Pay off the property soonest or buy new asset ?

3 Replies

Hi all,

I bought my first investment property in 2018 as a cash deal in Indianapolis and the second one I bought in Kansas this year with a 30 year mortgage (6,75%), now should I pay off sooner the mortgage or should I use my cash in order to buy a new investment property?

@Jan Van der vorm   This question comes up repeatedly on BP.  You can search for different opinions.  Basically it comes down to what your goals are and what you are comfortable with.  Where I am 6.75% is high for a traditional mortgage.  Look at your numbers and see if you'd be better off paying it down quickly or saving and buying another property.

It's just a question of math.

How much are you making, how often do you have to make moves with assets and how much do those moves cost you in time and money.

In very basic terms, whatever you pay down at 6.75% will guarantee you a return on your investment of 6.75%. Not paying 6.75% is the same as making 6.75% tax implications aside

Are you going to make more than 6.75% on another deal? Possibly, and once you factor in time and work to that deal is your effective return from that deal the same as 6.75% in passive income or savings?

Passive 6.75 is pretty nice.  Doing real estate deals is not passive income, you're working for it.  Mortgage money is available because many people with assets like having stable investments.  You should start thinking of why they're so happy to have you paying them 6.75%.