I paid off the loan on my first rental property three years after I bought it. I was incredibly proud of myself at the time. I had used all the cash flow from my other rentals to pay off the mortgage. Over the three years I paid about $65,000 extra into the loan. After I analyzed the pay off I realized it may not have been a smart thing to do. I could have used that money for so many other things that would have made me much more money.
https://investfourmore.com/2014/02/07/first-rental-property-paid-three-years-bought/
I basically had saved myself $400 a month by paying off the loan. The loan had an interest rate of 4 percent and I can make much more money from my real estate investing. I could have used that $65,000 to buy more rentals. My first rental has been an awesome investment and although I bought 15 rentals from 2010 to 2015 I wish I would have bought many more. The video below talks about my first rental.
After thinking about things I got a line of credit on my rental after I paid it off. I also stopped paying off any loans early. I can make so much more using that money for other things. In the article below I go into more detail about paying off loans.
https://investfourmore.com/2018/06/15/is-it-smart-to-pay-off-your-mortgage/
Have you ever done the trick of using a home equity loan and depositing money in that account and withdrawing from that account so that you do not have 30 year mortgages? Do you know if it works?
I have heard of that. It is basically counting on you investing all your extra money into the line of credit. The problem is lines of credit have to be renewed which can be expensive.
If you are not investing in rental property it may be best not to pay it off but if its a personal home it can give you peace of mond knowing the house is yours even if your cash flow suddenly decreased after that.
Yes, but only if you have other savings. I still think it is better to use the money for other investments.
When buying own property most people think it's all about paying off the loan as soon as possible. But the truth is whether you are only a home-owner or real estate investor it's never about paying off the loan as soon as possible. As a home-owner it's about quality of life - if you want to live your life fully you have to have enough cash-flow. So it's better to have low rates to pay for your rental in order to have enogh money to live. And as an investor it's also about having enough cash-flow to invest in more properties in order to scale up your profits. As right now money to borrow for rentals is so cheap it doesn't make sense to pay it off quickly.
Great comment!
Thank you:-)
I agree with you, more investments, more money, it's a very simple life mathematics, but sometimes difficult to follow.
Investments is a beautiful thing, I keep trying to tell people, just like in my post yesterday.
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