

Appreciate the thoughtful pushback. These are exactly the kinds of discussions that make this community valuable.

0 Reply

Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
9mo
Quote from @Ryan Spath:

@Dan H.
I appreciate you laying this out so clearly. I don’t disagree with the math, and I think your framework is directionally correct when the goal is maximizing returns on deployed capital.

Where I think we may be talking past each other is that I'm not making the case that unleveraged real estate outperforms the S&P on a pure return basis. In most scenarios, it doesn't. If the objective is to chase the highest possible IRR, leverage combined with equities or leveraged real estate will almost always win.

For me, this decision is less about optimization and more about risk alignment at this stage of life. I already have meaningful exposure to leverage through the rest of the portfolio, exposure to equities, and enough cash flow to cover our needs. Paying off the primary doesn’t eliminate leverage from my balance sheet, it just reduces concentration in the one liability that directly impacts my family’s day-to-day stability.

I also think primary residences sit in a slightly different bucket than rental real estate. I don’t underwrite my home the same way I do an investment property because its purpose isn’t to maximize returns. It’s shelter, stability, and optionality. Removing that fixed obligation materially changes how I can deploy risk elsewhere, even if it’s not the mathematically optimal move in isolation.

I completely agree that real estate is work and that if someone can achieve similar or better returns passively through equities, that’s a very rational path. For me, the “return” I’m prioritizing right now includes reduced downside risk, simplicity, and flexibility, not just CAGR.

I don’t view this as an argument against leverage or market investing. It’s more a rebalancing of where leverage lives on my balance sheet given age, family considerations, and already having surpassed my original financial goals. Different stages, different trade-offs.

Appreciate the thoughtful pushback. These are exactly the kinds of discussions that make this community valuable.

>Some investors genuinely sleep better with leverage and others sleep better with simplicity. Neither is right or wrong as long as the numbers and risk tolerance align.

I agree with this and if leverage on your primary is causing stress or lack of sleep, it does not matter what the numbers say. The leverage should not be a detriment to your everyday living and if it is, get rid of it if you can.
>this decision is less about optimization and more about risk alignment at this stage of life. I already have meaningful exposure to leverage through the rest of the portfolio, exposure to equities, and enough cash flow to cover our needs.

note I believe you can have leverage without large leverage. Heavy use of leverage and over extended use will of leverage are not the same. I have 8 digits of debt, fairly low income, and am not over leveraged. My leverage is not a risk item. I question for those not over leveraged if there is more risk at 0% LTV than there is at 75% ltv? My belief is 0% LTV has more risk.
>Paying off the primary doesn’t eliminate leverage from my balance sheet,
It does eliminate some leverage from your balance sheet. I think you are indicating it does not fully eliminate leverage from the balance sheet. When I could refi at a rate that was similar to my existing rates, I actively worked to maintain a high LTV. Paying off a conventional financed loan early when the interest rate is significantly below the recent S&P 500 return is foreign to me (but see my stress/sleep comment).

>the “return” I’m prioritizing right now includes reduced downside risk, simplicity, and flexibility, not just CAGR.
I question if in reality you are not increasing your risk. If you are not over leveraged, where is the risk of leverage especially with non recourse loans?
Mathematically, there is a right answer. However, if that answer is causing stress, worry, lost sleep then it is not the right answer for you.

good luck

2 Reply

Errol GrahamPro Member

Investor · FL · Member since 2020 · 38 posts · 25 votes

9mo

Very interesting discussion on an important strategy issues. As I was reading through the thread, I kept thinking, “why has no one mentioned insurance as a way of protecting the interests of the wife and children in the event of a death” and then @Marcus Auerbach did and I thought “bingo! That’s my strategy. I have taken out insurance on my primary, equivalent to the current mortgage balance at the time and because the interest is below 3 percent on a 30-year mortgage, I will find other things (investments) to do with my money, than pay off the mortgage on my primary home. It’s tempting to do because sometimes the heart leads and the head is slow to wake up!!

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @Errol Graham:

Very interesting discussion on an important strategy issues. As I was reading through the thread, I kept thinking, “why has no one mentioned insurance as a way of protecting the interests of the wife and children in the event of a death” and then @Marcus Auerbach did and I thought “bingo! That’s my strategy. I have taken out insurance on my primary, equivalent to the current mortgage balance at the time and because the interest is below 3 percent on a 30-year mortgage, I will find other things (investments) to do with my money, than pay off the mortgage on my primary home. It’s tempting to do because sometimes the heart leads and the head is slow to wake up!!

