Need Advice / Pay Debt down or get 2nd Deal
Rental Property Investor · Wichita Falls, TX · Member since 2018 · 353 posts · 79 votes
I'm looking for some advice on the best move here. I recently did a cash-out refi on one LTR and am selling another, which should net me around $40–50k. I currently have $37k in debt: $15k on a 0% credit card and $22k on an interest-only business line of credit. Part of me wants to wipe out the LOC (and maybe all the debt) and strengthen my balance sheet, keep solid reserves, and then look for another deal from a safer position. The other part of me wants to use the cash to acquire a second STR now and use the cash flow over the next few years to pay down the debt, aiming to be debt-free while holding two strong properties long term. My goal is to be in the best position possible in 2–3 years. For those who've been in a similar spot, would you prioritize cleaning up debt first or leveraging into another deal? Any tips on how you'd approach this strategically?
Because in my mind I'd love to get a second deal but with that I know comes stress and some unwanted expenses but long term it can really do wonders. Just have to be conservative with it.
You are not really choosing between “debt free” and “second deal.”
You are choosing between stability and velocity.
Here is how I would think about it strategically.
First, look at the nature of the debt.
• $15k at 0 percent is not urgent.
• $22k interest only LOC is risk. Variable rate, callable, and psychologically heavy.
That LOC is the weak link in your balance sheet.
If you net $40k to $50k, you could:
Option A. Clean slate approach
– Wipe out the $22k LOC immediately.
– Keep the 0 percent card until promo ends.
– Maintain strong reserves.
– Rebuild liquidity.
– Hunt for the next deal from a position of strength.
Option B. Aggressive leverage
– Keep the LOC.
– Use proceeds for STR down payment.
– Rely on projected cash flow to service debt.
– Accept higher stress and thinner margin for error.
Now zoom out to your stated goal: best position in 2 to 3 years.
In a 2 to 3 year window, liquidity and optionality matter more than raw door count.
If you eliminate the LOC:
• Your DTI improves.
• Your stress drops.
• Your risk profile improves for lenders.
• You protect yourself if STR performance underwhelms.
STR income is not guaranteed. It is seasonal, regulatory sensitive, and expense heavy. Layering that on top of consumer and business debt increases fragility.
Personally, I would:
Kill the LOC.
Set aside 6 months reserves across properties.
Keep the 0 percent card until expiration, but have a payoff plan.
Reevaluate in 6 to 12 months with a stronger balance sheet.
There will always be another deal. There is not always another clean reset opportunity.
Wealth is built by controlled leverage, not constant leverage.
If you cannot comfortably carry both properties and all debt through a bad 6 month stretch, you are scaling too fast.
Strength first. Then scale.
You are not really choosing between “debt free” and “second deal.”
You are choosing between stability and velocity.
Here is how I would think about it strategically.
First, look at the nature of the debt.
• $15k at 0 percent is not urgent.
• $22k interest only LOC is risk. Variable rate, callable, and psychologically heavy.
That LOC is the weak link in your balance sheet.
If you net $40k to $50k, you could:
Option A. Clean slate approach
– Wipe out the $22k LOC immediately.
– Keep the 0 percent card until promo ends.
– Maintain strong reserves.
– Rebuild liquidity.
– Hunt for the next deal from a position of strength.
Option B. Aggressive leverage
– Keep the LOC.
– Use proceeds for STR down payment.
– Rely on projected cash flow to service debt.
– Accept higher stress and thinner margin for error.
Now zoom out to your stated goal: best position in 2 to 3 years.
In a 2 to 3 year window, liquidity and optionality matter more than raw door count.
If you eliminate the LOC:
• Your DTI improves.
• Your stress drops.
• Your risk profile improves for lenders.
• You protect yourself if STR performance underwhelms.
STR income is not guaranteed. It is seasonal, regulatory sensitive, and expense heavy. Layering that on top of consumer and business debt increases fragility.
Personally, I would:
Kill the LOC.
Set aside 6 months reserves across properties.
Keep the 0 percent card until expiration, but have a payoff plan.
Reevaluate in 6 to 12 months with a stronger balance sheet.
There will always be another deal. There is not always another clean reset opportunity.
Wealth is built by controlled leverage, not constant leverage.
If you cannot comfortably carry both properties and all debt through a bad 6 month stretch, you are scaling too fast.
Strength first. Then scale.
You are not really choosing between “debt free” and “second deal.”
You are choosing between stability and velocity.
Here is how I would think about it strategically.
First, look at the nature of the debt.
• $15k at 0 percent is not urgent.
• $22k interest only LOC is risk. Variable rate, callable, and psychologically heavy.
That LOC is the weak link in your balance sheet.
If you net $40k to $50k, you could:
Option A. Clean slate approach
– Wipe out the $22k LOC immediately.
– Keep the 0 percent card until promo ends.
– Maintain strong reserves.
– Rebuild liquidity.
– Hunt for the next deal from a position of strength.
Option B. Aggressive leverage
– Keep the LOC.
– Use proceeds for STR down payment.
– Rely on projected cash flow to service debt.
– Accept higher stress and thinner margin for error.
Now zoom out to your stated goal: best position in 2 to 3 years.
In a 2 to 3 year window, liquidity and optionality matter more than raw door count.
If you eliminate the LOC:
• Your DTI improves.
• Your stress drops.
• Your risk profile improves for lenders.
