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Updated over 16 years ago on . Most recent reply
paying off the mortgage- the best strategies?
Ok so I would like expert opinions on the best mortgage options for rental/income producing properties. If I have a positive cash flow prop, is it wise to apply the positive cash to the mortgage principal? does that help pay a 30 yr fixed down any faster or is it not really worth it and I should just pocket the leftovers? Im not an accountant and I hate math but RE is such a numbers game and Id just like to know the smartest ways to finance a rental portfolio. Also are 5/10yr interest only mortgages worth it if Im planning on selling a property only a few yrs after acquiring it for a nice return? do smart investors use int-only for short term investments?
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![Frank Adams's profile image](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/596/1621345501-avatar-all_cash.jpg?twic=v1/output=image/cover=128x128&v=2)
When I was younger I took a good look at where my investments (non REI), "job" prospects and the rest of my financial situation were heading. I decided to make everything that I had coming in then (peak earning years) do the most they could for my future (declining income years).
I decided that interest was an expense I did not need or want. I started slamming every extra nickel I could onto my LOWEST BALANCE LOAN. In hindsight it wasn't every nickel, I still kept around $5K or so in my checking account, ready cash, and had some of my "investment" portfolio in money markets funds and CDs.
Once I had paid off the lowest balance loan, I started in on the next lowest balance one, when it was gone the next one. By the time I was 45 I had 15 rentals FREE AND CLEAR. At that time we found a house that would be ideal for us, we didnt' have great cash reserves but we had a killer income stream. We actually took out a 95% LTV loan and paid PMI, but we only paid it for 3 months! We only paid on the mortgage for about 30 months before we paid it off.
Being "all cash" is a great way to live. I worked hard for a lot of years to build up my investment portfolio, both REI and equities. Now they are repaying the favor and supporting me.
all cash