I want to pay down $20,000 off the principal in the first year.Year 1 - I pay it down to $60,000 principal. 

However, we are struggling with whether to reinvest this money as cash or to pay down some principal on our primary mortgage and take out a HELOC to reinvest. 

The $108,500k includes the principal, interest, taxes, and insurance.

My stance is don't stand on principal.

In fact he is arguably in a better position since you have made payments on time, improved his credit, made improvements to the property and either stabilized or increased it's value, paid down the principal, caught up back payments, paid the taxes, etc. 

Why not save the money you would be throwing at the principal and invest that in your next deal? 

On top of $750 cashflow, are you also making more on the principal repayment? 

Now, in my dotage(I'm 44;) I look at the portfolio and can clearly see that the theoretically lower cap rate properties have been substantial outperformers over the years on the metric of cash flow- so I'm pruning the challenging(and capturing the principal appreciation, *wink wink*) to replace it with the chill. 

Ahh its like Principal and interest.

I noticed that when I calculated the numbers manually I could get the same NOI if I left out the monthly mortgage expenses of "principal & interest".