Christian Osgood and Cody argue against both "never pay off debt" and "pay it all off immediately." Instead, they recommend a stair-step approach: build cash-flowing properties to hit an income target, pay off those mortgages, then scale again. Each debt-free property becomes a foundation for the next acquisition.
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Should you pay off your mortgage? There's a lot of answers on this. Some people say yes, some people say no. We don't say either of those things. We'll explain this in today's video.
Welcome back to the channel. My name is Cody. This is Christian, and we're talking about should you pay off your mortgage? The right answer is yes, but it depends when, because there's a business cycle and you do— you should pay it off. However, not right away.
Now, before we get deep into this, a lot of people, especially in the online space, are saying never pay it off, never pay it off, lever to the moon. Oh my gosh, you're going to get taxed.
Yeah.
You will get taxed more if you're borrowing less dollars. That is true. Just because you want to avoid taxes forever and scale forever, that's a good way to eventually implode. You don't scale forever because unfortunately you don't live forever.
You know what's worse than taxes? Playing the game twice.
Oh my goodness. And everyone does it. Even Dave Ramsey. Now granted, his whole thing was, hey, I'm just going to not do the debt thing again. But like, there's so many stories of—
we're seeing it all over the internet right now. Thousands of units are going back.
Yep. Oh, it's all falling apart, but I'm going to build it back stronger. And then the next round of your internet info influencers will be how I lost everything and how I've built it back. Don't be one of those. Build it right the first time. You know how much farther you go if you have all that time? If you don't have to build it twice, you build it right the first time, you have astronomically more time to move forward.
Now, saying just do it right is nice, but how do you actually do it right? You figure out what your income goal is. You go buy apartment or whatever asset class that you want to buy that fits your long-term goals, that gets a net operating income of your cash flow. And once you've built what you need, Dane, and then be able to do what you want, when you want, where you want. Pay it all off. Secure your base. And then you can play again with leverage if you want to. You can always borrow the money again. Nobody wants to pay it off.
Take a stair-step approach to it. So you're going to hit your first goal. Say it's $10,000 a month just for easy math. Trying to get $10,000 a month. You get to say $12,000 a month of gross rental income. That's going to pay some of the additional expenses. So it's like, okay, we're a little bit past our goal now. We're going to pay that all the way off. That is stair-step one. That is now a solid foundation when it's paid off. That doesn't mean that you can't keep buying and scaling over here. You're you're just going to put them in blocks and you're going to use these as solid foundations to move up. So while I'm building block 2, I'm paying down block 1. And as I'm paying down block 2, I'm building block 3. And you can stair-step up to insane goals, billions of dollars with this strategy. But every time you proceed and you hit a new goal, you begin the process of securing your base. And if you continue to do this, it is very hard to lose an asset that produces income if it has absolutely no debt. If it made money with debt, cash flow to debt, going to cash flow a a lot more without it.
And when it's done, it's done. And that's the beauty of this. You get it paid off, you don't have to do it again. You just get to collect checks. And it's not going to be the huge ROI that you're going to get when you go seller finance a deal with low to no money down. However, if you can buy real estate with low to no money down, you don't need money to go buy more real estate. Use it to pay off your debt as you're building your next block.
And there's a bunch of other ways to play the tax game. Like there's something Cody and I will do realistically. We'll probably do this through our entire career as we pay things all the way off. Yes, there'll be more income. That income will not be— won't have the same level of write-offs, interest that we pay in the different debt products. But what you can is things like cost segregation studies. We can go out and buy a building while we have all of our little and mid-sized buildings paid off, and the tax write-offs for that can be transferred through our global income. There are a ton of different ways that you can work on the tax game, and I know we're kind of sunsetting the cost segs. There'll be new strategies and things that come up, but tax management is important. You can stay highly leveraged and it will help with that, but the goal shouldn't be, hey, I want to avoid as much tax as I can for my entire life. It should be, I want to have the life that I want to live and I want to maintain my income. Then you can worry about tax second. The best and only way that I know from watching the other players in the market to secure it and never lose what you built is to eliminate your largest liability, which is typically going to be the debt on the asset.
And one last note on this: scaling just to scale is not cool. Get what you need to do what you want. Once you get there, get rid of the risk. There's no reason to stay levered if you can have everything you've ever one. Some people forget that and then they just keep scaling to the moon and wonder why they lose it someday. Don't leverage things you're unwilling to lose. So once you've built the life that you want to live, don't leverage it again. You can leverage new things, but make sure you have your base solidified.
Yep. One of my favorite sayings: start with the end in mind. Set a goal, knock it out, secure it. Set a new goal, knock it out, secure it. See how far you go. Don't lose. Don't go all the way back to zero and rebuild it. Keep moving forward because that's what really makes this fun. I think for every entrepreneur and every investor I've ever met, we love playing the game just as much as we love all the benefits and the financial freedom and all this stuff. The actual feeling of moving forward through your life is really important. Taking a huge step back is exactly what you want to avoid. It's more important to secure what you build. I'm not talking about playing defense before you play some offense, like get to your goal, then defend it, get to the next goal and defend it. That's how you win any game. That's how you would play any sport. That is how you win in the business realm.
And that's the lesson that we got from the person who sold us the Robinhood, that take some chips off the table so that Solidify your base just from another owner meeting. That's how we learn to play this game. It's not like we have some magic book, but there are magical people that can teach you magical things about the real estate game.
That's what we have today. I hope this landed. My favorite thing that Cody said was, when it's done, it's done. You note takers, I think that's the lesson.
Write that down.
Yeah, write that down. Write that up. It's a good piece. Write that down. When it's done, it's done. Know what you want to do. Secure what you want to do. Set a new goal. Repeat. It is that simple. It's 3 steps. If you want 3 more steps, like, subscribe, and follow, and we'll see you guys on the next video. Now, if there's one YouTube channel that you watch to learn creative finance, multifamily investing, I'm going to recommend Cody and Christian Osgood, Multifamily Strategy.
