Pay off property or invest in new one.

2 Replies

I have two investment properties, cash on hand to pay one off, and combined equity of about 150k between the two. I just recently heard about HELOCs and refinancing a paid off home to purchase another. On a recent podcast it was explained that the FEDs can’t tax a loan and the rental income to pay pay down the financing is subject to lower taxes.  This strategy was an option if somebody lost a job and needed to live off this loan.

So question is would it make more sense to pay off a property off for the advantages described above (greater leverage) or simply roll my liquid cash into a 3rd property? 

There are more benefits to leveraging your money, which means putting a percentage down and financing the remainder. 

There is more safety in owning a property outright.

You should study the benefits of both, apply them to your situation, and then determine which option is best for you. I don't know all the facts but if you are looking for financial growth and a stronger return on investment, I would use the cash on hand to purchase another investment (or more).

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you