Don’t be real estate rich and flat broke!

I am often asked, should I get a mortgage, or just pay off my house? Well, why would I choose a fake house in a wrapper for this? Because that’s what can happen if you payoff real estate and can’t get to it! I have known many “millionaires” in my banking career who didn’t have bank accounts, didn’t have money on the side, etc., literally all of their assets were tied up in real estate. I remember one of them coming in with loose change to come up with payments on other accounts.

So it’s literally possible to be “rich” in real estate, and have nothing else to show for it. Of course, someone will argue about the rent that they can get, or they can just sell it, etc. But there is nothing certain in life. As many have said, plan for the best, prepare for the worst. We keep hearing the bust is coming, how can you prepare for it? How can you plan for the best at the same time?

So how can you make sure you aren’t paid off and have nothing to show for it?

This is not an exhaustive list, this is just some of the ideas that I have seen others use over the years:

1. Use the BRRRR method and cash out those paid off properties.
2. Setup a line of credit or commercial line of credit on your properties so you can “tap” that wrapped up equity.
3. Consider keeping a mortgage instead of paying off so quickly. Yes, this might go against a lot of older wisdom, but there are advantages to your credit, property taxes, and maybe even income taxes by maintaining a mortgage on the property. Bonus: you keep your cash for something else.
4. Pay yourself first. Yes, you may have said you were by paying off those rental properties, but you can now pay yourself through the rents. Make sure you put aside at least 10% if not more in savings, investments, or a retirement account.
5. Take advantage of grants and local redevelopment opportunities. Keep an eye out for opportunities to liquidate property that may be needed for government or utility use. Also keep an eye out for local grants to improve frontage, signage, etc.
6. I know someone who put up a billboard, while possibly not the prettiest thing, it is another source of earnings on his land. Whether it’s a cellphone antenna or a sign, it can mean extra income for you monthly.

None of these are new, or fantastic, but currently rates are historically low still, and people are talking about paying off mortgages?!? It seems like the wiser thing would be to hoard cash at super low rates and invest wisely at a better rate of return…

Start your plan here…