We owe over $1.3 million, but our buildings make money. What should we do?

Dear Dave,

My wife and I own three commercial properties. They are all leased out long-term. Currently, we owe about $400,000 each on two of the buildings, and a little over $500,000 on the other. The only other debt we have is our home mortgage, and we should have that paid off in two or three years. I know you hate debt, but how do you feel about owing on commercial properties that are consistently making good money?

Dean

Dear Dean,

From what you’ve told me, it doesn’t sound like you two need to shift into panic mode and start selling everything in sight. But I do 100% believe you and your wife should sit down together, and formulate a sensible plan that will enable you to systematically work your way out from under all that debt.

I own several commercial buildings. And guess what? I don’t owe a dime on any of them. Never have. So, based on that—and the other principles I teach teach—I can’t tell you I think it’s okay to have debt on commercial buildings. I believe the best plan for building wealth is to become completely debt-free.

If I were in your situation, Dean, I’d focus my energy on getting my home paid off first. Then, I’d take a look at the commercial properties and begin working the debt snowball on them. Start with throwing as much money as you can at the smallest debt, while making minimum payments on the other two. When you get the first one paid off, roll that amount over—along with every penny you can scrape together—and attack the second largest one. Continue following these steps until you’ve paid off all your commercial property.

In your case, it might take several years to get this accomplished. I mean, no matter what these properties bring in, we’re still talking about well over a million dollars in debt. And debt equals risk. If you have a bunch of equity in one you don’t particularly like, you might consider selling it and throwing the cash at the other two. But whatever the timeline, I’d develop a serious game plan to get rid of this debt as fast as possible.

— Dave