What is the best way to pay down your first property?

Question

I just purchased my first rental property this week. I put 20% down and my loan amount is not too bad. My question is, should I take extra from the passive income to pay the loan down faster in an attempt to acquire another property faster or just make the minimum payments and be patient? I also have recently gotten a HELOC. I have had some people tell me not to use it unless I can pay what I borrow within 6 months. Others have told me I can use it and then refinance. I am brand new so I would love different opinions. I met with my realtor and have created a 5 year plan but I would like to accelerate it if at all possible. Maybe I am just being to impatient. Any advice would be appreciated. Thanks everyone!

Account Closed · Answer

Don't pay it down. Let inflation do that for you.  (pssst - it's what the federal government is doing with our national debt)

Jason Wray · Answer

Will,

First off not every opinion is perfect or geared towards your goals.  I would just take a little time to come up with a comfortable game plan based on cash on hand, equity, and time line.  There is nothing wrong with being impatient and wanting to fill that urge to buy and accumulate more REI.  There is no need to rush to pay off your rentals because the market can fluctuate and that equity can go up and down.  As long as you have enough equity to pull out you can always use it to buy more investment properties.

Heloc's are good for small projects but not so great for using as a down payment (in most cases).  Get rid of the HELOC ASAP because a liability is not as good as cash in the bank.  If you have 10-20% in any of your properties I would suggest pulling the trigger on buying what ever fits your fancy!

Will Stewart · Answer

Johnny,  funny you say that. I just watched a video on the exact same thing that advised just as you did. Like I said in my post, I am just anxious to really get this off the ground and moving. Thank you for your reply.

Will Stewart · Answer

Thanks Jason. I am not using the HELOC at this time but figured it was better to have it ready and not need it than need it and not have it. I have had one person suggest paying off the mortgage with the HELOC and then just make the payments on it as they assumed it would be at a lower rate. However, I have another person that suggested only using a HELOC if I know I can pay it off in no more than 6 months. I am admittedly not a numbers guy and am relying on a lot of different input. Thank you for your reply.