That’s a great call-out, and I agree insurance absolutely belongs in this conversation. We do have life insurance in place, and I think it’s one of the most important and often overlooked tools for protecting family risk, regardless of whether someone chooses to pay off a mortgage early or not.

For anyone sitting on a sub-3 percent 30-year mortgage, your approach makes a lot of sense. In that rate environment, the math strongly favors deploying capital elsewhere, and insurance becomes a very efficient way to hedge the downside.

In our case, the decision isn’t being driven by emotion alone or ignoring the numbers. It’s more about how all of the pieces fit together at this stage, including existing cash flow, leverage across the portfolio, insurance coverage, and long-term intentions for our primary residence.

I appreciate you bringing this up. It’s an important part of the discussion and a good reminder that there are multiple ways to manage risk beyond just debt paydown.

[email protected]208-600-2814
0 Reply

Allison Park

Member since 2024 · 158 posts · 88 votes

9mo

Very good thread. I am working through my strategy. My primary is at 6.25 and technically it's a wash to pay off or keep the mortgage except I would lose the interest deduction. In my case I am already invested in the stock market and using real estate for diversification and steady cash flow as I get closer to retirement in the next 15 years or so. So I think less volitility for a couple % less in returns is worth it. Ideally I would also want to leave paid off properties for easy sale in my estate plan. If I had invested in RE earlier in life, I probably would have opted to stay leveraged longer.

0 Reply

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @Allison Park:

Very good thread. I am working through my strategy. My primary is at 6.25 and technically it's a wash to pay off or keep the mortgage except I would lose the interest deduction. In my case I am already invested in the stock market and using real estate for diversification and steady cash flow as I get closer to retirement in the next 15 years or so. So I think less volitility for a couple % less in returns is worth it. Ideally I would also want to leave paid off properties for easy sale in my estate plan. If I had invested in RE earlier in life, I probably would have opted to stay leveraged longer.

Thanks for sharing this. I think you captured the nuance really well, especially the idea that strategy naturally evolves as timelines shorten.

At a 6.25 rate, the conversation feels very different than it does at sub-3 percent. The volatility point also resonates. As retirement gets closer, reducing variability in outcomes can be just as valuable as squeezing out a few extra points of return.

I also like your comment about estate planning. Leaving paid-off, simple assets that are easy to manage or sell is something that doesn’t get talked about enough, but it matters.

Appreciate you adding this perspective. It’s a good reminder that leverage decisions aren’t static, they change as goals, timelines, and risk tolerance change.

[email protected]208-600-2814
0 Reply

Allan C.

Rental Property Investor · Member since 2018 · 826 posts · 810 votes

9mo

You have good alternatives presented above and you’ve found many counter-points. I’ll propose another option for you to consider to manage risk.

Why not leave your real estate assets levered as much as you're comfortable, and then maintain some reserves as cash equivalents (HYSA, tbills, etc). As Dan notes above, 0 LTV isn't as protected as you think it is. I'd rather have 80% LTV and liquidity in the bank than a paid off balance sheet.

As an extra measure of security, apply for a HELOC and don't touch it. Combining these measures with personal umbrella should significantly mitigate the risks you mention.

David F.

Member since 2018 · 113 posts · 135 votes

9mo

To answer OP's initial question: as a husband and father of 2 younger kids, my goal has changed over the years from putting all our family's savings into having 5 paid off SFH, to still having having the 5 SFH, but maintaining 60% leverage and never paying them off. And then diversifying some into the stock market via my work's 403b. I don't sleep well at night with all my eggs in one basket, especially when "exposed" to lawsuits like REI is. The fact of the matter is a 401(k) or similar, is protected from lawsuit. Its just my peace of mind thing.

Also, I believe @Allan C. gives great advice if the goal is security…

- paid off assets are higher likelihood of targets for lawsuits (sad as it is), I choose to maintain leverage.

- umbrella policy and proper insurance

- high cash reserves

- HELOC quickly accessible

- if not done: a will in place

- Worth noting, is the homestead exemption. In my state, home equity is protected from lawsuit up to theaverage home value of my area. This is state dependent, but it’s safe money. I would never pay off a rental first as that’s not protected under the homestead exemption.

2 Reply

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @David F.:

To answer OP's initial question: as a husband and father of 2 younger kids, my goal has changed over the years from putting all our family's savings into having 5 paid off SFH, to still having having the 5 SFH, but maintaining 60% leverage and never paying them off. And then diversifying some into the stock market via my work's 403b. I don't sleep well at night with all my eggs in one basket, especially when "exposed" to lawsuits like REI is. The fact of the matter is a 401(k) or similar, is protected from lawsuit. Its just my peace of mind thing.

