Pay off mortgage or invest?

[John Dersoe]

I am in process of selling in NY. After mtg paid, commission, taxes, cap gains, etc.. I'll have +/-425k left over. 

My new 30yr mortgage in Tampa is 1600 a month. 324k total. My monthly income is around 8k.. BUT, my bills top out at around 7-7.5k. Not a good feeling to almost be right at what you earn. 

Would you guys use 324k of the 425k left over proceeds to free up 1600 a month and be mortgage free for extra cash flow? Side note.. I already have +/-700k in various investment accounts. So my real question is, at almost 50yo, would anyone prefer to be mortgage free with a nice monthly cushion between income and bills or use the proceeds from the sale for something else?

[JD Martin]

Quote from @Travis Timmons:

There was a great conversation about this exact topic on a recent Tim Ferriss podcast - with guest Morgan Housel. He wrote a book called "The Psychology of Money," and among other topics, it talks about money being as much dopamine, cortisol, and serotonin as it is ROI and calculation. Of course the math makes sense to not pay off the house. You could get a better return on that money by investing in something else. Paying off your house, however, is worth more than money. It provides a sense of security and comfort that has real value. Ultimately, it's a judgment call that only you can answer. I copied/pasted the portion of that podcast interview on this topic below. It's worth a watch. Apologies if the link did not come through correctly...not sure of the security measures that restrict links on here. If it does not come through, just google "Personal Finance Advice: You don't have to do what the spreadsheet says! Morgan Housel.

Personal Finance Advice: You Don't Have to Do What the Spreadsheet Says! | Morgan Housel

Excellent. And it's not just the psychology of paying off a house - the original poster spends essentially 100% of his monthly income on debt. That is a rough place to be in, even with retirement accounts. Taking $400k and turning it into, let's say $1.6 million of real estate (25% down), depending on where he lives, might let him acquire another 4-10 houses, but all of those houses are going to require reserves and the cash flow on them is going to be pretty minimal. He could easily be in a situation where he's spending down his own savings to keep the properties going.

Yes, generally in an inflationary environment it's better to have locked-in low interest debt. Inflation destroys the value of the debt, so you pay back the loan with weaker dollars. But it doesn't appear that, other than the car, he has a lot of flexibility in getting rid of his monthly costs beyond having to then maintain reserves for rental properties.

I would take the "buy, buy, buy" advice with some serious salt, and I'm a big proponent of real estate. I think his original inclination to pay off the car note, and personal mortgage, and then play with what's left is a pretty sound strategy in a market with super inflated property costs.