Mortgage almost paid on 3 unit rental - what next?

[Allison B.]

Hi, 

My wife is Allison, I'm her husband David.  We have a 3 rental unit in Park Slope, Brooklyn.  The 15 yr mortgage will be paid off in 3 years.  Right now we have 90% equity in the house.  We'd like to make another real estate investment now but not sure what to do.  We rent our current living space in Manhattan and don't have a lot of liquid equity on hand.  I figure my options are: 

A) do nothing and have mortgage free cash flow in 3 years, then save big time for our kids college (about 7 years from now).  

B) We could refi the house, buy another property and rent it that out.   Taking out a 15 yr. mortgage on both aiming be paid off when we're about to retire (at 65ish)

C) leave the Brooklyn property be and get another mortgage on a house that we move into.  Hack that house or quickly flip it.  Then try to buy another house either to live in or flip

D) Wait 3 years, move into the Brooklyn house and live for mortgage free and then make another investment

Anyone have any other ideas?  Part of me is really looking forward to not having a mortgage to pay a mortgage.

Thanks, 

David

[Thomas S.]

Very sad to hear all that equity is lying dead in your property likely reducing your cash flow to zero or less. Equity kills cash flow since all it is doing is saving the prevailing interest rate. It is likely costing you 5% - 8% annually in lost income.

You need to pull out all the equity and force it to earn it's keep in other investment properties.

Cash should never be allow to wallow in a investment property. It is disrespectful of it's true opportunity value and costing you a lot of money.

$100,000 is worth on average $833/month in opportunity value. When you deduct a 10% return ($833 for every 100K in equity) from your monthly rental income on the property what is your remaining positive cash flow. That number is your actual return on the property. My guess is your property is returning nothing or is negative cash flow.

This means that owning the actual property is worthless.