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).
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