Pay off rental or invest in more properties?

[Don Bessette]

I own 2 single family rentals, one is Zillowed at 156K with a 118K mortgage at 3.41% 12 years remaining.

The other Zillows @ 141K with an 86K mortgage, same rate and term.

I'm 61 and planning on retiring in 5 years with no debt.

My home is paid for and I max my 401K every year, I have cash available to pay off the 118K on the first property and use the savings toward the other property and pay it off in 4.5 years, giving me about $1800 a month gross rental income.

does this make sense?

[Thomas S.]

Burying cash in a income property will turn the property into a liability. It will result in the lowest possible ROI compared to almost any other investment. Paying off a mortgage defeats the advantages of investing in rental properties.

A better option would be to invest the cash in a income fund or moderately aggressive mutual fund.

If you are going to have dead equity sitting in a income property you would be farther ahead to sell them when you retire.