How quickly should I pay down my rental mortgages?

[GetRichODT]

One of my goals has been early retirement. 2 of the rentals I own are going to help achieve that goal. Here's a quick summary of each:

1) 30 year mortage, 4.125%, $1,350 / month rent, 30% equity

2) 30 year mortgage, 3.75%, $1,595 / month rent, 45% equity

I've owned both of them for < 4 years. I could pay off both in the next 2 years and own them free and clear.

What I'm trying to determine is how quickly should I pay off rentals. My goal is to cash flow gross $10,000 per month from my rentals. That coupled with other investments, 4% rule, etc will allow me to retire young at a level I'm comfortable with and allow me the time to focus on creating value through ventures other than selling my soul to corporate america.

Obviously, these 2 prroperties aren't going to gross me $10,000 per months, but if these 2 were paid off and i had 4 more like it (paid off), i'd be grossing about $10,000.

Thoughts on how best to decide when to pay down more quickly, especially with the markets generally being at new highs these days?

 

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[GlobalWealth]

If you pay them off earlier then you will have less cash to buy the other 4 properties that help you achieve your goal.

I would say this is a simple math problem.

If you are earning a yield of anything greater than 4%, don't pay off your mortgage early and continue to use the leverage to add properties.


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[ArtRyumin]

As with mentioned above about not paying them off I also consider your risk. Currently your equity % is your risk and the bank has the remaining. If you take more equity you also take more risk.
You'll have a better opportunity to get another positive geared rental if you keen that money available for acquisitions

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[MidwestLandlord]

Using actual mortgages, you might run up against lending limits depending on your income. In that case, the other properties might have to go under commercial loans (I would do that anyway, no fees other than appraisal and cheaper rates), and you might have to refi the current under commercial loans as well, depending on your lenders rules and your debt to income ratio.

I ran into that exact problem, where my lender would only lend me more if I put them all under commercial loans with the related cash flow pro forma, etc...

I would not be in a hurry to pay off loans with interest rates the lowest they've been in our lifetime.

 

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[malonewolf]

If you still have room to leverage up and buy more properties and have a diversified income stream to continue paying mortgages, then it's premature to pay off the loans.