Should you pay off a house completely?

[Joshua Michael Hauman]

Paying off a house completely is a trap. You should avoid it if you want to amplify your wealth.

Here’s what to do instead:
Successful investors own nothing outright. 

They sit back and wait as their properties go up in value and their tenants pay off loans for them. This builds equity. Then they extract this equity to invest in more wealth building assets instead of paying it off completely. All that extracted cash isn't a taxable gain. It's simply a loan against growing equity. When you refinance, banks look at your property's value, not your personal credit. You can use this equity over and over to get more cash to buy more properties. 

Why pay off loans when you can use your property's value as leverage?

Counter argument:
Paying off a house reduces risk by eliminating mortgage payments. This makes it a safer bet than unpredictable market investments. This strategy improves cash flow, allowing more freedom in financial planning and personal spending. Plus, the emotional peace of mind from owning a home outright is significant, offering both psychological and financial benefits. It also simplifies estate planning by ensuring properties can be passed to heirs debt-free. Despite the appeal of leveraging debt for wealth expansion, the security and certainty of a fully paid home offer compelling advantages for many.

Pro tip:

I look at the metric ROE, Return on Equity over ROI, Return on Investment.

ROI = (Net Operating Income/ Total Investment Cost​) × 100

ROE = (Net Operating Income/ Equity​) × 100

For me, what is best for you is dependent on what stage of your investment lifecycle you're in coupled with your risk tolerance and personal financial goals.

With Discipline,

Josh

[Justin Brickman]

There's no right or wrong answer to this, it just depends on the investor and what their goals are.

Of course leverage is great. But many investors don't want to deal with any risk or debt whatsoever, and they don't have the urge to buy more properties. 

[JD Martin]

At some point in life, and in your investing career, you start phasing from one to the other - generally from leverage to paid for. Leverage is fantastic when you are young, just starting out, and don't have a lot of capital to work with. Since no one is immortal, as you start hitting the back 9 you start thinking about simplifying, which is what deleveraging will do. You stop worrying about having to maximize every month on every rental because you just don't care if you bring in an extra $50; you'd rather have a stable tenant that pays on time every time and doesn't cause you trouble. You've bought all the properties you want to own, and you'd rather trade money for time than the other way around, which is also what deleveraging does for you. 

So there's no right answer. It depends on the person. Financially it's almost always better to leverage but less so in higher interest rate environments when there are good investment alternatives, and not everything in life is or should be done for purely financial reasons.