Payoff mortgages or buy additional rentals?

[Melody Wright]

I’ve been struggling with what my next move should be. My goal is to get out of my 9-5 ASAP, and have my real estate investments replace about $4k of my income. I’m leery of being highly leveraged, but also dreading the idea of staying in the rat race for another 10 years. Two opposing desires.

I already have 1 paid off rental house that nets appx $1000 after taxes/maintenance/vacancy/etc. I did open a $125k HELOC in order to facilitate purchasing future houses if I needed it, but I have not used it yet. It took me about 5 years to pay off this house while working my 9-5.

I currently am live-in rehabbing/house hacking a second home that will turn into a rental later this year. When rented, this should net about $500.

I’m caught between these options as I can see it:

1) throwing all effort into paying down house 2’s mortgage. Would likely take another 3 years working the 9-5, but would then net about $1000. So by year 2023, I’ll have replaced $2k of my income. Repeat the purchase and pay-off method, with each house being expedited by the additional income of the houses before, but will likely take 9 years and I will have to stay at the 9-5 to cover personal expenses. Slow, Low leverage.

2) leave 2nd house's mortgage in place. Use HELOC/personal savings/etc as down payment/rehab budget for third rehab to rental, hope for $200-300 additional income. Repeat yearly or quicker, stay at job for another 5 years or so to cover personal expenses. Year 2021-$1700-$1800, 2022-$1900-$2100, ect. Moderate speed, Moderately leveraged.

3) save enough money to cover a year or so of my personal expenses, leave 2nd house's mortgage in place. Quit job, throw caution to the wind, and use the HELOC to rinse and repeat the BRRRR strategy? Highly leveraged, fast, could bite me in the butt when the savings runs out if I haven't made enough progress.

I know this is ultimately a personal decision based on risk tolerance, but I’d appreciate any words of advice from those further along in the journey. The goal is financial freedom as quickly as possible without having 50 doors to manage that only $50 a piece.

Thanks!