Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
I had the bank wire the money today to pay off my first rental that I bought in Dec 2010. I paid $96,000 for it and put 25% down. I have been using the cash flow from my other 7 rentals to pay down this mortgage. Now I have an extra $400 a month to go towards paying the next one off!
Mark -- that is great. I have told many investors that is the way to go. I think a good strategy is to pay several off, then use the equity in those houses to buy more houses...then pay those off too.
Personally, I use my 30 year loans to cover the little cash flow I get on my 10 year mortgages and 15 year mortgages.
There are a lot of gurus who preach "create the lifestyle you want" by adding cash flow leveraged real estate to your income or even worse, quit your job and replace with leverages loans. In my opinion, that is dangerous.
Your strategy to pay down the 5 year ARM as quickly as possible seems to make sense.
Would your strategy be different if all your loans were fixed 30 years at 4.5%? Would you still accelerate your pay down?
Suppose all of your mortgages were 30 year fixed totaling $500,000 and your cash position is $500,000. Would you still pay off all of your mortgage at 4.5% or would you try to beat the 4.5% with $500,000 cash in other investment vehicles i.e. dividend stocks.
@James Park yes, my strategy would change if I had 30 year Fixed loans and I knew I could get as many as I wanted. I would be in no hurry to pay them off early. I would keep buying as many properties as I could.
For me, I'll never own a property free and clear because I want to increase my portfolio as fast as possible. I typically re-finance at 60% LtV and buy another property or 2. But I have a buddy that's doing the same thing. He wants enough paid off properties (around 10-15) to fund his retirement. Once he has a certain amount of income each month, he's done. He wants 10-15 paid off properties that just fund his travel around the world. Everyone has their own strategy and I can tell you're excited about having the first one paid off, so congrats again!