To Pay Off Or To Buy Another Property

[Zachary Farris]

Hello! My wife and I bought our first long term rental in March, 2023. It is currently Grossing approximately $500/month (net is $220). Its financed with an 10yr ARM at 5.25%, currently. Our primary home has a 2.5% interest. We are looking to expand, however we are finding that very difficult due to the current market. We have considered options such as long term, short term, and BRRRR. We started looking more seriously into short term and found a location which a friend is successfully renting short term (he has a lower interest rate than we can get now).

We have $90,000 to invest. So, my question is: Do we put our $90,000 down on a short term rental that (based on my friend's occupancy) would yield approximately $2,500-$4000 gross cash flow, or do we take that $90,000 and pay down the current rental. By making a lump sum principal payment on the current rental, we would save $126,973 in interest and own the home outright by 2030 (assuming we did not make any other principal only payments). We could probably own it outright by 2028 with additional payments each month.

My biggest concern is AirDNA is not real accurate. Looking at short term rentals, AirDNA gives a really high occupancy rate, however my friend (who is a super host on airbnb, all 5 star reviews) says that info is inaccurate, according to his bookings.

Any advise would be appreciated! Thank you.

-Zach and Karen