In need of advice for an accidental real estate investor

[Ellen Nodine]

HI - - With no real strategy in place, my husband and I have ended up with three properties - two we rent long term and one we live in. We own two townhouse rentals free and clear (Value about $450k each) and took a $250K Liquid asset line of credit (at 1.5%) to buy the home we're in now (a 1952 fixer-upper - which we've almost completed - current value $450+). 

The $250K LAL is due in June 2024, so trying to figure best way to pay that off. Take a traditional mortgage on our home? Sell assets (stocks, etc) to pay it off? Sell one of the rentals?  Get a short-term loan and wait for mortgage rates to go down? 

We've read a lot about the diversity of assets - some say no more than 25% in real estate, others say it depends, etc. We're about 65% real estate now. 

If we sell one of the rentals, we'll have  $200K profit so there will be tax implications.

Other consideration - we're two years from retiring and it's nice to have the cash flow that rentals provide...

Would love to hear ideas from you all! 

Thank you!

[Greg Scott]

Despite not having a strategy, it sounds like real estate has done very well for you.

It is clear that I come from a very different philosophical position on my real estate investments, so I suspect you would not like my approach.  I would never have paid-in-full real estate.  There are several reasons 1) it diminishes your returns 2) your cash is locked up and unavailable in an emergency 3) paid-in-full rentals are a magnet for lawsuits and fraud and 4) it limits your tax benefits, assuming you use the extra cash to buy more rentals.

With that in mind, I would just get a 30-year mortgage to pay off the LAL. There is no point in getting a short-term loan because you can always refi the long-term mortgage later if rates come down. Furthermore, I'd also put mortgages on your other real estate, even if it is just 50% LTV. You can use that cash to buy more rent properties. Alternatively, you could use the cash to diversify assets.