few options to invest 350k please help!
Member since 2026 · 14 posts · 8 votes
few options to invest 350k please help!
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesI'm firmly in one camp. I think it is foolish to pay off a rental property. Why? Here are my reasons:
- Paying down a mortgage at X interest rate is the same as investing cash at X interest rate. Most mortgages have a fairly low interest rate and I can make much more than that with smart investments.
- A paid-in-full property is a target for ambulance chasing attorneys
- A paid-in-full property is a target for title fraud (Listen to David Greene's podcasts on the problems he had in FL)
- You expose much more income to be fully taxed because depreciation cannot offset enough of the income. If you do the math, you are typically better off owning two properties at 50% leverage than one property paid-in-full.
- Cash poor and equity rich gives you very little flexibility in uncertain times. I always want a nice chunk of cash for unforeseen opportunities
I know that many people disagree with my philosophy. That's OK. Go for it.
20 Replies
- 5moGreg ScottPro MemberRental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
I'm firmly in one camp. I think it is foolish to pay off a rental property. Why? Here are my reasons:
- Paying down a mortgage at X interest rate is the same as investing cash at X interest rate. Most mortgages have a fairly low interest rate and I can make much more than that with smart investments.
- A paid-in-full property is a target for ambulance chasing attorneys
- A paid-in-full property is a target for title fraud (Listen to David Greene's podcasts on the problems he had in FL)
- You expose much more income to be fully taxed because depreciation cannot offset enough of the income. If you do the math, you are typically better off owning two properties at 50% leverage than one property paid-in-full.
- Cash poor and equity rich gives you very little flexibility in uncertain times. I always want a nice chunk of cash for unforeseen opportunities
I know that many people disagree with my philosophy. That's OK. Go for it.
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes5mo
What are the mortgage rates on the current properties you have in your portfolio? Return on equity would be a useful metric to look at. Are you more focused on growth or consolidation?
If you were to pay down $120k in debt and get $20k more cash flow, that's a 16.67% return on your investment. Very strong so that's probably what I would do in your situation.
Option #1 - if you did this, including 2.5% for closing costs you would be looking at a 6.39% CoC return/yield. Not great but not terrible. You should be able to get a higher return if putting 25% down.
Option #2 - under these assumptions with 2.5% for closing costs your CoC return/yield would be 4.47% so I wouldn't recommend this option.
- Member since 2026 · 14 posts · 8 votes5mo
First of all, I want to thank you for your time and for giving me a path... This is a very hard decision, but there is one more factor I forgot to mention. I'm constructing, and all rehabs I can do very cheaply... That's why I'm considering paying off my current debt and buying a condo for cash and doing a full rehab... But somebody told me this is not smart because I'm still stuck with the HOA... which is 400/500 per month... and I should scale the portfolio...
but I see the market prices for door plus 6 %avg, and this makes me crazy, and I don't want to make a bad move.
Regarding my credit rate... I have 4,25% and 4,50% 60/60k to pay
- 5moMasoud ArouniPro MemberInvestor · Pleasanton, CA · Member since 2026 · 119 posts · 52 votes
@Greg Magiera the construction background you just mentioned changes the math significantly and nobody has addressed that yet.
Paul's CoC calculations are correct on paper but they assume you are paying market rate for rehab labor. If you are doing the work yourself your actual cash in on Option 1 drops materially. A 50K rehab that costs you 15-20K in materials and your own time gives you a completely different return on equity than the 6.39% Paul calculated. That number could realistically be 9-11% with your cost advantage factored in.
On the condo with HOA concern, whoever told you that was right. A 400-500/m HOA on a cash-purchased condo is a fixed expense you cannot control or eliminate. It also caps your upside because buyers and appraisers discount HOA-heavy properties. Your construction skills are worth much more deployed on a property without an HOA where you can force equity and control all the variables.
