Pay off my personal home or buy another rental property

General Real Estate Investing
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Pay off my personal home or buy another rental property

Heidi M.
Rental Property Investor · Reno, NV · Member since 2013 · 77 posts · 31 votes

I going to be receiving a large sum of money in the near future.  Should I invest in another property or pay off my personal residence?

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Elizabeth Colegrove
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
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Everyone is going to give you a different opinion and it all depends on your comfort, job and financial position.

My husband and I are young in stable careers and are all about leverage. It is more important to use to build up our houses and rental properties than have a paid off house Therefore we would reinvest it into another rental. Therefore our investments look more like a faster moving line.

I know other who are at the end of their careers, have health issues, etc. Therefore while they want to grow it is about growing perfectly, safely as they grow as a complete fully paid of mass.

So it really depends on what YOU want as an end goal. Do you want safety or another asset someone is paying off.

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  • Jason McDougall
    Rental Property Investor · Decatur, TX · Member since 2010 · 128 posts · 33 votes
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    Hi Heidi! I think it would be wise to purchase additional rental properties with the additional money. If your mortgage interest rate is lower than 6%, then you can probably be making more than 6% on your $20,000 by investing in it real estate instead of using it to pay down your home loan. If you leverage yourself responsibly in real estate, you'll grow your wealth quickly!
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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Heidi M.

     is the large sum of money 20k  and is that what you owe on the house.

    there is something to be said about owning your home outright. 40% of all homes are free and clear in the US... and that is a good thing.

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  • Sam MasielloPro Member
    Investor · Commerce City, CO · Member since 2013 · 30 posts · 9 votes
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    What an interesting question.  My top of mind answer is that I think I would purchase additional investment properties and then use some of the cash flow to pay down the house faster.

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  • Heidi M.
    OP
    Rental Property Investor · Reno, NV · Member since 2013 · 77 posts · 31 votes
    11y

    I'll be receiving about 15 K, which is enough to pay off my home.  I'll own it free and clear.  

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  • Doug McLeodPro Member
    Investor · Cypress, TX · Member since 2014 · 496 posts · 205 votes
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    Hang on to the 15k and also do a cash-out refi on your house up to about 70% LTV (include closing costs in loan). Take the combined sum and use for a downpayment on an apartment complex - or several rentals.

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  • Elizabeth Colegrove
    Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
    11y

    Everyone is going to give you a different opinion and it all depends on your comfort, job and financial position.

    My husband and I are young in stable careers and are all about leverage. It is more important to use to build up our houses and rental properties than have a paid off house Therefore we would reinvest it into another rental. Therefore our investments look more like a faster moving line.

    I know other who are at the end of their careers, have health issues, etc. Therefore while they want to grow it is about growing perfectly, safely as they grow as a complete fully paid of mass.

    So it really depends on what YOU want as an end goal. Do you want safety or another asset someone is paying off.

    2Reply
  • Riley F.
    New York City, NY · Member since 2013 · 136 posts · 76 votes
    11y

    I think this is a no-brainer. At a 6% or less interest rate, that is one of the cheapest costs of capital you are going to see in your lifetime. Your future properties are going to be financed at a higher rate, they should be paid off first, not your 6% mortgage note. Not to mention, if inflation is running at 2% a year, you are paying off your loan with cheaper dollars year by year. That's a big win!

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  • Brian Mathews
    Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes
    11y

    Pay off your home, then rent it out and go buy another one to live in.  After you save money for a good downpayment.   Which shouldn't take long after you have no house payment. 

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