To pay off or to reinvest ?

Question

I recently bought a townhouse in a renter popular area. The property is occupied and i am currently making rental income. I only financed 70K. I am fortunate to say I am saving significantly between rental income on this property, my profession, and other investments. My questions is .....

Should I pay off the property ASAP or use the 70K to put down for another property similar property with similar deal in today's market? FYI I am based and investing in South Florida.

Steve Gee · Answer

Addam thanks! Yes in my case my mortgage is $408/ month, 30 year conventional loan with 5.3% interest rate.  So i can see your point about making those 70k produce more on a similar deal and make more. Thanks again!

Addam Driver · Answer

HI @Steve Gee,

Like @Brian Garrett said it is difficult to give any input/advice w/o knowing the details of your first deal.

I will say this... IF you have a mortgage that is $xxx, remember that by you paying it off sooner will only save you the monthly payments.

Example:

$350 mortgage + a $70k pay off probably wouldn't be the best use of $70k.  You will be spending $70k to save $350 a month.

OR

$70k as a down payment on another property that will bring you $450+ in cashflow, would be a better use of the cash on hand in my opinion.

Hope this perspective helps!

-A

Steve Gee · Answer

Thanks for the reply Brian. What details would you like to know ? My interest is in rental income and not flipping purchases. I find myself undecided to payoff the 70K loan and capitalize on the rental income or use that cash to put down for another property.  Your advise is much appreciated!

Brian Garrett · Answer

Hard to give any input/advice without knowing the details of your first deal.

I wouldn't be in any rush to pay off my properties and have dead equity sitting in them though.