Financing an additional property or paying down a current property

5 Replies

Good Morning BP!  I have a question that I've been playing over in my mind in many ways, my question is I have 1 property with a long-term tenant that in July will renew our contract for two years.  I have 20% in cash saved that I would like to use for a 2nd property, but I'm wondering if I should A.) use the 20% saved to reduce the 1st properties mortgage or B.) use that money to purchase a second property?

Any help/direction is greatly appreciated!

Nathan

good question.  The answer depends on your personal risk tolerance.  Many investors will tell you that the logical answer is to buy another property and increase your monthly cash flow, and they buy more property when you have more cash saved up.

While I personally agree with that philosophy, I can also argue the benifits of free and clear property.  So the real question is what is your risk tolerance?

To your success

Josh

It depends on your goal and time frame. Is your goal to have one paid off rental in X years or to have Y paid off properties in Z years or to have a certain cashflow with certain rate of leverage.

Great Responses and all I have considered, I'm a big Dave Ramsey follower and enjoy what he has practiced which is the snow ball affect of paying off 1 at a time.  I'm going to save the 20% for a good down payment on the second property, but to continue after all monthly expenses pay down the principal on the 1st rental property.

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