Also, I believe @Allan C. gives great advice if the goal is security…

- paid off assets are higher likelihood of targets for lawsuits (sad as it is), I choose to maintain leverage.

- umbrella policy and proper insurance

- high cash reserves

- HELOC quickly accessible

- if not done: a will in place

- Worth noting, is the homestead exemption. In my state, home equity is protected from lawsuit up to theaverage home value of my area. This is state dependent, but it’s safe money. I would never pay off a rental first as that’s not protected under the homestead exemption.

This is a really solid perspective, and I appreciate you bringing the legal and asset-protection side into the conversation.

You’re absolutely right that diversification isn’t just about returns, it’s also about risk vectors. Lawsuit exposure is real in real estate, and qualified accounts like a 401(k) or 403(b) being protected adds an important layer of security that doesn’t get enough attention. That peace-of-mind factor matters, especially with kids.

I also agree with the broader framework you outlined. Proper insurance, an umbrella policy, strong cash reserves, access to liquidity, and estate planning all work together. Leverage can actually be part of a defensive strategy when it’s used intentionally rather than aggressively.

The homestead exemption point is a good one too and highly state-specific. That protection can change how someone thinks about where equity should live, particularly when comparing a primary residence versus rentals.

This really reinforces the theme of the thread for me. There isn’t a single right answer. The “best” strategy depends on legal environment, family situation, temperament, and what risks you’re trying to minimize at a given stage. Appreciate you adding this layer to the discussion.

[email protected]208-600-2814
1 Reply

Henry ClarkPro Member

Developer · Member since 2020 · 4k+ posts · 4k+ votes

9mo

OP

We worked our way thru I believe what you’re discussing. If not disregard.

1. Worked with a financial advisor to pull together a detailed inventory. The financial advisor won’t help you. They get paid for assets managed.

2. Then we accessed our goals.

3. Read my post. What happens if you die.

4. Life insurance for you and your wife. Do term policies for each exposure area. Don’t do one large policy. That way you can drop policies as needed. One for your house. One for your kids till they are say 25 needs. One for your investments.

5. Available cash equivalents. Enough to cover your exposure period.

6. Evaluate your investments from near, mid and Longterm.

7. Diversify.

8. Risk and operational management. If you’re at a good spot. Evaluate your investments and trim as needed.
9. Have your estate handled in a trust so things don’t have to go thru probate.

10. Have your power of attorneys in place.

11. Put TOD on your bank accounts.

12. If you have an LLC build in exit strategies.

The more you chip away at this. The more your moat will be built. Pick the big issues and address.

Once you have this done. Step back and develop your world view. Adjust to support that.

Ryan SpathBusiness Member
OP
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
9mo
Quote from @Henry Clark:

OP
We worked our way thru I believe what you’re discussing. If not disregard.
1. Worked with a financial advisor to pull together a detailed inventory. The financial advisor won’t help you. They get paid for assets managed.

2. Then we accessed our goals.
3. Read my post. What happens if you die.

4. Life insurance for you and your wife. Do term policies for each exposure area. Don’t do one large policy. That way you can drop policies as needed. One for your house. One for your kids till they are say 25 needs. One for your investments.

5. Available cash equivalents. Enough to cover your exposure period.

6. Evaluate your investments from near, mid and Longterm.

7. Diversify.

8. Risk and operational management. If you’re at a good spot. Evaluate your investments and trim as needed.
9. Have your estate handled in a trust so things don’t have to go thru probate.
10. Have your power of attorneys in place.
11. Put TOD on your bank accounts.

12. If you have an LLC build in exit strategies.
The more you chip away at this. The more your moat will be built. Pick the big issues and address.

Once you have this done. Step back and develop your world view. Adjust to support that.

Thanks for laying this out, Henry. This is a really solid checklist and a good reminder that these decisions don’t live in isolation.

A lot of what you outlined is exactly how we’re thinking about this, especially separating risk management from pure return optimization. The point about insurance structured by exposure instead of one large policy is a good one, and something more people should consider as their situation evolves. Same with having liquidity aligned with specific risk windows rather than just a generic emergency fund.

I also agree that the “moat” isn’t built with one decision. It’s built by stacking a lot of smaller, intentional choices around diversification, estate planning, operational risk, and exit strategies. None of those moves are flashy, but together they matter a lot.

Appreciate you sharing a practical, experience-based framework. This is the kind of perspective that helps people zoom out and think beyond just leverage versus payoff.

