Paying debt vs. investing

Amarillo, Texas
Buying & Selling Real Estate
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Paying debt vs. investing

Camryn Thompson
Member since 2025 · 7 posts · 0 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!

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Jon K.
Rental Property Investor · Perry Hall, MD · Member since 2016 · 590 posts · 603 votes
17h

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.

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    1d

    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.

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    • Camryn Thompson
      OP
      Member since 2025 · 7 posts · 0 votes
      1d

      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!

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    • Jon K.
      Rental Property Investor · Perry Hall, MD · Member since 2016 · 590 posts · 603 votes
      17h

      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.

      3Reply
    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      15h

      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

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    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      6h

      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..

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    1d

    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.

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    • Camryn Thompson
      OP
      Member since 2025 · 7 posts · 0 votes
      1d

      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!

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  • Ametria Chaney
    Realtor · Memphis, Shelby County · Member since 2026 · 43 posts · 8 votes
    1d

    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?

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  • Aaron Zucker
    Realtor · New York, NY · Member since 2019 · 42 posts · 13 votes
    1d

    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.

    1Reply
    • Camryn Thompson
      OP
      Member since 2025 · 7 posts · 0 votes
      23h

      I think we needed to take a step back and look at the big picture. This helped a lot. Thank you!!

      0Reply
  • Hossein Sharifi
    Investor · Member since 2023 · 100 posts · 48 votes
    23h

    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.

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    • Camryn Thompson
      OP
      Member since 2025 · 7 posts · 0 votes
      23h

      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!

      0Reply
  • Adam Summerer
    Lender · Franklin, TN · Member since 2026 · 95 posts · 22 votes
    20h

    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.

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    • Camryn Thompson
      OP
      Member since 2025 · 7 posts · 0 votes
      20h

      Good idea! Thankfully, I have 4 years under my belt tax return wise. That’s a good idea though, thank you!!

      0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    18h

    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.

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  • Valentina Dalia
    Lender · 699 14th St NW, WA · Member since 2026 · 5 posts · 1 vote
    11h

    Hi BP

    Your situation already has a good basis, especially with the acquisition of a foreclosure property and your experience in real estate.

    As a private lender, I would advise you to compare the two strategies based on the actual figures: cost of debt, expected rate of return on future rental properties, cash available after the renovation project and level of reserves.

    If the acquisition of one or two rental properties generates a solid cash flow while maintaining a sufficient reserve of security, it can be interesting. Conversely, if your current debt is expensive, its repayment could offer a more predictable return.

    The main thing is not to compromise your liquidity to accelerate your growth. I would also be attentive to the financing, the LTV ratio and the ability of the property to support its debt.

    If you wish to exchange, I would be happy to discuss your strategy and see which private financing options could possibly match your situation.

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  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    6h

    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!

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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2h

    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.

    0Reply
  • Madox Miller
    Real Estate Agent · Atlanta · Member since 2026 · 6 posts · 5 votes
    1h

    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.

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