11/20/2024
Part 3: Dave Ramsey/ Pay off Your Mortgage Fast / Good idea for Florida investor https://bit.ly/3EyO4xs
Dave Ramsey advised my best friend to pay off his mortgage fast! Here is my answer:
Real estate Warriors,
After being a licensed financial advisor for many years and doing more than 3,000 real estate transactions for the past 20 years, this is what I have found:
The correct answer is often found within our own risk tolerance. It is also the level of desired financial education against your "WHY" and your priorities in life. In the end, it is based on what makes you the happiest. What makes you enjoy this "ride of life" the most.
Answer to the questions
Always look at what actual net cost you pay off versus what type of return your financial education can yield you. And then decide what is best for you.
Example: Paying off a mortgage at 2.5% versus investing your funds into a super large-cap mutual fund yielding 5%, investing in the stock of the company you have been working for the past 15 years, investing in a neighborhood rental where you can buy for 300k and rent it at Airbnb or Vrba for $6,000 a month, Crypto (sexy) altcoins, or even a hobby that provides you not only pleasure but also a higher return than 2.5%.
Also, not having a mortgage can make your house an easy target for lawsuits. Secondly, focusing on paying off a mortgage to be debt-free is an Illusion because when life gets in the way, an emergency comes, and if you are cash poor, you will pull out the money for something else at a higher cost. These are some of the disadvantages, to name a few. (I will elaborate more on this in my next article)
Example "Ybor Bungalow" I bought by not paying my mortgage off, cashing out max equity to buy this Airbnb property.
I bought it for 100k, 20% down ($20k) Invested $25k to fix it up. The property has been renting for $3,000 a month for the past 12 months non-stop. What is my ROI?
Monthly numbers:
Income: Rent= $3,000
Payments:
Mortgage PITI= $1,000
Property management $300
“Just in case” funds $200
Total monthly next cash flow $1,500
Pockets funds: 20% to buy, plus 25k repairs = $45,000
So $1,500 x 12 months is $18,000 net income a year.
$18,000 divided by the total investment of $45,000 equals to a 40% return.
And this, ladies and gentlemen, is what we call BRRR strategy.
Is there a risk of overleveraging? Yes, that is why you should perform a rental stress test to ensure you are safe on the next bubble.
Venturing into the world of real estate investing can seem like a daunting task, but with the right guidance and information, you too can ace it!
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If you’re ready to dive into the real estate market, contact us. Whether the type of real estate investing you want to do is a wholesaling, buy-and-hold, commercial investment, or fix-and-flips, we can help.
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Dave Ramsey advised my best friend to pay off his mortgage fast! Here is my answer:Real estate Warriors,After being a licensed financial advisor for many yea...
