219: Should You Pay Off Your Rental Property, Reinvest, or Buy More in 2024?

On The Market

BiggerPockets

News, Investing, Business, Education

4.8 • 820 Ratings

🗓️ 23 May 2024

⏱️ 35 minutes

🔗️ Recording | iTunes | RSS

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Summary

If you’re like most investors, you’ve probably asked yourself, “Should I pay off my rental property early?” With today’s high mortgage rates, troublesome inflation, low inventory, and risky economy, many investors don’t know whether it’s the right move to pay off their mortgage, reinvest in their properties, or go out and buy more. Paying down your debt gives you a guaranteed return, but with home prices still climbing, you could miss out on the sizable appreciation of getting another rental. On today’s show, we’re going to debate which is the best move to make. Should you pay off debt, buy more investment properties, reinvest in your portfolio, or put more money down when you buy? Each investor has a different method for their next move, but thankfully, our expert panel gives their thought processes for figuring out which decision is best for your portfolio. Henry even shares his “three buckets” framework that EVERY investor should think through BEFORE investing or paying off a property. We’ll also discuss the crucial calculations you can use to help you decide and avoid analysis paralysis if you’re stuck between choices. Plus, how a high-risk house flipper like James protects himself from downsides even during tough markets like today. Don’t pause on making moves that could help you reach financial freedom; stick around, and we’ll show you exactly how to know which moves to make in 2024’s housing market! In This Episode We Cover Whether to pay off your mortgage early, reinvest, or buy more properties Why EVERY investor needs to calculate return on equity (ROE) on their portfolio Is it too risky to invest today? Why James is making even more high-risk investments in 2024 The “three buckets” of your real estate portfolio that will help decide what you should do with your cash What to do with extra money and how to make some serious passive income with private money lending The only time when we would put a large down payment on a rental property And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Forums BiggerPockets Agent BiggerPockets Bootcamps Join BiggerPockets for FREE On The Market Join the Future of Real Estate Investing with Fundrise Connect with Other Investors in the “On The Market” Forums Subscribe to The “On The Market” YouTube Channel Dave's BiggerPockets Profile Dave's Instagram Henry's BiggerPockets Profile Henry's Instagram James' BiggerPockets Profile James' Instagram Property Manager Finder Should You Pay Off Your Mortgage Early or Invest? BiggerPockets Real Estate 622 - ROE over ROI and Why Your “Cash Flow” Number is Deceiving Books Mentioned in the Show Real Estate by the Numbers by Dave Meyer Start with Strategy by Dave Meyer Jump to topic: (00:00) Intro (02:06) Too Risky to Invest? (09:18) Pay Off Debt Instead? (15:56) Value-Add and Reinvesting (23:55) Putting More Money Down Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/on-the-market-219 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	With the trio of challenges facing the real estate industry, which are interest rates, inventory, and inflation, what should investors do right now?
0:08.9	Should they try and buy new deals?
0:11.1	Should they add value to what they have?
0:13.5	Should investors stop investing and just pay off their current properties?
0:16.8	Today, we're digging into that and debating what investors should do.
0:25.6	Hello and welcome to On the Market. I'm your host, Dave Meyer. With me today are my friends Henry Washington, James Danard.
0:32.6	Guys, good to see you. Morning.
0:34.6	What's that, buddy?
0:35.6	Well, as you know, with today's interest rates,
0:38.7	inflation, all these things, these challenges, I don't know if you guys hear this question a lot,
0:42.5	but I have a lot of people asking me, you know, I have X amount of dollars, 20 grand, 50 grand,
0:47.2	100 grand, they don't know what to do with it. Do you put it into a new property? Do you reinvest? Do you pay down debt? So that's what we're going to talk
0:55.9	about today. This big question is now a good time to invest or are there better ways to be
1:00.7	allocating your resources in this economy? So I'm excited to talk to you both about that.
1:05.9	But before we jump into today's debate, I want to just give investors a sort of a quick market update.
1:12.1	If you don't follow mortgage rates on a minute-to-minute basis like I unfortunately do,
1:17.6	you may not know that interest rates on mortgages have actually come down a bit over the last
1:22.0	couple of weeks. We are recording this on May 20th. So they shot up in April up to about 7.5%.
1:30.8	They're down now to about 7% at the time of this recording.
1:35.5	So that is encouraging, improving affordability a little bit.
1:40.1	We're also seeing that active inventory is starting to tick up just a little bit over the course of the last few months, which is also encouraging for a healthier housing market.
1:50.0	And as of the last reading, which is April 2024 for Redfin, median home price in the U.S. is $433,000, which is up 6.2% year over year, pretty strong situation.
	...

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