Should I buy more or pay down the mortgages?

5 Replies

I'm fairly new at being a REI. I closed on my first SFR in January of 2017. I now have 3 SFR and 1 triplex. So, 6 doors.

I put at least 20% down on each. I have two with 5/1 ARM's and two with fixed rate, 30 year mortgages.

The mortgages are roughly $36K, $70.5K, $75K and $162K.

I'm retired with a pension and I have 2 PT jobs. My wife is still working FT.

I also have a HELOC with about $20K on it.

I'm 50 years old. Currently, I'm paying a tiny bit extra on each mortgage. I'm building up a cash reserve for each property. And, if I had an expensive emergency, I can get the funds to cover it.

So, I'm trying to figure out my best game plan. Do I try to pay off the $36K mortgage quickly, say in 2-5 years?

Do I just continue to pay a little extra on each one.

Do I save so I can pay cash for a BRRR house or maybe a $45K renovated, move in ready house or do I take that same money and just pay off the $36K mortgage?

@Mark K. Given that you’re retired and 50 you probably don’t want debt for the next 30 plus years. So I would pay off the low mortgage first and then go from there

@ Caleb Heimsoth, one thing I forgot to mention is that I'm currently saving roughly 60% of my pension.  I just started one very PT job that pays not much, but I can put all of that cash either in savings or pay down a mortgage. 

Part of me says if I currently have close to $17K in annual positive cash flow, after expenses and vacancy's, repairs and cap ex held out, that I should pick up another 2-3 house to get that cash flow over $25K. 

The other part of me says to pay down and off the $36K mortgage and HELOC, and then get more rentals, perhaps paying cash for them. Or, close to paying full cash if house is $45K or so.

Get as many homes as you can afford, then start to pay them down.  I just paid off my first property this year and love how much extra cash flow that has created.  I am all about simplify life as you get older, especially if you have kids. I want to leave a large paid for portfolio to our kids, not a mountain of debt.

@Mark K. I would agree with @Caleb Heimsoth recommendation. You're 50, semi-retired and aggressively saving. Plus, if you pick up additional hours you will be crushing it. 

You could always lever up but you don't have the luxury of time or income to support you in case things go awry. At most, I would add one or two extra properties that you can afford and go from there. 

A bird in hand is worth two in the bush!

I agree with @Alex Craig and @Omar Khan . You can probably expand a little bit more. 

A total debt of 343k doesn’t seem over extended. A lot of people have that much debt on their primary residence.

I’d say pick up 2-3 more with mortgages then start paying them down.

OR if you want the higher level of involvement, build cash to start using the BRRR strategy.