We buy all of our properties with Hard Money and refinance immediately after the rehab in order to limit our cash in the deal, our Cash On Cash returns are always above 20% and our equity Capture is always at least 50% of our cash outlay in Houston. Once you pay down/off a mortgage your tax liabilities go up drastically, because you no longer have the mortgage interest to cover the portion of the income that your depreciation doesn't cover. You also are limited with only 1/5th of the appreciation that you would receive if you used leverage and purchased a minimum of 5 properties with the cash you have in 1. Many people also don't realize if they have a paid off house vacant, it is just as bad as a leveraged house, for multiple reasons: if it rents for $1,300/month, you have essentially lost $1,300 if it isn't leased, you will also always have to pay property taxes and insurance and for the described property that would probably be ~$350/month. Remember, all you ever save is the interest that you pay of the mortgage, because you'd have to pay taxes and insurance already, and the principal goes back into your networth as equity. On a $130,000 house leveraged at 75% LTV at 5% interest, that is only $406/month, historically real estate appreciates at 5% a year, since appreciation is based on the total value of the property, not just the leveraged amount it more than makes up for the interest payments.