40K/yr to invest: Pay down home OR buy more

[Andrew Horner]

Hey there! 

TL;DR:

I'm 29, have 40K to invest per year, but don't think I should "buy high." I'm not confident I'll get great deals on houses in this market. Should I just pay down my own mortgage for now, use my house as a savings account, and leverage it to buy rental homes when the economy dips? Or should I just get started buying houses? 

More detail:
I have a salary of $70K that I live on. Two months ago I bought our first house ($250k, Austin, TX, via FHA). I'm new to being employed, having run my own business (graffiti art, colorcartel.com) since I graduated from college 4 years ago. But even employed, I've been able to continue making money with my murals at the same rate. So I've decided to live on my salary, and dedicate $40k/yr of my art income to investing. If I just pay down my own mortgage, would it be easy to leverage this to a buy a house or two when we have our next recession? Or should I just suck it up and try to find good deals now?

Thanks!
Andrew

[Kris Wong]

My question to you is, how long are you willing to sit on the sideline waiting for deals to be readily available? Who's to say when the next downturn will be. Could be this year, next year, 10 years. Who knows. And who's to say that real estate deals will be easier to find. In theory they should be, but again, who knows. One thing I can say for sure, by paying down your mortgage, you're paying back the cheapest leverage available to you, and you're tying up that liquidity and making it illiquid. I am fairly confident you should not have any problem finding an investment vehicle that will return more than you are paying in interest on your mortgage.