Pay down mortgage or keep capital liquid

[Kirk Perecich]

Hey guys, I wondering what you think about the idea of paying off your personal mortgage vs investing while the market is inflated.

I have some money just sitting in the bank making nothing.

I've been saving up to buy my first rental property, however the prices are high because of where we are in the market cycle, and prices are high in my area generally (Chicago western suburbs).

I'm also inexperienced, so starting when the market is down might be a safer first investment to learn on.

Would you advise paying down my mortgage and then using a HELOC, cash out refi, or something of this nature, to help fund investments when the market is down?

I'd also really like to know what everyone thinks about the "velocity banking" strategy, wherein you "pay off your mortgage in 5 to 7 years" with a HELOC. I have watched several videos about this and still don't understand how it works, or even IF it works.

To those of you who think the "velocity banking" strategy does work, I'm curious if YOU think paying down my mortgage, while the market is high, is a good idea, specifically because of the "velocity banking" strategy.

Thanks for your time!

[Axel Meierhoefer]

@Kirk Perecich I agree fundamentally with the two really good reasons @Ashely Carter gave you.

Here are a few points I like to add to give you an increasingly deeper understanding and ability to make decisions:

1. The interest on any money in the bank is low as it is and will keep going down. As soon as you like to get more the risk for your funds increases
2. You want to ask yourself what your strategy really is:
   
3. 1. Do you want to build a portfolio of assets that will pay you passive income for the rest of your life (also called buy and hold and aligned with a lot fo what "Rich dad poor dad" teaches?
   2. Do you want to invest to benefit from the appreciation of the asset (which would include strategies like BRRR)
   3. Do you want to manage and own properties only in a reasonable distance of where you live or are you willing to have properties get managed remotely (also called "Turnkey")? That's what I am doing actually about 80 miles west of Chicago
   4. Do you want to have a lot of control over your assets and all the tax considerations, benefits etc. you can get from the tax code or do you see them as part of your retirement planning (possibly early retirement), which would allow you to include your funds currently held victim in traditional retirement accounts like 401K or Roth IRA
   5. Do you need relatively quick access to your money? In real estate access is slow as it takes time to sell an asset and turn it into cash. In your bank account is it very quick but you don’t get much for holding it there. Everything is a balance of risk and reward
   6. Most importantly in my view: Do you have discipline to follow rules that you have learned about and accept long term?

When you say the market valuations are high making you wonder if you should get started or wait or pay down your current mortgage, it sounds to me that you have not yet made up your mind what rules and strategies you want to pursue.

I would be happy to mentor you about that if you like. Feel free to send me a PM and we can setup an initial call.

Just as a teaser regarding this question about rules:

• Imagine you decide to purchase a property west of Chicago that will be managed by a professional property management team and financed by a nationwide lender. The property costs you between $80K-$120K, meaning you put down (from your funds in the bank) $20K – S30K. Your property performs under the 1% rule and your purchase only happens when a lease deal of 1 year or more is already in place. Ask if you would consider that a good deal?

In case you wonder why I tease you this way: I just bought three properties of this kind this week.

Happy Thanksgiving and let me know if you like my help