advice wanted on use of excess cash flow

[David Ackerman]

Hi all. Here is my current situation

Property 1: A recently purchased SFH in Raleigh. I put 20% down and have a 4.62% mortgage on the other 80%. The property cash flows $200/month. I have $4,000 in reserves for vacancies/repairs/assessments.

Property 2: I am planning on using my HELOC from my home to purchase a 2nd property. The current rate is 2.75%. My goal is to use the HELOC for 2 years and then do a cash-out-refinance.

If I go this route, then my 2nd property will cash-flow $550/month ($6,600/year) if the prime rate stays the same.

So, here is my question: What should I do with this excess cash-flow? My initial plan was to use the extra $6,600/year to pay down the 4.62% mortgage on my 1st property. But, now I am questioning if that is a smart move. Why should I pay off a mortgage that is at historical lows? At 4.62% that is extremely cheap money for an investment property. Would I be better off using that excess money for a down payment on a 3rd property?

THNX,

Dave

[Mitch Kronowit]

Originally posted by David Ackerman:

What should I do with this excess cash-flow?

Very simple - send it to me!!! :mrgreen:

Seriously, in the current climate, I am more inclined to leverage my cash than pay off debt. Yes, I am doing both, but I'm placing far less capital towards debt, which should get paid off just fine if and when inflation rears its ugly head, and allocating the majority towards financing at these super-low rates.