Should I spend 20,000 to pay down a loan or buy another property?

3 Replies

Hi all!

I have two loans associated with my business and I am wondering if I should take $20,000 to $30,000 and pay one of the loans down?

Here are the loan details

Both loans have a balance of about $190,000 and they are both at 6.5% interest. The remaining term is about nine years.

So i could plop a lump sum onto this loan and shorten my term by a couple of years and save interest as well.

The second idea is to take the money and put it towards  another rental property purchase. I have to say that I have a comfortable of properties now and I am not 100% sure that I want any more.

So i am open to suggestions.

Thanks

Travis

Travis, if it were me I'd invest the money, but I think you answered your question already. If you aren't sure you want more property you probably shouldn't buy anything. That's how you become a burnt-out landlord, the kind who sells their properties to guys like me at a discount, haha. 

Will you earn more than 6.5% on the money if you invest it into another property?  A $20k pay down on the loan won't create more cash flow right now but will increase the principal pay down (I'm assuming this is a home loan...)  This will increase your taxes slightly due to more income on the property even though it isn't realized yet.  These are all things you probably already know but they would be just a couple of the reasons why I would use the money to acquire another cash flowing property instead of paying down my mortgages or company debt.  However, there are other factors in play here so if you are happy with your portfolio then start paying off properties.  

William Allen, Real Estate Agent in FL (#SL3330247)
850-483-1761

if you don't want any more properties than pay off your loan. That's easy ;)

That being said, if it was me I would put it toward my next house! On the other hand I'm in a growth and acqudision stay and want to get to 10 as quick as possible without sacrificing quality! I know the rates and market is going to change where it won't make sense at some point! 

At this time I plan on cleaning up all the Pmi, paying down what doesn't make sense and evaluating where to go from there.

So it really depends on your goals and plans!

Join the Largest Real Estate Investing Community

Basic membership is free, forever.