Refinancing for immediate cash vs leaving lines as is

[Rick Dreyer]

Hello, we own four rental properties in Arkansas, all on 15-20 year mortgages to pay them off quicker. All have appreciated at this point, and we are wondering if we should be changing our strategy. Initially, we were going to continue working our day jobs, and 15 years down the road, have these as passive income

We have the opportunity to refinance these loans now and get immediate cash flow, where we could flip houses and look at buying more rental properties. The downside of this is that it will push out the end date of these loans, prolonging the time until we have passive income on these

Has anyone dealt with this, or know of a good way to analyze which path will be more profitable in the long run?

[Stephanie P.]

@Rick Dreyer

It's really up to you and your personal taste for risk.  Some people want everything paid off and others want to leverage everything so they can acquire more.

I think you would be well served to take the middle of the road approach.  Get a mortgage with the longest term possible and the lowest rate available (without paying too much in points).  Then as cash flow warrants, pay the loans off early (being cognizant of whatever prepayment penalties there may be if any).  If something happens and you are tight on cash, you have the ability to not accelerate the payments and pay the minimum.  Either way you're protected.

Stephanie