NEED ADVICE/FULLY PAID FOR UNDERPERFORMING ASSET/CHICAGO

[Eduardo Alfaro]

Hello,  I am a small investor, looking to put the accelerator and grow my portfolio (3 properties so far).  I own a small condo in downtown Chicago, this unit has been a great rental  as it relates to continously being occupied.  Having said that I bought this property about 14 years ago, and it has not appreciated at all, it went down during the 2008 financial crisis, and now before the pandemic it had come up to about where i Bought it.  It doesn't cost me any money and gives me some passive income, after expenses it gives about 5% ROE.  I don't necessarily want or need to sell, but I feel I could do more doing a cash out refi. Questions 1)  ultimately is the goal to have your properties paid off to increase the cash flow, or it is better to use more leverage to build up the portfolio eventhough the total cash flow could diminish?  2)  would you just get out of this market and look for greener better locations? What is your opinion about Chicago?

tks in advance

[John Warren]

@Eduardo Alfaro I agree that your condo probably won't go up a ton more. Most condos are actually down right now and a bit harder to sell, although we just listed and sold one in North Kenwood that sold with multiple offers in a week. Mostly your value and ability to sell is tied to price point. If yours is more affordable (less than 250k) then you will have an easier time selling if you go that route. 

As to the goal of paying off properties vs using debt, I think this is a function of your age and risk tolerance. I personally use a lot of leverage since I am on the younger side and am trying to grow my equity position. If I was nearing retirement and was looking to retire I would be paying things down and conserving cash reserves. There is no right answer here, but I ultimately will never pay everything off as I plan to pass this portfolio to my family some day so the debt will just keep helping the portfolio grow.