Rental Property Investor · Member since 2018 · 10 posts · 2 votes
Hi all,
I bought my first investment property in 2018 as a cash deal in Indianapolis and the second one I bought in Kansas this year with a 30 year mortgage (6,75%), now should I pay off sooner the mortgage or should I use my cash in order to buy a new investment property?
@Jan Van der vorm This question comes up repeatedly on BP. You can search for different opinions. Basically it comes down to what your goals are and what you are comfortable with. Where I am 6.75% is high for a traditional mortgage. Look at your numbers and see if you'd be better off paying it down quickly or saving and buying another property.
Las Vegas, NV · Member since 2016 · 133 posts · 53 votes
7y
@Jan Van der vorm I'd say let your tenants pay down your mortgage and use the rest to buy more rentals. Time is precious and it is on your side as long as you focus on building now than later.
Lender · Lewis, CO · Member since 2017 · 218 posts · 159 votes
7y
It's just a question of math.
How much are you making, how often do you have to make moves with assets and how much do those moves cost you in time and money.
In very basic terms, whatever you pay down at 6.75% will guarantee you a return on your investment of 6.75%. Not paying 6.75% is the same as making 6.75% tax implications aside
Are you going to make more than 6.75% on another deal? Possibly, and once you factor in time and work to that deal is your effective return from that deal the same as 6.75% in passive income or savings?
Passive 6.75 is pretty nice. Doing real estate deals is not passive income, you're working for it. Mortgage money is available because many people with assets like having stable investments. You should start thinking of why they're so happy to have you paying them 6.75%.