Who here is paying off their long term rentals?

[Andrew Neal]

I know many of the posts focus on the forums focus on max leverage for scalability and I get that and to a degree (especially in the beginning) agree that leverage can be great.

I am curious who in here is buying with either cash or buying with the intent of paying off the entire mortgage for max cash flow.

Would love to know your rationale behind the strategy.

[Steve Vaughan]

Originally posted by @Jay Hinrichs:

@Steve Vaughan  paging .

in areas of low asset values and high rent to purchase price values I like all cash.. mainly because tenant base tends to be tougher on the properties and the ups and downs etc. 

 Thanks for the page, Jay!

Before this turns into a 'you're stupid to pay things off' , ' fake cf' or  'dead equity' slant, I'll tell you my rationale.

Half my portfolio is paid off.  As my reserves and opportunity fund swelled and deal flow got too difficult to bother hunting down anymore, I started punching my higher rate and higher risk mortgages in the face.  Commercial loan bothering me for my financials again? Nah. Gimme a payoff quote.  Old 7.9% funky commercial hybrid house loan?  See ya.  And so on.

Most of mine are commercial and in LLCs since day 1 so the asset protection already is in place.  If a house, I slap a new d of t on it to at least appear encumbered at first glance.

Glad I paid off what I did.  The cf increase was equal to buying another 15-20 units in my market now.  Even after buying another one with cash in June I still have an opportunity fund and reserves.  An awesome snowball, building while I do other things. 

I wouldn't spend down through reserves to pay off a mortgage, especially if a low fixed rate below 5%.  Nor would I start until I had at least 5 properties (I started at 36 units), but higher rate and higher hassle loans going bye bye has been nothing but a good thing for me.  All loans I accelerated were above 5.75%, most in the 6s, one 7.9%.