Paying off rental properties?

Question

Is it good idea to pay off the rental properties with the money you keep for future deals? And then take heloc when you actually find a good deal. Then refinance the paid off property to pay off heloc loan.

I was wondering if I can do something better with the money I have saved up for the next deal while I wait for my next deal?

Peter Mckernan · Answer

@Manjunath Shetty The ultimate answer is in the goals that you are setting for yourself. If you are looking to work on the investments as more of a conservative position then that is a great way to go. Pay the rental(s) off and then use the cash flow to buy 1 at a time.

If your goals are to build a large portfolio and then start to pay them off later down the road once you are set with 50-100 rentals the smarter decision would be start building up your rental portfolio and get it to a great position for when you are going to start paying them off.

It's all about your goals, comfort level, and family goals in the future.

Erickson Sainval · Answer

What is your ultimate goal and is this the most efficient way to get to it. If you think this is, than do so. If this has been your current actions and your happy with the progress, than continue it.

Manjunath Shetty · Answer

Thank you for all the replies.

my goals are still to keep growing my portfolio. But i was wondering if its good idea to park my liquid cash in equity instead of considering other conservative methods like CD, index finds, savings account. i know i will miss out on writing off the mortgage interest as part of depreciation. but i wanted to look at it as investing my money in some "safe" stocks which pays me dividends (rental income).

>>What are the cost associated with this?

i am not sure. i was hoping someone who has done it would pitch in

Theresa Harris · Answer

What are the cost associated with this?   Is there a refinance charge or higher interest rates.  I just invest my money, so it isn't tied up and I can get it when I want with no extra charges or hassle.

Nicole Lee · Answer

As Peter mentioned, it's all about your comfort level and your end goal. It's no wrong way, as long as you continue to invest. The BRRR (buy, rehab, rent, repeat) method works great, just make sure you watch the market and always include vacancy rate during slow periods. I pulled about 80% of the equity out my first property with a interest rate of 5.75%.

Trading in the stock market may be a good idea for the money you want to invest short term I would research it first before diving in.

Nicole Lee

Arizona Real Estate Agent SA680730000

Dave Poeppelmeier · Answer

Another thing to consider is your funding sources. If you're going to use Commercial lending, they are going to be watching your debt ratios making sure you're not getting too leveraged. Paying down some balances would help lower that. But, if you're using private money that doesn't care about that, then just build up your war chest.

Paying off rental properties?

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