Review my properties and next steps on my jourmey

General Landlording & Rental Properties
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Review my properties and next steps on my jourmey

Steve S.
Dallas, TX · Member since 2014 · 650 posts · 53 votes

I have 2 rental properties. 

Property 1

1977 valued at $290,000

30 year note 3.875% purchased 2016 for $130,000
monthly payment $363

Owe $60,000

Rent $2000/month

Annual taxes $$3500

property 2

1998 half a duplex valued at $575,000

Purchased 2017 $340,000

30 year 4.125%
owe $220,000

Rent $3600/month

Property tax annual $10,000

i dont currently pay any extra in these properties. What if anything would you recommend I do?

I Work a career type job taking home $15,000 per Month with minimal Expenses so have some optionality on what I do either excess cash (buy stocks, index funds, pay down real estate, etc)

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G. Brian DavisPro Member
Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 866 votes
9mo

Hi @Steve S. I wouldn’t rush to pay them down early given how cheap that debt is; the optionality is more valuable than eliminating 4% loans. If anything, I’d focus new capital on higher-return opportunities rather than concentrating more equity in already-stable assets.

In our investing club, this is exactly where small, diversified co-investments shine. Instead of sinking excess cash into one property or overpaying down debt, we place smaller amounts across multiple deals, spread risk, and let the portfolio compound without overexposure to any single asset or market. With your income and balance sheet, maintaining liquidity and diversification is likely the biggest edge you can preserve.

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  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 978 votes
    9mo

    @Steve S.

    I recommend finding a financial planner who specializes in working with real estate investors. You need someone who can look at your complete financial picture and provide comprehensive financial advice. 

    You also need a financial planner who is proactive instead of reactive when providing advice.

    Working remotely with your financial planner will expand your options.

    I would also recommend looking for a financial planner who will work with you throughout the year and can help you strategize, as well as be responsive when you want to understand the consequences of the financial decisions you are making.

    Happy to answer any questions. Good luck.

      404-482-3170
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    • G. Brian DavisPro Member
      Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 866 votes
      9mo

      Hi @Steve S. I wouldn’t rush to pay them down early given how cheap that debt is; the optionality is more valuable than eliminating 4% loans. If anything, I’d focus new capital on higher-return opportunities rather than concentrating more equity in already-stable assets.

      In our investing club, this is exactly where small, diversified co-investments shine. Instead of sinking excess cash into one property or overpaying down debt, we place smaller amounts across multiple deals, spread risk, and let the portfolio compound without overexposure to any single asset or market. With your income and balance sheet, maintaining liquidity and diversification is likely the biggest edge you can preserve.

      2Reply
    • Peter MckernanBusiness Member
      Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
      9mo

      Hey Steve! This really depends on your goals to be honest. The payments do not seem crazy and the low rates are great on rental properties! 

      I would focus on what your goals and what you want to do.. Sounds like you have great active income, so you could add to your passive income/horizonal income by adding more doors instead of paying down the current ones. But if you want to live care free with no debt at all and income coming in you could pay those down and off. 

      This is something you need to strategize about figure out what you want to do. 

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    • Caleb Brown
      Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
      9mo

      The 2 properties you have have cheap debt and a lot of equity. You also have strong income. You can do this a million ways depending on what you want to do. A few options to give you ideas... 

      1) 1031 or trade up the properties you have. That can be more doors or buy in a better area or change asset types. 2) Leave your properties alone and use your income/savings to purchase more. 3) Do a cash out refi on the 2 to pull the equity out and reinvest. This would increase your rates and change your monthly payments. 4) Stay the course and hold these 2 while investing your income in stocks, mutual funds, etc. 

      Real Estate has a million ways to go about and you have a strong base to do anything. I would learn different niches, in the meantime invest your income in stocks, funds, retirement accounts, etc. 

      1Reply
    • Dave FosterBusiness Member
      Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
      9mo

      @Steve S. , like others said, depending on what aligns with your future financial goals, you have a lot of options.

      I'd be most concerned with the age of those properties and potential capital expense exposure. If you decided to sell the properties, you would be able to do what we call a consolidation exchange, where you sell multiple properties in a 1031 exchange and reinvest in a larger investment opportunity. And one that could have reduced exposure to potentially large fix items.

      This would allow you to defer all of the capital gains tax and depreciation recapture, and concentrate your equity into some better cash flow potential.

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    • James JonesPro Member
      Investor · Collierville, TN 38017 · Member since 2017 · 716 posts · 529 votes
      9mo

      You’re in a strong position already. Both properties are doing exactly what long-term rentals are supposed to do: low leverage, strong cash flow, and massive equity buffers.

      A few objective observations and next steps to consider:

      1. Don’t rush to pay these off early.

      Your rates (3.875% and 4.125%) are excellent, especially relative to today’s financing environment. From a math perspective, aggressively paying these down is rarely the best use of capital unless your goal is purely emotional security.

      2. You’re sitting on a lot of trapped equity.

      Property 1 alone has roughly ~$230K in equity. Property 2 has ~$350K+. That equity isn’t doing anything unless you deploy it intentionally.

      3. Your portfolio already qualifies you for leverage-based growth.

      With strong W-2 income and conservative LTVs, you’re in a position to:

      Cash-out refinance selectively

      Use a HELOC on the single-family

      Or leverage equity as down payments on additional cash-flowing rentals

      The key is not over-leveraging. Keep DSCR healthy and stress test conservatively.

      4. Define your actual objective before acting.

      Ask yourself:

      Are you optimizing for cash flow replacement?

      Portfolio scale?

      Tax efficiency?

      Optionality and flexibility?

      The answer determines whether your next move is more rentals, diversification into index funds, or simply holding and compounding.

      5. A reasonable next step:

      Rather than changing anything immediately, I’d model two scenarios:

      Status quo with excess cash invested outside real estate

      One additional property acquired using existing equity, without materially increasing risk

      Let the numbers decide, not urgency.

      0Reply
    • Joseph Guzzardi Jr
      Rental Property Investor · Member since 2019 · 411 posts · 148 votes
      9mo
      Quote from @Steve S.:

      I have 2 rental properties. 

      Property 1

      1977 valued at $290,000

      30 year note 3.875% purchased 2016 for $130,000
      monthly payment $363

      Owe $60,000

      Rent $2000/month

      Annual taxes $$3500

      property 2

      1998 half a duplex valued at $575,000

      Purchased 2017 $340,000

      30 year 4.125%
      owe $220,000

      Rent $3600/month

      Property tax annual $10,000

      i dont currently pay any extra in these properties. What if anything would you recommend I do?

      I Work a career type job taking home $15,000 per Month with minimal Expenses so have some optionality on what I do either excess cash (buy stocks, index funds, pay down real estate, etc)


      If you are looking for relatively immediate cash, you can consider a 2nd lien DSCR loan on property #1. It would still cashflow, cover dscr requirements and you'd be able to pull out a $100k if that's what you are looking to do. That int rate will be much higher but depending on what you do with the cash it can be beneficial. Oh and similar to cash out refi, no negative tax implications.

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