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Ask Dave

Pay Off House Or Buy Real Estate?

Bob has $160,000 in a money market account that he should use to pay off his mortgage before investing in more rental properties.

QUESTION: Bob has $160,000 in a money market account.  Should he use this toward his mortgage or should he use it to purchase some more real estate?

ANSWER: If you have worked your way up all the Baby Steps, you should then pay off your house completely and very quickly.  Then with no payments and the increased cash flow, you can keep piling up money and buying rentals.  This is a great wealth-building tool. 

You just shouldn’t borrow against your personal residence to buy rental property.  Always pay cash for investments – especially in real estate.