Small but mighty vs expanding the portfolio
Alright looking for some insights and opinions. I have a low price SFH LTR. I owe $84,000 on the mortgage. It currently cash flows $300 a month on a $1200 a month rent. Debating on what strategy to use as I try to grow my portfolio. Asking for the plus and minus of these 2 options.
Option 1: Save cash and pay off mortgage. Thought is triple+ cash flow with just one insurance, maintenance, and management cost. Take out HELOC on property and use that to continue to invest.
Option 2: Purchase additional properties and build portfolio
I know that there are some tax implications to no having the mortgage payment to consider. Other then that I'm wondering on the downside of option 1?
Please share any and all thoughts
Thank you!
Most Popular Reply
Keep on scaling with adequate reserves until you hit your point where you no longer want to grow. At that point, start stabilizing the properties, proactively spend some cash on big ticket items (roof, furnace etc. that you know are coming due) or upgrades, then start paying them off. Make sure you don't go too fast and keep the proper reserves, but start to get that snowball rolling downhill rather than paying the first one off.
Returns on real estate without leverage just aren't worth the hassle. An index fund is a better option...eventually, I'm a fan of paying them off and treating them like fixed income, but not now assuming that your financial house is in order and you like owning and managing real estate.