Deciding where to go from this point

[Isaac Isaia]

I am in Springfield, Missouri and have six investment properties.  I’m torn on which direction to go. I’m concerned how the economy looks moving forward and want to consolidate, but I also want to continue growing our portfolio and  I am weighing a few options and can use some guidance:

1. Should we sell a few properties and pay off the remaining properties?

2. Should we cash out refi on a couple properties which will allow me to keep the properties but still have some cash to prepare for our next move?

3. Should we pay off a couple properties, and work to pay down our remaining properties without adding debt to the properties and focusing on cash flow?

Any insight and advice will be greatly appreciated. Thanks!

[Max Householder]

Just my opinion here, not investment advice and I have no credentials, but if your properties are cash flow positive (at a minimum covering the mortgage payment and all expenses) then I would leave long term, fixed-rate debt in place as long as you can (i.e. make the min. payment and don't tie up idle cash in equity) especially if you are looking at a 20-year timeframe. The economy might suck for a while, but the Fed and global central banks more broadly have made a major policy shift over the last year, especially since COVID, they are opening the floodgates and intend to let the economy "run hot" above their "target" inflation rate for the forseeable future. The problem is there is too much debt globally, especially at the sovereign (country) level and the release valve for that is a debt jubilee of sorts by debasing/devaluing the currency. This has happened many times in the past and many times in US history. It always ends this way.

IMO, even if the economy is sluggish, asset prices should rise and inflation will come to commodities, food, sundries, and RENTS. This will have consequences in the remainder of the 2020 decade (think pitchforks and more economic populism) but for your purposes, this will mean inflating rents against a fixed debt payment. Now your expenses will surely rise in price as well, but for wealth-building purposes you'll be in good shape. You want to be a borrower right now (smartly, that you can afford and cover even with vacancies or a personal job loss) and NOT a lender in my opinion.

Also, Springfield should have some tailwinds as mid-sized metros should become more attractive as millennials form households and leave high-priced urban centers. This demographic shift from city to suburb was due to happen anyways, but with work from home becoming more popular, that just adds fuel to the fire. Why pay through the nose for a tiny apartment in downtown KC when you can get 3000 sqft and an a half acre in Springfield for probably the same or less per month and your boss doesn't care where you live?

I don't know Springfield city politics at all, but I imagine it's conservative overall so I doubt you'd see rent controls, eviction bans, punitive tax raises, disbanding police, etc. like you might in more liberal urban centers. Not a political comment on the merits of those things, just saying there are risks to owners of property/capital when economic populism drifts too far left. I would think Springfield would be a hold out there, certainly more than KC, STL, or Columbia. 

Just my $0.02, shoot me a DM if you want to talk further about any of these thoughts (not advice!).