Updated about 7 years ago on . Most recent reply
Better to pay off property? Or save for another?
I currently own a rental income property.
It’s worth about $75k and I owe $50k on it. It is currently cash flowing $650/month.
Currently, my goal is to add as much passive income as possible so naturally I am saving for another rental property.
I’m just thinking, what if instead of buying another property, I just splurge and payoff the $50k mortgage and instantly raise my cash flow to $1,150 (owning the property outright). Then, I would plan to use a cash out refinance to pull the money out of the house and dump it on another.
Is this a good idea? Or should I just save and buy a new property the traditional way?
Most Popular Reply
Joe Villeneuve
#5 All Forums Contributor
Pro Member
#5 All Forums Contributor
- Plymouth, MI
...and you'd be behind. Do the math. ALL the math. If you take $50k out of your pocket and spend it on you're current property to pay off the mortgage (you know, the mortgage you're tenant is currently paying off for you), and you add $500/month ($6k/year, how many months (years) would it take before you recovered your $50k in cash...that you didn't need to spend in the first place?
Keep in mind, you are not making a profit until you have recovered all of the cash you spent...which includes the unnecessary payoff of the property.
Buy a new property.