What's the carrying cost on the loans? If you're talking 1980's era, I'd probably be looking to close them down, but if you're running in the 5% +/- range, your borrowing costs are already low enough to probably make that effective rate in the 3% range with tax benefits. I have a mix of both. Cash is a great thing to have, though.

@Mick Regan, It depends on your strategy. Are you looking to acquire more rentals? Keep your cash liquid. Otherwise, decide if being equity rich / cash poor suits your interests.

Do you need your DTI lower to buy more using cheaper money, why not use the tenant's money to eliminate some mortgages? If you think you'd be set with 7 paid off properties, go for it! Or take a year or two off and have some fun? All depends on what your goals are. The pros are more income, less debt/risk. Cons are, you'll have to receive that increase in income longer to recoup the principle you paid down. Losing liquidity for negligible increase in income (no income during the pay-down period). If everything is going fine, just keep hoarding cash for purchases.

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Updated over 8 years ago on 09/19/2016. Most recent reply

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Mick ReganPoster

Investor
Eldridge, IA

Buying & Selling Real Estate

Pay off houses?

Mick ReganPoster

Investor
Eldridge, IA

Posted September 19, 2016 08:02

I have 7 rental properties and have accrued cash in the bank. Should I keep putting rent into the bank or pay off the mortgages? What are the pros and cons?

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Pay off houses?

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