Paying down Rental Unit Mortgage?

[Michael Limjoco]

Hi all,

I'm new to these forums and heard of it through Jaime Tardy's interview with Josh Dorkin. It was like the heavens have opened for me and here was this wonderful resource I had been missing all along!

I was hoping for some guidance on a matter.

My wife and I have two rental units (townhomes), and a primary residence. The combined mortgage on all three properties is around $438K.

Our household income is more than enough to comfortably cover all three mortgages, even without the rental income, although both properties have been rented for a long time and pull in good rents.

We have, over the last two years accumulated enough in savings to pay off one of the mortgages. This cash is separate from our emergency fund (which we don't touch), so this isn't something that would leave us without a lifeline.

My question is this: should I pay down the mortgage or use the cash to further leverage myself with additional units? Alternatively, I know I could use the cash to flip units, but I don't have experience with that at this time.

What made paying the mortgage off attractive was that if we did this, we would be able to free up enough cash flow to pay down the remaining properties within four years, and that point, it's a straight up cash game to purchase additional units. We also would be completely debt free if we did this.

But it's also a slow-burn kind of process, and interest rates are still relatively low that I feel like that might not be a smart thing to do.

I was wondering what everyone thinks because there are obvious pros and cons.

Thanks in advance.

Mike

[Chuck Holland]

I would pay off my personal residence first. That's an instant monthly expense reduction and you can start saving that extra cash for your next deal. Mortgage interest deduction be damned. Have a free and clear home and not paying interest to the bank well makes up for it. Just my two cents. Good luck and it's sounds like you are well on your way!