Best way to reinvest cash flow?

Question

Hello all. New to bigger pockets. Pretty simple question, just looking for others ideas and opinions. In 2009 I bought a foreclosure, (my first), for around $65k, and lived in it as well as renting rooms to friends while we were in college. Upon moving I held the property and continued to rent it out. I cashflow roughly $350/month from the property and the mortgage is roughly half paid off. My question is how is this profit best used? Is it worth while to pay this extra cash onto the mortgage principal to payoff the debt off quickly? Stick cash in pocket? Reinvest into another rental property? Love to hear some ideas and opinions from others. Thanks for any help.

Jesse

Thomas S. · Answer

Pull out as much equity lying dead in the property as possible and reinvest in another rental. Assuming you have banked the equilivant of 6 month rent for emergencies bank the remaining positive cash flow until you have enough for another down payment.

Paying off a rental mortgage is not good business scenes as having money lying dead in a property kills the cash flow. Return on equity becomes the primary income instead of the property itself which is suppose to be generating the income.

Jesse Birdwell · Answer

thanks for the replies guys. Good insight. I had originally thought that getting rid of the debt was the smartest but like you all said, why kill your cash flow when the tenants are paying for it.

Justin Fox · Answer

Sock away that 350 until you can put down on another property.  You'll have to run the numbers and see if the the cost to refinance and get the cash out is worth it.  I mean, your tenants are really the ones paying for it, but it still affects your bottom line.

I wouldn't deleverage until down the line once you're done and want less bills to keep covered in the checking account for auto-pay.

Rosston Smith · Answer

Get a HELOC and stick that cash into another property!Do not put it in your pocket.Definitely reinvest into another property.

Best way to reinvest cash flow?

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