Balancing debt reduction and cashflow

[Mehgan Moore]

We purchased a great property in 2012; due to appreciation and aggressively paying down the mortgage, we have some good equity in the property. This allows our monthly cash flow to increasing.

We are looking to purchase another property and are trying to consider all options for the down payment funds. We can borrow against my 401k and use some cash savings, OR do a cash out refi on one of out properties to help leverage us. We will likely do the BRRRR method and do the refi, but my question is how do you determine the right balance of debt reduction and cashflow?

[Geordy Rostad]

@Mehgan Moore

Also, from one perspective, paid off properties carry a higher risk than one with a large mortgage on it. If a tenant decides to sue you for some reason, one of the first things their lawyer will do is look up your house and see how much debt is owed on it. If you own the house free and clear, the lawyer sees a nice juicy target.