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1 Reply

Mike Dymski

Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes

9mo

For me, it would depend on the interest rate of the loan. Low rate keep...high rate fine to pay off as a conservative risk free return (or if no desired better alternatives). I paid off a 7+% commercial mortgage about a year ago as that was a guaranteed 7+% return vs alternatives. Can always refinance.

Bill Goodland

Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes

9mo

I think the most important thing is that you’re intentional and strategic with your decisions. Congrats in advance!

Kevin PolitePro Member

Investor · Decatur Atlanta, GA · Member since 2011 · 610 posts · 232 votes

8mo

For those thinking of leaving real estate for your estate you need to think about how easy/difficult this will become for those inheriting it. Unlike financial investments and insurance these aren’t easily offloaded. Also, most of the folks I’ve spoken to with adult kids none of the kids are interested in keeping the real estate or continuing to invest in real estate.

Allison Park
Member since 2024 · 158 posts · 88 votes
8mo
Quote from @Kevin Polite:

For those thinking of leaving real estate for your estate you need to think about how easy/difficult this will become for those inheriting it. Unlike financial investments and insurance these aren’t easily offloaded. Also, most of the folks I’ve spoken to with adult kids none of the kids are interested in keeping the real estate or continuing to invest in real estate.
No one in my family is interested in real estate either. Any tips or advice on what to include to make it easier? I am re-doing my estate plan in a couple weeks.
1 Reply
Kevin PolitePro Member
Investor · Decatur Atlanta, GA · Member since 2011 · 610 posts · 232 votes
8mo
Quote from @Allison Park:

Quote from @Kevin Polite:

For those thinking of leaving real estate for your estate you need to think about how easy/difficult this will become for those inheriting it. Unlike financial investments and insurance these aren’t easily offloaded. Also, most of the folks I’ve spoken to with adult kids none of the kids are interested in keeping the real estate or continuing to invest in real estate.
No one in my family is interested in real estate either. Any tips or advice on what to include to make it easier? I am re-doing my estate plan in a couple weeks.
Yeah, most people I’ve talked to with adult kids say the same thing: the kids want zero part of being landlords. Someone has to deal with tenants, repairs, taxes, insurance, and eventually selling. If no one wants that job, clarity matters—be very clear about whether properties should be sold and who’s responsible for making that happen.

Make it easy on whoever’s left holding the keys: a simple list of properties, loans, vendors, leases, and logins goes a long way. Otherwise they’re starting from scratch at a stressful time.
For context, I’ve already started selling mine off (mentioned this in an earlier post), but that’s just my path. Everyone’s situation is different. If you still need the income or are earlier in the journey, selling may not make sense at all. Don’t assume real estate is a “gift” to heirs unless you’re sure they want to run a small business. If they don’t, having an exit plan is usually the kinder move

2 Reply

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

8mo

I don't know anyone that's super HNW that did it without massive debt to get there. I don't know anyone that got there and now has really any debt at all.

Paying off a primary is a great goal. Only the yesteryears, before recession folks remember this as the gold standard of how you create wealth. Back in the 80s and 90s you always paid off your house first.

As time goes on post-2023 and higher than what the recent interest rates are, then folks will find this move as a tangible option.

2 Reply

Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
8mo
Quote from @V.G Jason:

I don't know anyone that's super HNW that did it without massive debt to get there. I don't know anyone that got there and now has really any debt at all.
Paying off a primary is a great goal. Only the yesteryears, before recession folks remember this as the gold standard of how you create wealth. Back in the 80s and 90s you always paid off your house first.
As time goes on post-2023 and higher than what the recent interest rates are, then folks will find this move as a tangible option.
80s and 90s had double digit rates, it made sense to pay off the primary.
I have a 30% LTV balance left on my primary with 2.75% - that is basically the rate of inflation AND also a tax write off. It makes not sense to prioritize that when I can knock out several 6% or 7% loans every year with a fraction of the balance; also while doing that now also turn the principal payment portion into free cash flow.
It's the same advice BP would give someone with lots of credit card debt: you pay off the highest interest rate card first, then 2nd highest etc.
3 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
8mo
Quote from @Marcus Auerbach:

Quote from @V.G Jason:

I don't know anyone that's super HNW that did it without massive debt to get there. I don't know anyone that got there and now has really any debt at all.
Paying off a primary is a great goal. Only the yesteryears, before recession folks remember this as the gold standard of how you create wealth. Back in the 80s and 90s you always paid off your house first.
As time goes on post-2023 and higher than what the recent interest rates are, then folks will find this move as a tangible option.
80s and 90s had double digit rates, it made sense to pay off the primary.
I have a 30% LTV balance left on my primary with 2.75% - that is basically the rate of inflation AND also a tax write off. It makes not sense to prioritize that when I can knock out several 6% or 7% loans every year with a fraction of the balance; also while doing that now also turn the principal payment portion into free cash flow.
It's the same advice BP would give someone with lots of credit card debt: you pay off the highest interest rate card first, then 2nd highest etc.
The rates were double digit, but the payment was more affordable than today. It'd still make sense to pay off today.

