Did Floyd Mayweather Get Knocked Out In Real Estate, As TheStreet Claims?

“Floyd Mayweather Got Knocked Out in Real Estate By Not Taking a Mortgage” screams the headline on this article at the TheStreet.com. The article would have us believe that the billionaire boxer has made a huge mistake by paying for a $26 million Beverly Hills mansion in cash, rather than taking out a mortgage.

Some celebrities have chosen to adopt a debt-free tactic: boxing champion Floyd Mayweather recently bought his $26 million mansion in Beverly Hills with cash. But he may have dealt himself a stiff blow.  Eliminating that monthly payment may seem like a good idea to avoid accruing interest and to remove clutter in your personal finance, but for most of us, having extra money on hand is helpful for emergencies such as floodwaters damaging your home and car. That’s not to mention the fact that investing that money for the long-term will deliver better results for you that exceed the cost of your mortgage payments.

So let’s get this straight. Mayweather got “knocked out”. He “may have dealt himself a stiff blow”. Why?  Because he took a tiny percentage of his wealth and bought his house outright instead of borrowing money? What an asinine assertion! The article may be right that for many people with much smaller net worth that the value of liquidity suggests that a mortgage is a good thing. This may be especially true of low interest debt in a time of rising inflation. That certainly is not true for Mayweather and, Ellen Chang, the article’s author, loses all credibility by making such a preposterous claim. Mayweather is fine, and will be fine, relaxing in his fully paid for, $26 million mansion. And you may also sleep better at night in your paid off house- even if taking on additional risk might have yielded you a better return.

Want some real advice? Buy a house you can afford. There are lots of advantages to having a mortgage, but leverage always entails risk. There is no such thing as a free lunch, and if you have the means to own your house outright without impacting future liquidity needs, then it may make a lot of sense for you to do so. As it does for Mr. Mayweather.