Paying of Mortgage or invest in index funds? investor question non US national

Real Estate
#1

Hi,

I have 2 mortgages for rental properties in the US, both at 6% interest rate (best rate for international buyers). Both townhouses are rented and the mortgage-taxes-condo are cover, I do not make any money today, but expenses are 100% covered. (one mortgage is 145 KUSD, other 115 KUSD).

I do have around 400K USD in cash, some money in the stock market and planning to place additional money in Index fund. However, I question myself on the decision to paid off the mortgages or actually put an important additional capital payment to bring the debt down to half at least.

Any recommendation on the investment strategy under this condition? (when I bought the townhouse, I did not have the cash I have today, I was recently laid off, and got some additional cash).

Options in my mind:

  • Keep the money “available” in case of additional opportunities (real state), market dip, entrepreneurship option. and Keep the rentals to paid off themselves… loosing cash flow today…
  • Other is to paid as it will be difficult to beat the 6% interest rate with. the index fund.
  • I am not american, So I do not have access to IRA, retirement accounts, etc.
#2

Hey @luis_unet!

I would probably pay off those mortgages. The rates are pretty high. A guaranteed 6% is hard to beat, plus it reduces your risk. Once you have not mortgages, you’ll have two little cash machines kicking off money every month. You can save that up for another real estate purchase, or plow that into the market for lots more growth!

#3

Thanks, good advice.

I did something in the middle. I pulled 100K from the stock market and paid off 50k each mortgage. I feel more confortable with less money in the stock market by now. However, I still not invested as I believe there will be a market dip in the next 6-8 months. Pending 200k… (no working for me) until the water is clearer.

I know is not a good decision not to be invested, but how bad I can be for a 20’30 years strategy to wait few more months?

Regards,
Luis