Pay-Off Mortgage or Buy Rental Property

[freeazabird]

My husband and I have a dilemma. We are not sure whether we should use our savings to pay off our mortgage or put a down payment on a new mortgage for a rental property? Our current home has a $174K balance at 4%, we could pay this off in 7 years. If we bought a rental property in our neighborhood we would spend no more than $200K. Currently, our household income is $175K, and we are concerned that my husband's career field may dry up in the future (10 years or so) and  reduce our income. So my question is should we use our extra funds to pay down the mortgage or buy a rental? We live near 2 universities so could rent easily for at least $1,600/mth.

[waltworks]

Sounds like you need to do some background reading on rental real estate investing and come back. At 4%, your mortgage is pretty darn cheap so I would not prioritize paying it off *personally*. If you are worried about losing income, I also probably wouldn't invest a bunch of money in anything as illiquid as real estate.

Lots of open questions. Go read all you can find at biggerpockets.com and come back.

-W

My husband and I have a dilemma. We are not sure whether we should use our savings to pay off our mortgage or put a down payment on a new mortgage for a rental property? Our current home has a $174K balance at 4%, we could pay this off in 7 years. If we bought a rental property in our neighborhood we would spend no more than $200K. Currently, our household income is $175K, and we are concerned that my husband's career field may dry up in the future (10 years or so) and  reduce our income. So my question is should we use our extra funds to pay down the mortgage or buy a rental? We live near 2 universities so could rent easily for at least $1,600/mth.

[arebelspy]

1600/mo rent for a 200k house is generally not what most investors would be happy with (look up the 1% and 2% rules).

I'd personally be buying a rental over paying off that mortgage, if you are cut out for landlording.

I'd suggest rather than reading at BiggerPockets, going to check out some real estate books from your library.  Much more exhaustive and will give you a good idea of the questions you need to start asking, here or at BP.