Would you own rental properties free and clear (No mortgage)

[Pablo Pozo]

Hello biggerpocket members,

Me and my wife are still relatively inexperienced in the world of Real Estate investing. I considered my self a conservative guy and my strategy is to buy and hold.  I have one rental (rental 1) and our primary home that is under my name along with the mortgages. We recently bought another rental (rental 2) back in June and put under my wife's name and the mortgage is under her name as well. I recently called my bank to see if I can refinance my primary home that has an interest rate of 5.75% 30 year fixed. It turns out that they offered me a rate of 3.25% 30 year fixed rate and I have enough equity to pull money out and pay off the (rental 2) property we recently purchased in June under my wife's name, which the current rate on that rental is 5.25% 30 year fixer. My dilemma here is that in the event that me or my wife were to get sued, that property would have equity that is not protected. Right now the equity is on my primary home which is protected by Florida homestead. With this refinance I will be saving a lot of money on interest rates but on the same token I will be exposing my equity. I will be consulting with my lawyer next Friday but I want to hear the opinion from and investor's perspective. Thank you in advanced and I wish you all a happy new year with a lot of success.  

Best regards,

Pablo 

[Arnie Guida]

One thing many are forgetting...

Not everyone is a one trick pony, their are more asset classes, and more to do in life than real estate. 

For the maximum leverage crowd, you must have short memories. My painter had a helper...nice guy, late 30's..."I had a 5 bedroom house and 15 properties"...then the downturn around 2007-08 came, all that wonderful leverage that guys like Joe Villeneuve take every opportunity to post in every thread they can, left this guy bankrupt, being a painter's helper, working for me.

I have enough properties, most are free and clear, there are other asset classes and more to do in life besides real estate. There are only so many hours in a day, and the clock is ticking.

Be careful with leverage. There's nothing wrong with owning income properties free and clear. I sleep like a baby...