Should I pay off Heloc if it's tax deductible?

[Cal]

I am surprised the OP has not mentioned how cash flow positive the property is to offset the payments. As if it isn't generating at least 5-10% I would have to wonder why they bought a property in the first place. As opposed to simply buying dividend paying equities or preferred shares that get tax preferential treatement.

Having said that, I agree with andrew, why earn 1% and pay 3%. Personally, assuming it is cash flow positive. I would probably continue to pay the 3%, and take the tax deduction, but invest the other money to make more than the 1%. Much more.

[colossk]

I am surprised the OP has not mentioned how cash flow positive the property is to offset the payments. As if it isn't generating at least 5-10% I would have to wonder why they bought a property in the first place. As opposed to simply buying dividend paying equities or preferred shares that get tax preferential treatement.

Having said that, I agree with andrew, why earn 1% and pay 3%. Personally, assuming it is cash flow positive. I would probably continue to pay the 3%, and take the tax deduction, but invest the other money to make more than the 1%. Much more.

It doesn't have to generate 5-10% when he's building up equity in the 8-10% range each year plus whatever points he is doing in positive cash flow to be better than dividend paying equities

[mcu]

Thanks for the reply guys. The Heloc is at prime, so yes 3%. The building is cashflow positive (have to calculate what % that comes out to, but at least 10%). I don't want to invest in the market. Not enough experience....I have tried myself and with an advisor and both times came out with losses, so I will stick to real estate for now. I am looking to buy other property, but the problem is that the market has gone haywire and will not pay for an amount for a property that I don't think is worth that.

[Chris L]

Wow, this got complicated for no reason!

Pay down the HELOC, then reborrow it. Borrowed money is still tax deductible if used for investing. If you plan to buy a toy then keep the cash.

[LondonHomes]

This is the sort of thinking that got the American real estate market in serious trouble since nobody was paying off their mortgage because it was tax deductible.

This HELOC should probably be the last thing that you pay off, but you should pay it off when you can. If you want to buy another property you can just pull the equity back out when you need it.

[Cal]

It doesn't have to generate 5-10% when he's building up equity in the 8-10% range each year plus whatever points he is doing in positive cash flow to be better than dividend paying equities

Umm...the dividend paying equities should increase in share value also. But as mentioned they have preferential tax treatment over RE income.

But back to the OP....if all you know if RE...then by all means stick with what you know. It sounds like you are a disciplined investor in that you set your price target for a property, and if you don't get it for that, you don't make an unwise decision.