As you alluded to, you'll most likely get better quality tenants, which leads to faster tenant fill-in, less turnover, higher chance of rent collection, etc.

With your mortgage at such a low rate it makes no sense to pay it down faster with cash.

Phase 1 is the big picture, and it should come first.Money in your retirement account is already your money, and it is already invested in something, and it is growing in a tax-deferred environment, meaning that it grows faster.

Pros- inflation on a 1M house raises value far faster than a 100k home in a smaller home even at 3%Your broker commissions on a 1M house will also eat away much of that inflationary gain if you sell off soon.- Small Town: Your experience will all depend on a) quality of property you buy b) quality of tenants c) quality of property manager.

In the long run it will hurt me more than my tenants if I decide not to pay because as an investor my credit holds weight with lenders and that needs to be protected at all cost.

The faster you build equity the faster you can cash out refi and buy more!

However, as we live in the real world, investments don't always wrap up with a fairytale ending.Any investor worth their weight (even someone as inexperienced as me) knows that while projects are budgeted to include unforeseen expenses, hidden/unpredictable cost can throw your numbers into a never ending pit of despair.  

You can pay it down faster if you want, but by stretching it out, you payments are lower. 

I really hope I can work with him, but knowing this is a huge weight off of the shoulders.

I know for a fact that they weighted bad comps the most heavily and that similar houses in the area are worth between $210k-$230k. 4 of 5 comps used had a corrected value greater than the purchase price and the one below was well over a mile away in a less desirable neighborhood.