Mortgage Paydown vs down payment for another property

4 Replies

I currently own my personal home and two rentals, and I'm also currently looking for my first BRRRR deal. I used my own cash for down payments so far, and bought properties that didn't really need much work, but now I'm ready to roll up my sleeves and try to put in the work to pull my cash back out at the end.

I have currently been paying extra towards my smallest rental property mortgage and have considered doing the debt snowball method on my existing mortgages. (owe around $75k on smallest one) My mortgage payment is $600 and I have been putting an extra $500 towards it each month. I have been torn on if this makes sense, or if I should be throwing that extra $500 into savings until I have enough for a down payment on another property (this would be on top of the BRRRR deal as I have funds set aside for that deal down payment also).

It’s appealing to me to have fewer free and clear properties to maintain than to have a larger number that all have mortgages from an immediate Cashflow and ongoing maintenance standpoint. It’s also appealing to have more properties that only cashflow a little now, but as they start getting paid down, then the cashflow potential is greater. (Think 5 free and clear homes bringing in $4,000 a month after expenses vs 15 homes with mortgages each cash-flowing around $270 a month to get to that $4,000 a month, but then could be closer to $12,000 after expenses as the mortgages get paid off)

I wanted to get everyone’s input on what you would do in this scenario and why? Go for 5 or 15? Feel free to ask me questions also! Thanks

@Mindy Templeton For me I would prefer to have the extra 500 to put towards another property...I would totally love to have properties without a mortgage but how long will you lose out on the cash flow trying to pay of 75K?

I think you answer your own question. If you only want 5 properties, I think you should buy all 5 then start to pay them off. It's easier to scale/pay down mortgages the more properties you have cash flowing. 

You limit your exposure to vacancy (effecting your livelihood) the more properties you have. Mortgage pay down is a huge benefit when tenants pay for your equity.

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