Pay of Rental Property Early vs Making back your initial investment

2 Replies

Hello I have general question.

I recently bought a rental property for $35k and put roughly about $8,000 down and put about $5,000 in repairs, mortgage payment, utilities, etc. So my total investment is $13,000. My mortgage payments are $250 per month and I am currently renting it out for $750. I was wanting to know if I should focus on paying off the property which would take about 5 years or making back my initial investment by continue to pay the minimum mortgage payment of $250 which would take about 2 years. Also, what are the pros and cons of both methods.

Thanks 

BP Nation for your help

I would put the rental income in a separate checking account.  Let the balance build up and only use that account to pay for repairs or other expenses for that property. Once you have enough money built up in the account, use it to either pay off this house or buy another one. Either of your ideas are smart, so there is no disadvantage of either.

Hello,

It depends on your goals.  Do you want a paid off rental property, or do you want more property (or to do something else with that money)?

I look at it this way- you would be paying off the mortgage ($30k?) to gain $250/month in cash flow.  With that $30k, you could potentially find 2 more properties like the one you just bought, and have cash flow from all 3.  Which is the greater return on your investment?  For us, it makes no sense to pay down the mortgage when the interest rates are cheap and we can use that leverage to generate cash flow.  We are reinvesting the cash flow into more rental properties- it just makes more sense to us.

Kelly