Am I being too risk averse?

[Kyle Rutledge]

Am I being too risk-averse? 

So my wife and I want to get started on our first deal, or possibly multiple deals depending on what decision we choose moving forward. We keep going back and forth on if it's worth waiting to pay off our home before investing or if that will just delay our wealth building by a few years. 

Here's the situation: I'm debt-averse and love having a paid-off home. My thoughts are that there are good debt and bad debt, like consumer debt and debt tied to investments that are making you money. I understand that in real estate investing, there are huge benefits to using other people's money to build your wealth. On the other hand, I really like the idea of establishing a really solid financial foundation where I can feel safe and secure, which allows me to do more with my money in terms of investments. We can also use the saved mortgage payments after a few months to get into another property. 

Let's get into the numbers

We purchased our first home in 2016 for around $200k and paid it off in early 2020 before the pandemic. We just purchased our second home, since our family is growing, and are finishing some remodels on the first in order to sell it. We think we'll be able to get ~$320k from the first home after closing costs.

On the new loan, we owe around $460k right now. If we direct the proceeds from the sale of our first home plus add all of our savings to our new home loan, we'd have ~$60-70k left on the mortgage and could pay that off in 1-2 years. Add a handful of months to build up a downpayment, we'd be 2-3 years away from our first deal, but could then get another property every few months. My wife and I both work full-time, so this is something we'd do on the side for now but possibly something my wife would want to take on full-time in the next few years. 

Decision Making

Now this plan is my ideal route, but my wife is more willing to start investing some of this money sooner. We don't want to miss out on any deals that might pop up by the end of the year due to foreclosures, and this would also be our first big step which is always the hardest. We've thought of three routes we could possibly take: 

1. We do as planned above and wait a few years to start. Possibly miss out on some opportunities but have that solid foundation to build on, and quickly. 

2. Pay down the mortgage to a level that we're more comfortable with (<$200k loan) and hold onto the rest of the money to start. 

3. Leave the mortgage where it's at ($2,200 mortgage payment 💩) and invest with all that we have. 

Final Thoughts

We don't love option 3 and keep going back and forth between 1 and 2. Any thoughts or insights would be highly appreciated!

Side note: We would also love to talk to any local investors in Utah, or that might know of any groups or communities that we can join to hear about what's working well, and what isn't. It's a crazy market right now and are wondering if it's even worth investing around here or looking nation-wide. 

Best,
Kyle