Joined: 17 May 2012
Location: Atlanta, GA
pre-paying investment property vs saving cash
Does it make sense to pay off investment property early instead of saving that money for down payment to buy another property? What tax benefits would I lose/gain by paying off investment property early?
Tue Apr 16, 2013 9:57 pm
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
quote: Does it make sense to pay off investment property early instead of saving that money for down payment to buy another property?
It almost never makes sense to prepay a property - the US mortgage market provides some of the least expensive capital in the world, all or the other 191 nations have 10 yr reset limits, restrictions, etc, the US is the only place whereanyone can go to a bank, borrow $100,000"s at <6%/yr, fixed rate, for 30 yrs.
Borrow "low, long" capital, keep it for the full term, and invest it elsewhere. Eg, borrow an extra $50k (pay $300/m, ie $108,000). Put the $50k into an 11%/yr index for 30 yrs = $1,150,000.
But don't borrow for tax benefits, it never makes sense to pay $10,000 in interest to get a $1500 tax break, that is an $8500 loss. (I hear folks say that they keep the mortgage for the tax break - but not invest the money - yipe - lol, our Tax Code causes a lot of people to do irrational things.)