Why Paying Off Your Mortgage Might Be the Smartest Move You Haven’t Considered: Insights from Coach Chad Carson

In the real estate world, you’re likely familiar with the mantra “Leverage, leverage, leverage.” Using debt to scale faster is practically rule number one for investors looking to build wealth. But what if that strategy doesn’t apply to everyone at every stage? What if there’s another way that involves less risk, less hassle, and ultimately, more freedom?

Coach Chad Carson, author of Small and Mighty Real Estate Investor, shared a perspective that challenges the traditional approach to real estate investing. In a recent Youtube episode, we explored why paying off your mortgage early might actually be the game-changer that many investors overlook. Spoiler: It’s about more than just numbers—it’s about reclaiming your life.

1. The Classic Leverage Strategy—And Its Limitations

When you’re starting out as a real estate investor, leverage is essential. You can’t buy a million-dollar property outright—unless you have a trust fund lying around somewhere (which if you do…call me). So, you borrow money, minimize your down payment, and acquire as many properties as you can. It’s a proven strategy—leverage allows you to scale quickly and grow your wealth exponentially.

However, as Chad points out, there’s a downside to this approach that not many investors consider. The more properties you acquire, the more debt you accumulate, and that comes with risks. Market downturns, vacancy issues, or unexpected expenses can quickly turn your leveraged empire into a house of cards. Remember 2008? Yeah, so does Chad, who lived through the Great Recession while holding 33 properties.

Here’s the kicker: leverage might help you grow, but it doesn’t necessarily mean you’ll keep all the wealth you’ve built. As Chad puts it, “Once you’ve built a mountain of wealth, the goal should be to not lose it.”

2. The 3 Stages of Real Estate Investing

Chad outlines three distinct stages that investors typically go through on their journey. Each stage requires a different mindset and strategy, particularly when it comes to debt.

• Starter Phase:
  This is where leverage is your best friend. You’re trying to acquire as many properties as you can with limited capital, so borrowing is essential. Think of it as the “building blocks” phase. Leverage allows you to scale faster, but there’s always the risk of overextending yourself.
• Builder Phase:
  Once you’ve acquired a few properties, you’re in growth mode. Your focus is on maximizing your return on investment and continuing to scale. Here, leverage still works, but it’s important to be strategic about the debt you take on. You want to grow, but you also want to protect your assets.
• Harvester Phase:
  This is where things get controversial. Chad suggests that once you’ve built a solid portfolio, it’s time to shift focus from growth to stability. Rather than taking on more debt, the goal here is to reduce your financial risks, maximize cash flow, and—here’s the best part—actually enjoy the fruits of your labor. In other words, it’s time to harvest the wealth you’ve built and live your life.

This shift from growth to harvest is where paying off mortgages becomes a key strategy. Imagine owning five properties outright, with no mortgage payments eating into your cash flow. The income from those properties could provide financial freedom without the stress of managing a bloated portfolio.

3. The “Small and Mighty” Investor: Why Less is More

One of the most intriguing ideas Chad presents is the concept of the "Small and Mighty" investor. The goal isn’t to accumulate as many properties as possible—it’s to achieve your financial and lifestyle goals with the fewest properties possible. Sounds counterintuitive, right?

But let’s break it down.

Many investors believe that more properties = more wealth. But Chad argues that it’s not about quantity; it’s about quality. A smaller, well-managed portfolio can often outperform a larger, heavily leveraged one in terms of cash flow, stress levels, and—importantly—time freedom.

Chad shares his personal story of scaling up rapidly early in his career, acquiring over 30 properties in just a few years. But instead of feeling successful, he found himself overwhelmed by the sheer volume of work and responsibility. It wasn’t until he shifted his focus to a smaller, more manageable portfolio that he found true financial independence—and the time to actually enjoy it.

“I wanted the minimum number of properties that accomplished my goals. If I can get there with five properties, that’s better than 50 because it frees me up to do what I really want—play basketball, travel, and spend time with my family,” Chad explains.

This mindset shift is critical for long-term investors who value their lifestyle just as much as their wealth.

4. The Power of Pruning Your Portfolio

So, how do you transition from a growth-focused portfolio to one that’s primed for harvesting? The answer is pruning. Much like trimming a fruit tree to help it grow stronger, Chad suggests that real estate investors should “prune” their portfolios by selling off underperforming or high-maintenance properties and using the proceeds to pay off debt on the remaining ones.

Here’s a practical example: Chad tells the story of a couple who owned 15 properties but struggled to generate enough cash flow to leave their jobs. Instead of holding on to all 15, they sold five of the least profitable ones and used the proceeds to pay off the mortgages on the remaining 10. The result? They now have 10 properties free and clear, generating enough income to live comfortably without the need for full-time jobs.

This strategy not only increases cash flow but also reduces risk. By eliminating debt, you make your financial position more secure, especially in times of economic uncertainty. As Chad says, “Once you have enough wealth, the goal is to not lose it.”

5. Why Return on Equity (ROE) Matters More Than Ever

Another key concept that Chad introduces is Return on Equity (ROE). It’s not just about how much cash flow you’re generating from a property, but how efficiently your equity is working for you. If you have a property that has appreciated significantly but isn’t producing much cash flow, it might be time to redeploy that equity into a better-performing investment.

For instance, if you have $500,000 in equity tied up in a property that’s only generating a few thousand dollars a year in cash flow, that’s not an efficient use of your capital. By selling the property and reinvesting the equity in more cash-flowing assets (or paying off debt on other properties), you can significantly boost your financial returns without taking on additional risk.

6. The Emotional Side of Paying Off Debt

Let’s be real—paying off a mortgage doesn’t just make financial sense; it provides emotional peace of mind. Chad admits that paying off debt can feel counterintuitive for real estate investors who are trained to always leverage up. But there’s something to be said for the peace that comes from owning a property free and clear.

“In 2019, we decided to pay off our personal residence, even though it didn’t make ‘sense’ from a financial standpoint. But when COVID hit in 2020, that decision gave us peace of mind. We didn’t have to worry about our house—we could focus on managing the business.”

Owning a home without a mortgage offers security and freedom. It reduces stress and allows you to take more calculated risks in other areas of your life or business because you know your foundational needs are covered.

7. Conclusion: The Balance Between Growth and Security

Ultimately, the decision to pay off your mortgage—or not—comes down to your personal goals and where you are in your real estate journey. There’s no one-size-fits-all answer, but Chad’s approach offers a compelling alternative to the traditional growth-at-all-costs mindset.

If you’re looking for a strategy that gives you financial independence and the freedom to enjoy it, consider Chad’s advice. Prune your portfolio, pay off some debt, and focus on living your best life—not just building a bigger one.

By the way, if you want the full color and context of this conversation, then you’ll want to head over to the Robuilt Youtube channel to watch the full interview.

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