Dear Dave,
We recently sold our rental property. When we bought it, we thought it could be an excellent source of passive income. But owning it wasn’t passive in any respect. It got to the purpose where the work and energy became an excessive amount of. We have $240,000 from the sale and are debt free apart from our house. We owe $140,000 on our house and will pay it off immediately, but a part of me wants to take a position the proceeds from the sale of the rental property. Is it higher to be completely debt free at this point, or should we invest it so we now have even more cash for retirement?
Anthony
Dear Anthony,
You mean you needed to energetic do you manage your rental property? Listen, anyone who tells you that real estate is passive income is talking nonsense. It’s a natural extension of the rubbish that individuals spout once they say it’s OK to enter debt to purchase real estate since the tenant is making your payments. No, it’s your Payment. And if the tenant doesn’t pay or the home is empty, guess what? You should pay it.
If you would like passive income, buy an S&P 500 index fund. Set it and forget it. You won’t should fix a leaky roof, replace worn-out appliances, or try to gather money from delinquent tenants. Real estate is a fantastic investment opportunity for those who do it right. I like it. It’s anything but passive, though.
Let me ask you this about your situation. If you had a paid off house, would you are taking out $140,000 as collateral to take a position? Of course not. It’s just about the identical thing, and that may be silly. Pay off your home, bro. Just pay it off. You’re debt free and you continue to have six figures to take a position.
I really like that you just’re eager about the long run, Anthony. And I do know the compound interest effect you are imagining is de facto tempting. Your compound interest calculator will inform you some amazing things, but it surely doesn’t take risk into consideration. It can also’t inform you how carefree you may be, and the way it’ll feel like an enormous weight has been lifted off your shoulders while you now not should pay house payments. You’ll give you the chance to live your life in your terms, and all the selections you make shall be from a very different perspective – one which’s not burdened by the load of bankers hovering around you, waiting for you to provide them what’s theirs.
The borrower is all the time a slave to the lender. Think about it. Only one effect of slavery is mathematical. All the others are spiritual, physical, relational, emotional, and mental. Being debt free changes your life from the within out. Not only does it make your life higher, but it surely also means that you can give incredibly generously and create positive change within the lives of others.
Pay off the home!