The real question given your situation is not debt paydown versus acquisition. It is where your construction skill creates the most leverage. A distressed non-HOA property that you can rehab cheaply and either rent or refinance is where your unfair advantage lives. Option 1 as structured gets you closest to that if the property is right.
What type of properties are you most comfortable rehabbing: residential, light commercial, or both?
- Member since 2026 · 14 posts · 8 votes5mo
I have extensive experience in high-end residential work, and I occasionally take on commercial work.
- Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes5mo
Look for a 3 unit at 25% down and then put some money into cosmetic updates so can get the rents high. Where in Chicago? I work a lot on north side Chicago and 99% of my clients prioritize growth vs paying down properties. You get a much higher total return when using debt/leverage and it gives you the opportunity to cash out refi to capture your profits tax free every few years.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes5mo
Wow love the amazing position you are in @Greg Magiera! Amazing work to get those properties paid down.
I think @Henry Lazerow is right, if you are still trying to grow the portfolio moving forward then using the bank's money as leverage is the best way to do it! There's obviously also more risk in that scenario, so I think it's a very personal decision.
I've personally always been bigger on the appreciation play, but it's also left me feeling cash broke, which in my opinion hasn't been worth it - but several years from now I might say the opposite lol
Greg - What's your why behind real estate and what do you want to do with your money?
Quality Builders4.966 Reviews - Rental Property Investor · Emmaus, PA · Member since 2021 · 153 posts · 85 votes5mo
If you aren't living off the cash flow, or don't need to increase it, then I would lean towards buying the biggest property you can to add to your portfolio. As long as it is a sound investment, you will pay off the loan with income from the property and should add to your monthly cash flow as well.
The important aspect of this is that you now have another asset in your portfolio that is appreciating year after year.
Paying off your current property gives you cash flow today, yes, but, your asset base remains the same. If you're playing a long term game, I would buy the additional property knowing that 15-20 years from now you will have a larger portfolio than you do today and it will be all debt free.
- 5moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 954 votes
Quote from @Greg Magiera:
I’m trying to decide between a few options and would appreciate input from experienced investors.
I have about $350k available.
Current situation:
- I own 3.5 rental units (1.5 already paid off)
- If I pay down ~$120k more, I can eliminate remaining debt on part of the portfolio and increase my cash flow by about $1,700/month (~$20k/year)
Other options I’m considering:
- Buy a property cash (~$180k + $50k rehab) → estimated ~$15k/year cash flow
- Buy a 3-unit (~$650k, 25% down) → estimated ~$8k–10k/year cash flow
All numbers are conservative and based on current rents and expenses.
My main question:
From a long-term investor perspective, would you prioritize guaranteed cash flow (debt paydown) over acquiring new properties with lower returns but potential appreciation?Curious how you would think about this in today’s market.
omg!! What to do?
With $350K, you’re really choosing between certainty and growth, and neither answer is wrong, it just depends on what role you want your capital to play. Paying down debt to boost cash flow is the “safe compounding” route, especially if you value stability and simplicity right now. On the other hand, acquiring new assets, even with lower initial returns, keeps you in acquisition mode and gives you more long-term upside through scale and appreciation. A lot of investors in today’s market lean toward balancing both, but when they do buy, they often look at Midwest markets where entry prices are lower, and returns are a bit more forgiving, which helps reduce risk while still growing the portfolio. The key question is whether you want to optimize for certainty today or position for expansion over the next cycle. - Member since 2026 · 14 posts · 8 votes5mo
Thanks everyone for the input and for taking the time to comment — I really appreciate it.
From a long-term perspective, I do agree that continuing to grow the portfolio probably makes the most sense. However, my main question still feels unresolved.
How do you personally evaluate today’s market conditions?
When I look at the bigger picture — global uncertainty, ongoing conflicts, fuel prices — and then bring it back to real estate… current property prices make me feel somewhat frozen when it comes to making decisions.
I’m genuinely curious how others are looking at this right now:
1. Is investing today risky or even irrational because prices are already so high, with a real possibility of a correction similar to 2008?
