All Forum Posts by: Dennis Maynard

What are the interest rates on the loans and how much debt are we talking about?  I'd definitely pay off the credit card debt, but that's me.  Figure out the real cost of borrowing the money and why there is credit card debt (emergency or spending).

The loans will limit what you can borrow.

@Dennis Maynard great discussion! I’ll offer another perspective related to your primary objective (goal) and how that steers the answer.

Do you want to maximize net worth? Than run numbers both ways and you’ll of course have your an answer in terms of net worth that factors in risk, inflation, appreciation, and other assumptions.

Do you want maximum cash flow? Then run numbers maximizing cash flow and you may get a completely different answer!

For example: Paying off $20k of remaining debt at 0% interest to eliminate $500/month payments would yield a 30% cash on cash improvement to your cash flow. But putting $50k down on a property that cash flows $500/mon would yield a 12% improvement to your cash flow but will likely be better for your net worth.

So if you’re someone who is already financially independent, you’re probably more concerned about net worth.

However, if you’re someone who is trying to make it out of the rat race ASAP, you may be best off making decisions based on cash flow until you’re free from the rat race; then you can re-evaluate your goals!

@Dennis Maynard

Personally I took the Dave Ramsey approach and paid off all debt, cars and student debt and anything else, except for our mortgages. I could never buy in to paying off our house especially when homes are so expensive in Colorado and rates being so low.

@Dennis Maynard Now is the best time to invest in hard assets like cash flowing real estate. Interest rates are low, inflation is high and prices in most markets are expected to increase at a higher rate than normal over the next 1-3 years.

Remember, financially free beats debt free.

Buy the cash flow property.

 What I just wrote above.  Based my decision on the criteria my plan is telling me to follow at that time.

There is no one answer fits all.  Like I said above, you you are expecting one, "you're doing it wrong".

You pay off debt.  Paying off debt is risk free.  The return on an investment is not risk free.  Typically, credit cards should be paid off before pursuing investments.  Car, Home, and student loan debt will typically have a lower interest rate than you can make from reinvesting and so you should invest instead of paying off these debts if you have adequate reserves.

If you have to make a choice between the two, you're doing it wrong.  You should have a plan in place that spells out the order of what to do when.  The universal answer is it depends on your plan.  The specific answer is, it...depends on your plan, and you plan is based on the flow of cash from your investments through you to these costs...and the DP is a cost to you.

Depends on the loans interest rate. If it is lower I'd rather invest. But I wouldn't accumulate a bunch of debt for long term wealth 

Great question. I think it really depends on which is going to have a greater financial impact, and that is different for everyone. If you have lower interest debt, I’m all for buying a good investment property vs paying it off…it’s essentially just additional leverage for cash. For example, if you have a car loan that you’re only paying 2.9% on, why in the world would you pay that off if you can turn around and use that same cash as a down payment on an asset that’s going to produce a greater return than that? On the other hand, if you have high interest credit card debt, it may make a lot more sense to pay that off first before buying a property. Not only will it likely have a bigger impact on your monthly cash flow/debt service by getting rid of that payment, but you’re going to pay a lot more interest on that debt than the return you’re going to get on an investment property. 

Definitely a “broad stroke” answer, but I think for a lot of folks it’s a good rule of thumb.