I'm using current rates not these sub 4 Rona rates. Bp would tell you to pay the highest off. I'd tell you to pay the smallest total debt off.

Mathematically, you're right. But finance is tilted towards behavior, too. What's the price of peace of mind?

1 Reply

Jake AndronicoBusiness Member

Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes

8mo

@Ryan Spath

This is so awesome, congratulations!!

I listen to Robery Kiyasoki and Dave Ramsey, as well as many others.

Everyone has an opinion, but nobody has YOUR life.

I applaud you in going "against the grain" and focusing on YOUR goals and YOUR family, and sharing it.

Not everyone can do that.

I hope this provides you exponential peace of mind!!

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Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

8mo

@Ryan Spath, I really like this post, and I agree with the shift you’re describing, Ryan. This is a very natural evolution I see with investors who’ve been at it long enough.

From a tax perspective, paying off a primary residence is rarely the optimal move on paper, but it can absolutely be the right move in real life. Mortgage interest on a primary is only partially deductible now, leverage adds risk, and there’s no depreciation benefit on a personal residence. So the tax argument for keeping that debt isn’t nearly as strong as it once was.

What you do gain is flexibility. Eliminating the primary mortgage increases free cash flow without adding taxable income, lowers required returns across your portfolio, and reduces the pressure to chase deals just to service debt. That resilience matters more as family priorities grow.

Once the primary is paid off, you also gain optionality. If you ever want to re-leverage later, you can do it intentionally and from a position of strength, rather than necessity.

This isn’t about abandoning leverage. It’s about right-sizing it for the phase of life you’re in. Early on, leverage builds the base. Later, resilience protects it.

Your original goal was clarity, not scale. This feels consistent with that.

And to give a bit of my story, I actually had a real estate portfolio that I loved managing, and I plan to add to it again one day. But along the way, I saw a real need in the tax world, gaps that were hurting business owners, investors, and my own clients. I realized that was something I wanted to solve. So I made the decision to adjust. I sold off some investments and reinvested that money into myself, my company, and my clients. It was a scary move, especially now that I have a family to take care of too, but it felt like the right one and I wouldn't have been able to do it without real estate. Life changes, priorities shift, and sometimes the best investment isn’t another property, but building something that creates real impact. I know I can build that portfolio back up again once this investment in my business, my team, and my clients fully comes to fruition. That is the beauty of real estate.

Good luck, and happy to connect!

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[email protected]941-914-7779

Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

8mo

I really like this post, and I agree with the shift you’re describing, @Ryan Spath. This is a very natural evolution I see with investors who’ve been at it long enough.

From a tax perspective, paying off a primary residence is rarely the optimal move on paper, but it can absolutely be the right move in real life. Mortgage interest on a primary is only partially deductible now, leverage adds risk, and there’s no depreciation benefit on a personal residence. So the tax argument for keeping that debt isn’t nearly as strong as it once was.

What you do gain is flexibility. Eliminating the primary mortgage increases free cash flow without adding taxable income, lowers required returns across your portfolio, and reduces the pressure to chase deals just to service debt. That resilience matters more as family priorities grow.

Once the primary is paid off, you also gain optionality. If you ever want to re-leverage later, you can do it intentionally and from a position of strength, rather than necessity.

This isn’t about abandoning leverage. It’s about right-sizing it for the phase of life you’re in. Early on, leverage builds the base. Later, resilience protects it.

Your original goal was clarity, not scale. This feels consistent with that.

And to give a bit of my story, I actually had a real estate portfolio that I loved managing, and I plan to add to it again one day. But along the way, I saw a real need in the tax world, gaps that were hurting business owners, investors, and my own clients. I realized that was something I wanted to solve. So I made the decision to adjust. I sold off some investments and reinvested that money into myself, my company, and my clients. It was a scary move, especially now that I have a family to take care of too, but it felt like the right one and I wouldn't have been able to do it without real estate. Life changes, priorities shift, and sometimes the best investment isn’t another property, but building something that creates real impact. I know I can build that portfolio back up again once this investment in my business, my team, and my clients fully comes to fruition. That is the beauty of real estate.

Good luck, and happy to connect!

INVESTOR FRIENDLY CPA®5241 Reviews

TaxMD™ | AI-Powered Tax Planning