You should be able to generate a greater return that your mortgage rates investing in real estate so paying off a loan would only decrease your profit potential.

In oregon they base financing on the property you get and the income generated by that property, so you have to have an accepted offer before you can get financing.  

I have a system that I know would generate some serious cash flow out here. 

A mechanics lien is worthless until you sell/refinance the property.It sounds like what the LO is trying to do is generate a ML for 90% LTV on a free and clear property and then when the refinance kicks in, they'd have to pay that off and you'd be stuck with a 90% LTV loan and have 90% paid out.This is straight up mortgage fraud and not legal in any way, shape, or form.If it sounds to good to be true, it usually is.

There are some very high priced areas that can generate some great returns.

Ideally if you could 100% finance all properties you would be at maximum return on each with the property being the only income generating factor.For many investors the hardest concept to grasp (many never do) is that investment properties have two income generating streams.

Also, I was thinking we could buy more properties with the amount of money he would use to buy the whole house and generate even more cash flow!

All those things you replaced in 2013/14/16 will eventually need to be replaced again, so add that to your numbers.If you sell it now, could you generate more cash flow transferring the equity into another property?

Call me to discuss how I can get rid of all these headaches and still generate income for you!"

My friend and I are partnering up and are interested in flipping single family homes to generate some capital and then building our portfolio with multi family rentals to generate passive income.