• You protect yourself if STR performance underwhelms.
STR income is not guaranteed. It is seasonal, regulatory sensitive, and expense heavy. Layering that on top of consumer and business debt increases fragility.
Personally, I would:
Kill the LOC.
Set aside 6 months reserves across properties.
Keep the 0 percent card until expiration, but have a payoff plan.
Reevaluate in 6 to 12 months with a stronger balance sheet.
There will always be another deal. There is not always another clean reset opportunity.
Wealth is built by controlled leverage, not constant leverage.
If you cannot comfortably carry both properties and all debt through a bad 6 month stretch, you are scaling too fast.
Strength first. Then scale.
You are not really choosing between “debt free” and “second deal.”
You are choosing between stability and velocity.
Here is how I would think about it strategically.
First, look at the nature of the debt.
• $15k at 0 percent is not urgent.
• $22k interest only LOC is risk. Variable rate, callable, and psychologically heavy.
That LOC is the weak link in your balance sheet.
If you net $40k to $50k, you could:
Option A. Clean slate approach
– Wipe out the $22k LOC immediately.
– Keep the 0 percent card until promo ends.
– Maintain strong reserves.
– Rebuild liquidity.
– Hunt for the next deal from a position of strength.
Option B. Aggressive leverage
– Keep the LOC.
– Use proceeds for STR down payment.
– Rely on projected cash flow to service debt.
– Accept higher stress and thinner margin for error.
Now zoom out to your stated goal: best position in 2 to 3 years.
In a 2 to 3 year window, liquidity and optionality matter more than raw door count.
If you eliminate the LOC:
• Your DTI improves.
• Your stress drops.
• Your risk profile improves for lenders.
• You protect yourself if STR performance underwhelms.
STR income is not guaranteed. It is seasonal, regulatory sensitive, and expense heavy. Layering that on top of consumer and business debt increases fragility.
Personally, I would:
Kill the LOC.
Set aside 6 months reserves across properties.
Keep the 0 percent card until expiration, but have a payoff plan.
Reevaluate in 6 to 12 months with a stronger balance sheet.
There will always be another deal. There is not always another clean reset opportunity.
Wealth is built by controlled leverage, not constant leverage.
If you cannot comfortably carry both properties and all debt through a bad 6 month stretch, you are scaling too fast.
Strength first. Then scale.
The debt vs deal dilemma hits different when it's your money on the line. Simple math: what's that LOC costing you vs expected STR returns? How flexible is your timeline if the STR takes months to stabilize?
The debt vs deal dilemma hits different when it's your money on the line. Simple math: what's that LOC costing you vs expected STR returns? How flexible is your timeline if the STR takes months to stabilize?
Get the STR. Here's the math: You're sitting on 0-50k from liquidity events, you have 7k in total debt, and you're weighing paydown vs. acquisition. The 0% credit card is a red herring -- that's free money, leave it alone. The 2k LOC at interest is what matters. If you can get an STR producing 00-800/month in cash flow, you're paying off that LOC in 3-4 years while the property appreciates and you build equity. That's way better than using capital to reduce debt when debt is cheap and assets produce income.
The real play here is clear: Keep 0-12k in reserves (do this first), pay off 5-18k of the LOC to get breathing room, then deploy the remaining 2-15k into a down payment on the second property. You're not "leveraging into debt" -- you're being strategic about which debt you keep. The mortgage on the property is good debt if it's underwritten properly. An interest-only LOC is bad debt -- that's the one to kill.
Two STRs with strong cash flow fundamentals beat one property with a zero-debt balance sheet every time. You'll be further along in 3 years with this approach because you're stacking income, not just parking capital.
What's the cash flow you're modeling on the second STR? Is it in the same market as your first, or are you looking at a different area?
Hi Nathan from Wichita Falls, TX-
Great question! You just did a cash out refinance on one property and selling another property. You asked should you pay off existing debts and buy the second property from a stronger position or buy the second property now with leverage and use cashflow to pay down the debt.
First, having one paid off house can provide as much cashflow as two leveraged houses and your risk tolerance and sleep may prefer that. However, using leverage to buy more property will have you further ahead now with your ROI and later as you pay down debt and your equity and rents increase.
Keep in mind that when using leverage, short-term debt should be used for short-term projects and long-term debt should be used for long-term projects.
To Your Success!
James's answer above is solid -- I'd kill the LOC. That variable-rate business line of credit is a noose around your neck, not leverage. It's callable, it could spike at any moment, and mentally it's eating your sleep at night. That's worth the 2k.
The 0% card is free money until promo ends, so ignore it for now. Your real decision is whether your cash flow from the STR is strong enough to justify holding 2k of interest-only debt while you scale. Spoiler: It usually isn't. One slow winter, one major repair, one regulatory change (like Denver's STR crackdown), and suddenly you're sweating.
But here's the real question: What's your reserve situation right now? If you net 5k and blow 2k on the LOC, you're sitting with 3k liquid plus whatever reserves you already have. If that's not covering 9-12 months of all your payments + capex, you're one setback away from stress. And that's on property you already own. Adding a second deal on top of that is risky.
I'd clean slate first (kill LOC), add 0-15k to reserves, then hunt for deal #2 in 6-12 months. Your lenders will respect the clean balance sheet way more than they'll respect your multi-property portfolio with a hot LOC hanging over it.
After you kill the LOC, what does your 12-month reserve math look like across both properties?