Should I pay off my mortgage or should I buy an investment property, or should I buy an investment property rather than pay off my mortgage? My answer is one, “I’ll do both.” And while we’re at it, why buy one investment property if you can afford to buy two or three investment properties? I’m not saying go ahead and just buy three investment properties in one hit. But what I am saying, let’s look beyond one investment property.
So, the fact of the matter is if we only pay off our mortgage and not worry about buying an investment property, how long are we going to have to wait before we try to grow our wealth? That’s the problem. Okay? Because the longer we wait to get into the market, the opportunity cost is that we’re missing out on capital growth and income on another investment property or another property.
Take the word “investment property” out of it. So we can do both. We can have our home and actually pay that off as quickly as possible. And how do we do that? We do that by having the lowest interest rate possible and did I tell you that we’ve actually got an interest rate now, which is 0.75%, which is amazing.
What else could we do? We make extra repayments. If we just follow the standard, “My repayments are $300 a week. I’ll just do that for 25 years.” Well guess what? It’s going to take us 25 years to pay off our home loan, right? So making extra repayments is going to help pay off our home loan faster. So then, we’ve brought the question, “Do I buy an investment property?” Well, you could be clever and buy an investment property that is positively cash flown at say $50 a week or worst case scenario, it doesn’t cost you anything.
Therefore you’ve got another property, not costing you anything, which still means you’re able to pay off your home loan just as fast as you were anyway, but now what you’ve got is you’ve got the advantage that this investment property might actually grow in value and build equity, which then will allow you to gain more wealth. Now what we do is we try to buy multiple investment properties with the premise being that we’re hedging our risk.
So, if one property doesn’t grow, we’ve got another property, and if that one grows well then we’ve got a buffer. We buy a third one, and that one grows, well two out of the three then growing in value, and if they’re all not costing us anything to run, perfect. It still allows us to make extra payments into our mortgage.
There’s companies out there that talk to you all about this, including ours, and it’s all about making the extra repayments, building up the equity, which allows you then to buy another investment property, and then another investment property, right? And the whole gain is having a diversified portfolio, which was spoken about in other videos as well. So when it comes to, “Do I pay off my home loan or buy an investment property?” I would say, “Let’s consider doing both at the same time concomitantly.”