2. Or are today’s prices simply a reflection of a new reality, and we might still be in the early stages of further growth?
Honestly, if I could jump into a time machine, I would — it feels incredibly difficult to predict even the near future, let alone where things might be in a few years.
Would love to hear how you’re all thinking about this.
- Member since 2018 · 1k+ posts · 1k+ votes5mo
Paul de Luca pointed out the return on paying down debt was 16 percent. Add to that the fact that we live in interesting times. There is a move to restrict evictions and lift the ban on rent control (capping increases for now) due to families that got hammered by ICE raids directly or indirectly.
In interesting times, I keep my powder dry. What are your cash reserves now? What about using $60k to pay down debt with the other $60 k in reserve until the political and economic situations become clearer?
- 5moMasoud ArouniPro MemberInvestor · Pleasanton, CA · Member since 2026 · 119 posts · 52 votes
Greg, the frozen feeling you're describing is rational, not weakness. Most experienced investors felt the same in 2011, 2016, and 2019 and the ones who waited for clarity largely missed the next run.
On your specific question: 2008 was a credit crisis, not a price crisis. Lending was structurally broken. Today's market is expensive because inventory is structurally constrained, builders underbuilt for a decade and zoning hasn't caught up. Those are different problems with different outcomes.
That said, your construction background changes your risk calculus completely. You don't need the market to be cheap, you need a property that's mispriced relative to its condition, which exists in any market. Your unfair advantage is turning a distressed asset into a performing one cheaper than anyone else in the room can. That opportunity doesn't disappear in a high-price environment, it actually concentrates in it, because most buyers can't stomach the rehab.
The investors who get paralyzed by macro uncertainty are usually the ones without a specific edge. You have one. The question isn't whether the market is rational, it's rather whether you can find one property where your skills create value nobody else can replicate at your cost.
What markets are you focused on: Chicago only or are you open to surrounding areas?
- Member since 2026 · 14 posts · 8 votes5mo
Mainly, I focus on the suburbs...
I've done a lot of calculations, and I have a pretty good idea. I can share, and you guys can tell me if I'm wrong...
I will find two single condos... HOA no more than 380 per/m, tax around 4k, insurance 430 per/y
I'm going to put 55% down on both and do full remodeling for 45K each... total investment, including closing, etc., 270k
Result:
Two extra properties in my portfolio / 55% paid and almost 16K per year return.
Good deal?
For multi... is not a good time... more headache, much more fore renovation to get the same amount back....
On condo min, I will ask 1900 per month rent ... typically multi are located in bad areas when you want to buy something at a fair price....
I know HOA is a killer, but if you calculate tax, maintenance (landscaping, all season... garbage damages on exterior, other expenses...), at the end my idea wins at this moment...
Any more ideas?
- 5moVijay FriedmanBusiness MemberMiami, FL · Member since 2026 · 766 posts · 123 votes
Quote from @Greg Magiera:
I’m trying to decide between a few options and would appreciate input from experienced investors.
I have about $350k available.
Current situation:
- I own 3.5 rental units (1.5 already paid off)
- If I pay down ~$120k more, I can eliminate remaining debt on part of the portfolio and increase my cash flow by about $1,700/month (~$20k/year)
Other options I’m considering:
- Buy a property cash (~$180k + $50k rehab) → estimated ~$15k/year cash flow
- Buy a 3-unit (~$650k, 25% down) → estimated ~$8k–10k/year cash flow
All numbers are conservative and based on current rents and expenses.
My main question:
From a long-term investor perspective, would you prioritize guaranteed cash flow (debt paydown) over acquiring new properties with lower returns but potential appreciation?Curious how you would think about this in today’s market.
omg!! What to do?
With $350k available and existing rentals, I’d compare these options based on risk-adjusted return, not just cash flow.
Paying down debt gives you a predictable return and improves monthly cash flow, but buying another property may create more long-term upside through appreciation, rent growth, depreciation, and future refinance options.
