Please forgive me (and redirect me to a relevant thread) if this discussion has already happened; I'm finding the forums quite hard to navigate.
Last year my wife and I bought a duplex as a rental property, 20% down with a ~2.9% five-year term on a 30-year mortgage. After factoring in PITI, misc expenses, putting away a yearly 1% of the house's value for our contingency fund, and allowing for 10% vacancy, we make a modest cash flow. (We live in a hot real estate market in Canada, but the rental market happens to be equally hot, so that's why we're actually making money on rentals in Canada.) We're looking for another duplex to add to our portfolio.
We'd love to retire early, and one day I realised, "hey, if we tried to aggressively pay down the mortgage principal with some of our money, we'd be making free-and-clear income a lot sooner!" As in, once all the mortgages on both properties are paid off, we'll be able to live off the net income from the rentals. We live an accidentally Mustachian lifestyle, thanks to the fact that we have absolutely no interest in TV and other fripperies, we have a massive veggie garden, and we have obscenely low rent in my in-laws' in-law suite. So it won't take much income for us to have a cushy lifestyle.
This all makes perfect sense to me on paper. I realise that my ROI drops every time I pay down principal with some of my own money, because the investment is less leveraged. But if our goal is to retire early, and we know we'll be making enough money from this investment, does it matter how good my ROI is?
So I need all you seasoned real estate investors to tell me why my idea is horribly dangerous, or horribly inefficient, or simply unnecessary. Let's say we're able to pay off the mortgage in 12 years. Would it make more sense to invest that money in an index fund, then take it all out of the index fund and pay off the mortgage in one lump in 12 years? If so, why?