The U.S. Dollar, 5 year ARM vs 30 year conventional & the snow ball effect.

[James Park]

I've been reading @Mark Ferguson's website and been thinking about his loan strategy of taking out 5 year ARMs and focusing on paying off the mortgage within 5 years. I know other buy and hold investors in Biggerpockets have followed the same strategy of accelerating mortgage payments.

Here is why i personally struggle with this strategy. What if an investor has a million dollar mortgage locked in at 4% for 30 years spread about among 8 SFRs. Let's also say that this investor also has $750,000 in cash in the bank. Would it be wise for this investor to pay off $750,000 of his million dollar mortgage and just live off of his $8000/month passive income?

I feel that the downward cycle of the U.S. dollar has reversed in 2011 and is it in its early stages of its 6-7 year cycle making the dollar more valuable in the near future. If rates continues rise and CDs pay 5% like they did in 2007, aren't you in fact beating the bank at this point for any return over 4% on your cash? If your million dollar mortgage on your 8 SFRs rentals are fixed at 4% and in 2016, 30 years mortgage rates are at 7%. Wouldn't you keep the 30 year mortgage as long as you can and never pay more than you have to?

At the same time, I know that inflation is what makes a real estate buy-and-hold investor rich over time.

I am just not sure if having 75% of networth in real estate is right strategy, but i know that this allocation may be very common for many investor here on BP with 75% of their networth in real estate and perhaps 10% in cash. What are your thoughts? Perhaps is no right or wrong answer and varies by each individual's risk tolerance.