using your cash to payoff a rental property

[Lou Francis]

GOOD MORNING  JUST A  QUICK  QUESTION   ABOUT  SAVING  ON  INTEREST  PAYMENTS ON  RENTAL  PROPERTIES . 

WOULD IT BE GOOD IDEA TO PAY  OUT   A RENTAL  HOUSE  AND SAVE ON THE INTEREST  ON THE LOAN OR  LET  THE  LOAN RIDE  AND  CONTINUE  TO MAKE PAYMENTS  LONG TERM ?  JUST  HAVING  AN  ISSUE  WITH  THIS  QUESTION THANKS  FOR  ANY  GOOD  ADVICE

[Kelly N.]

Hi Lou,

It depends on your goals- is your goal to have a payed off rental property or to invest in more (or something else)?  

Our goal is to continue to invest, so we use the cash flow to fund the next down payment.  Loans are cheap right now and I can make more on rental property than I save if I pay off a low interest loan.  For example, my lowest loan balance is about $47k with the principal and interest portion of the mortgage payment being only $247.  I can get much better cash flow than $247 by purchasing another property worth almost $200k with the $47k as my 25% down payment.  We are using the leverage to gain more cash flowing property, and allowing the renters to pay down the principal over time.

Kelly