# Pay Down Mortgage or Invest Income



## SlowandSteady60 (Feb 19, 2012)

If you already have a principal residence which is paid for, and you own income properties with positive cash flow, is it better to pay down the mortgage on the properties and hold long-term, or invest the monthly income and sell the property in say ten years at a small profit. I've heard many different takes on this one. Any thoughts here?


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## donald (Apr 18, 2011)

Why not just keep paying down your rental properties and use the % that is cash flow positive to invest with?If you have assets that are generating money for you why would you want to sell? in 10 yrs for a small profit?Keep them(why would it be a small profit in 10 yrs,should'nt be)Sounds like you have a perfect sceniro in place.I would do both and not look at it as a either or.......layman view.


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## crazyjackcsa (Aug 8, 2010)

He may wish to retire in 10 years, rentals aren't the passive income some think they are.
You would have to take a look at the tax benefits of either plan and your personal scenario. I'm not familiar with the ins and outs, but either is a decent plan.


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## the-royal-mail (Dec 11, 2009)

You would have to be a pretty good investor these days to be able to derive enough PROFIT from your investments after paying fees (which could approach 4% in some cases) and of an amount that would trump the interest you would save on a lower mortgage balance. I say pay down mortgage...

But how's your emergency/rainy day savings fund? Is there enough cash in there?


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## andrewf (Mar 1, 2010)

If your investments would include anyfixed income allocation, I would repay the mortgages rather than that portion of the investment.


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## SlowandSteady60 (Feb 19, 2012)

Just a sidenote. We have rainy day funds for personal and for each property that we own. Currently paying down mortgage and investing positive cash flow. Just curious what others would do and why. Invested money hopefully generates more through ETF's, stocks etc. Paying down mortgage increases equity. Which one is better in the long run, not sure. Just throwing it out there.


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## MrMatt (Dec 21, 2011)

The risk adjusted return of paying off your mortgage almost always wins by a handy margin.

You have to take on substantially more investment risk to beat it, and that's the real question. 
Do you want to get a relatively good return with no risk, or a slightly higher return with much higher risk.

Personally I go for a mix of the two because I can't deny the allure of the higher return, but the competative risk free return is just so tempting.


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## Berubeland (Sep 6, 2009)

Prepaying your mortgage for an income property rarely makes any sense. First of all unlike the mortgage on your personal residence the interest is completely tax deductible. 

Equity stuck in an income property makes 0 % return even though the payments on the mortgage stay the same. 

Furthermore, you'll find around year 10 that you start to pay an awful lot of income tax on that mortgage paydown. Multiply this times 100 units and you'll quickly understand why corporations own rentals and why they almost always refinance to buy something else.


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