I’d run each scenario using cash-on-cash return, remaining liquidity, debt service coverage, reserves, and opportunity cost. In today’s market, I’d be careful not to use all available capital unless the new acquisition clearly beats the guaranteed cash-flow improvement from paying down debt.
- 5moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Greg Magiera:
I’m trying to decide between a few options and would appreciate input from experienced investors.
I have about $350k available.
Current situation:
- I own 3.5 rental units (1.5 already paid off)
- If I pay down ~$120k more, I can eliminate remaining debt on part of the portfolio and increase my cash flow by about $1,700/month (~$20k/year)
Other options I’m considering:
- Buy a property cash (~$180k + $50k rehab) → estimated ~$15k/year cash flow
- Buy a 3-unit (~$650k, 25% down) → estimated ~$8k–10k/year cash flow
All numbers are conservative and based on current rents and expenses.
My main question:
From a long-term investor perspective, would you prioritize guaranteed cash flow (debt paydown) over acquiring new properties with lower returns but potential appreciation?Curious how you would think about this in today’s market.
omg!! What to do?
Leverage is the only way you really make money in real estate.
If you're going to payoff your properties, you might as well sell them and invest in securities.
Logical Property Management4.9460 Reviews - Member since 2026 · 14 posts · 8 votes5mo
@Drew Sygit I understand you saw my first post, but perhaps you should review my latest one.
- 5moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Greg Magiera:
@Drew Sygit I understand you saw my first post, but perhaps you should review my latest one.
Doesn't change anything.
Many conservative people want to pay off their rentals to feel "safe" and "max cashflow".
Nothing wrong with that, but it is a VERY conservative strategy.
Do the math on your ROI with a paid off rental - you might as well sell and put in bonds.
Leveraging your cash with bank money, that you can then tax deduct AND have tenants pay the payments on that bank money boosts your ROI dramatically.
Also, did you know if you do a cashout refi on a rental, the funds are income tax-free until you sell?
- If you keep doing that and leave the rentals to heirs, they get the stepped-up tax basis and may not pay any income taxes on their inherited rentals.Logical Property Management4.9460 Reviews
I just recently decided to actually look into the concept of infinite banking, but for the longest time I simply wrote insurance off as a scam and felt like insurance agents were just greasy and/or shady. Now that I've started researching the benefits of insurance in conjunction with REI, I'm obsessed - ha! I think there are some good ways for you to defer/avoid/minimize taxes - @Austin Johnson would you like to chime in here?
- Investor · Phoenix, AZ · Member since 2025 · 40 posts · 20 votes5mo
@Lee Burns thanks!
@Greg Magieratheres tons of great tax moves you can do with insurance & real estate; Genreally speaking, I've found locking large amounts of cash up cash in properties inefficient, it's not doing much as equity & market conditions have a vote on what moves you can make; you can put some of that cash to work while it funds your investments too
Structure is crucial
Personally, I do about 4 turn keys a year with my whole life policies; the cash value finances the down payment, then my cash flow pays off the cheap debt to the insurance company. Your capital remains intact & grows tax free inside your policy even while you apply leverage
Partial 1031s & cash out refi capital is captured in the policies, then leverage again to buy more doors
I stack private lending notes as well playing positive arbitrage with my policies; helps out with the thinner cash flow margins on the turn keys
It's a great augmentation to many plans; helps solve lots of issues RE investors run into (idle cash; high taxes; expensive LOCs)
Long story short: I used to do 1 property a year using bonds/hysa to save for rental down payments, now I do 4+ ...main thing I changed is how I stored my capital
Hope this helps; these are good problems to solve!
- 5moBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
If you are still in expansion mode, I would consider option 2 or 3.
If the $8,000 to $10,000 cashflow projection includes principal paydown, I would go with this option.
You are slightly more diversified having 3 units compared to 1
The cash required to complete the project is less
Best of luck
Basit Siddiqi CPA4.979 Reviews
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