Rental properties: owning free & clear vs. mortgage

[Chris Pace]

I am still very new to this so please excuse my ignorance. What are the pros and cons to owning a rental property outright? It seems that cash flow would be significantly increased if you can pay a mortgage off, but through all my studying I never really hear anyone talking about it. It just seems absurd to me to have 20 loans out on homes that are cash flowing $100- $250 monthly. Why not pay off a couple at a time before adding to the portfolio? Once again I'm a total noob so please excuse my ignorance. Thanks for the time and happy holidays to you all!

[Sylvia B.]

@Chris Pace

Most of the posts so far have been heavy on the disadvantages of owning outright, so I will stick with the advantages. For reference, I own 11 properties, no mortgages.

1. Closings are easier, cheaper, faster, and more under your control if you buy with cash. No bank paperwork or approvals. Inspections and appraisals are at your discretion.
2. Carrying costs during rehab and vacancies are much lower, therefore less worrisome.
3. Insurance coverage is under your control, not the bank's.
4. Peace of mind. This is the biggest. If a renter is late it's annoying, but you don't have to wonder how you're going to come up with the money for your mortgage payment. Long term or multiple vacancies don't put you at risk of losing your investments.

But you have to realize that everyone's situation is different. Just look at the location of each person on this thread. Some rural, some urban, and 8 different states. Some are at the beginning of their careers and others are almost ready to retire. Some need to get into RE with as little as possible invested while others need a place to park cash. The size of the investment is also a factor. Are you buying a house for $50,000 or $500,000? All of these factors and more will affect the responses to your question.