Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Creative Real Estate Financing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 8 years ago,

User Stats

93
Posts
85
Votes
Edit B.
  • Rental Property Investor
  • Sacramento, CA
85
Votes |
93
Posts

Paying off Properties and Using Equity Line of Credit vs Not

Edit B.
  • Rental Property Investor
  • Sacramento, CA
Posted

Hi guys, I'm interested continuing my investing using the BRRR strategy. I currently have a duplex that was financed at 4.75%. I've recently began accumulating some substantial amount of cash and I'd like to get some pros and cons to paying off mortgages and using an equity line credit vs not paying off the mortgage, paying interest on the cash at all times.

Scenario-1:  Paying off mortgage entirely, and following up by a 75% to 80% equity line of credit

Pros: Not paying interest, stability, significantly increased cash flow. Aside from those, using a HELOC you will then have 80% of equity at hand in cash available to invest on your next property. Paying interest only when you are using the cash(mostly a pro in my opinion)

Cons: You will have slightly less cash available(20% less). You are taking on further risk if market declines- this was risk that the bank was previously owning

Scenario-2: Not paying off mortgage entirely, paying interest, and using your available cash for a new property.

Pros: You will have 20% more available cash than Scenario-1, thereby more purchasing power for your next deal. You will be taking on less risk in case of a downturn as your property will be mostly financed. 

Cons: You are essentially paying interest at all times. Not only when you are using the money. That has a significant impact on cash flow(low cash flow). Less financial stability as cash flow will need to be higher for there to be profit.

Please share any thoughts

Loading replies...