Quote:
Originally Posted by JSH
Do we want 10 mortgaged retails bringing in $100 a month or 1 paid off rental paying $1000 a month? Mathematically we should have 10 houses with the least amount of equity possible to maximize ROI. That is what a MBA learns in school. What is ignored in that calculation is the risk. With the mortgages if we get another event like COVID 19 and renters are allowed to skip payments I’m screwed. I have to cover 10 mortgage payments out of pocket while the market is down and I would have to sell assets at a loss. With one paid for house I lose income but don’t have to pay out of pocket. The entire point of investing in real estate is to diversify sources of income so we don’t have to sell assets in a down market to cover living expenses.
No doubt the math works to carry a high mortgage balance and invest the difference in the stock market. However, that is a riskier bet and a risk I’m not looking to take 3 years from our target retirement date. We plan to enter retirement with zero debt.
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When we were buying our current home I asked a CPA/CIO friend what was better; a 30 year mortgage, or a 15 year mortgage? She said "30 year" and went on to detail why; inflation dollars, opportunity cost, yada yada. My eyes glazed over. When she was done I asked her "what term do you have on your mortgage?" "15 years", she said, "I hate being in debt."