Lower payment vs greater cash flow? Advice

[Alan Jones]

Looking at finance options on a MF home and struggling with either getting it paid off in 10 years at 3.375% or stretching the loan for 30 at a rate of 4.125%. The difference in the monthly payment is $347 dollars. In our current market do you get it paid free and clear fast or low with more cash flow? Seeking advice.

[Thomas S.]

Assuming most of us can achieve a 10% or better return on investments in real estate every dollar you pay down on a 3.375% mortgage is costing you 6.62% loss on return. Take the 30 year, pull out every penny you can at renewals and maximise your investments.

There is zero logic in paying down a mortgage on a rental when doing so costs you more in lost opportunity than you gain. Think of a income property as having two income streams. One the rental property and the other a return on the equity in the property. If the equity can potentially generate a 10% return then paying down a property will in effect reduce the return on the property. Paying off a property does not increase cash flow with todays interest rates it has the opposite effect of reducing cash flow once you account for the return on equity. 

Additionally, although I am not big on advocating the advantages of appreciation, 5 properties worth 300K each with 20%down will produce 5X the appreciation as 1 paid off 300K property.