Summary

In this episode, the hosts challenge the conventional wisdom that paying off a mortgage is the best financial strategy. They share their personal experiences and financial strategies, illustrating how leveraging a mortgage can lead to greater investment opportunities and cash flow. The discussion covers the benefits of refinancing, the importance of understanding good versus bad debt, and the necessity of experience in real estate investment. The hosts encourage listeners to rethink traditional beliefs about mortgages and investments to achieve financial freedom.

Chapters

00:00 Rethinking Mortgage Payoff Myths

02:18 Leveraging Personal Residence for Investment

05:49 The Power of Cash Flow and Equity

08:30 Investment Property: Mortgage vs. Mortgage-Free

15:25 Understanding Good Debt vs. Bad Debt

19:26 The Importance of Experience in Real Estate Investment

Contact Jessilyn and Brian Persson | Weekend Wealth Investments:

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Transcript:

Jessilyn Persson (00:04)

In today's episode, we're flipping the script on a popular belief. The notion that paying off your mortgage is inherently better. And we're going to talk about two actual investments in our life that illustrate the difference. This episode was inspired by a notion that we keep seeing over and over again with our clients and friends. The idea of having no mortgage. Most of us were raised with the belief that you should pay off your mortgage as fast as possible. Well, we've learned differently.

and the two scenarios that we're going to detail will show the difference, which will allow you to make a more informed decision on your mortgage. So the first one we want to talk about is your personal residential mortgage.

Brian Persson (00:46)

And yeah, not just everybody else out there, but us as well. We were ⁓ told by our parents that paying off your mortgage is kind of your number one priority in your financial life. But we're going to show a little bit about why that's not entirely true. And we did go down that path when we first started ⁓ with our property. We tried very, very hard to pay it off until we discovered a different way.

Jessilyn Persson (01:11)

Yeah, we were, and I think we've shared this on multiple podcasts, we were, think, too much shy of being mortgage free before we actually decided to, instead of pay it off, we refinanced, pulled it out and bought property.

Brian Persson (01:28)

Yes. Yeah. So we want to work through some actual numbers in this podcast. So just so you can really see the financial difference that it creates by using the finances and the leverage that you have available for you in your personal residence versus actually just paying that off and then not using that leverage for any type of investment.

So as we just mentioned, we were very, close to paying off our personal mortgage and our mortgage had started at about 350K, but when we refinanced it, we were able to buy up to $2 million worth of property. So we now had $2 million worth of mortgages instead on those investment properties. But the portfolio is now cash flowing at $2,800 a month.

which was ⁓ almost or is now almost double our original mortgage payment. So we're actually paying our original mortgage and we are cash flowing and putting money in our pocket because we actually borrowed from our personal residence.

Jessilyn Persson (02:39)

Right and I mean it gives us cash flow as well as we have you know The interest that we have against our residential property because we borrowed against it is right off. Yeah, right So there it's not like our expenses enough necessarily went up because we have a bigger mortgage because those costs are being covered by our tenants

Brian Persson (03:01)

Yeah, the costs are being covered by our tenants, yeah. And then the added benefit is that seven years down the road after we refinanced our property, so this is seven years down the road today, and now we are able to buy apartment buildings from the original portfolio that we bought when we refinanced our personal residence. And now that $2 million in property has turned into $4.5 million in property.

So the contrast there is that now today we could have had $500,000 and actually specifically $570,000 in equity, or we could have refinanced as we did seven years ago and have $4.5 million in value of our properties. Plus the portfolio is now cash flowing with the apartment buildings at $6,000 a month. So if we had

If we had paid off our personal residence, we would have been saving about $1,000 a month, as in not spending it. Instead now, we are earning $6,000 a month with the exact same amount of equity.

Jessilyn Persson (04:16)

Yeah, that's a whole mind shift, I think. I mean, to think like, ah, everyone I know their safety net is I'm going to be mortgage free. So, you know, if something happens to my job or my husband's job or the family income, I don't have a mortgage. I can still live in my home. if you flip that switch and went the route we went, it's like, oh, if I don't have a job or don't have family income, I'm still making $6,000 a month off my investment properties.

to help pay down my mortgage, but also supplement other bills that still come whether you have a job or not.

Brian Persson (04:53)

Yeah, and not only that, our real estate portfolio has some leverage still in it. So if we had a really disastrous situation where we still had like the $6,000 a month wasn't enough to lean on, we have some stuff to lean on, like some credit to lean on inside of our real estate portfolio. So not only are we not just saving $1,000 a month if we had paid off our personal residence, but

We have that 6,000 plus we have the ability to leverage if, you know, there is a disaster in our life of some sort.

Jessilyn Persson (05:31)

Yeah, and the good news is this is a rinse and repeat story. So like as we grow these portfolios, we can refinance as the price goes up, pull that money out and buy more apartment buildings and just keep building our cash flow. And to a point where I mean, working outside of of course, our real estate portfolio would be optional.

Brian Persson (05:54)

Yeah. And you know, the first round took us seven years, but the planned second round for refinancing and buying, buying like upping our game again is about five years. I think it's going to happen in less probably about four, but then, you know, the next round after that will be two years. And all of sudden you're, you're on this, hockey stick of a, of a climb and your $1,000 in saving is now turning into just this.

huge multiplier on your income.

Jessilyn Persson (06:27)

Yeah. And upping our game isn't just adding another apartment. It's continually into double our portfolio. So as you mentioned, we went from...