Author Topic: Pay down primary residence or invest in rental property?  (Read 606 times)

FITortoise

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Pay down primary residence or invest in rental property?
« on: June 28, 2019, 11:37:11 PM »
Hello!

I have a 7/1 ARM that started recently, with just over 20% paid down on the property. I am starting to look into investment properties in order to build passive income stream. If you have $50k to put either in paying down the mortgage, or put into rental property, what factors would you consider and what would you do? What about the next $50k etc.?

This is after maxing 401k, HSA, and any other tax-advantaged accounts plus having emergency savings.

Thank you!
« Last Edit: June 28, 2019, 11:42:21 PM by FITortoise »

Freedomin5

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Re: Pay down primary residence or invest in rental property?
« Reply #1 on: June 29, 2019, 12:22:15 AM »
Id probably put it into a taxable account invested in index funds according to my investment plan. Rental properties are a hassle and are not considered a passive income stream, and I like hassle-free.

seemsright

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Re: Pay down primary residence or invest in rental property?
« Reply #2 on: June 29, 2019, 07:30:31 AM »
Id probably put it into a taxable account invested in index funds according to my investment plan. Rental properties are a hassle and are not considered a passive income stream, and I like hassle-free.

+1

I want true passive income. I do not want to deal with phone calls of this thing needs to be fixed. This issue after this issue...not thanks. I will invest in index funds.

Another Reader

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Re: Pay down primary residence or invest in rental property?
« Reply #3 on: June 29, 2019, 08:39:29 AM »
As someone that owns rentals, I would advise you not to invest in rentals for "passive" income.  Rental properties are a business, and like any business, they require your skills and your time.  If you want to do this, make sure you understand the math of successful rentals and what is involved in managing them.

SwordGuy

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Re: Pay down primary residence or invest in rental property?
« Reply #4 on: June 29, 2019, 10:25:23 AM »
As someone that owns rentals, I would advise you not to invest in rentals for "passive" income.  Rental properties are a business, and like any business, they require your skills and your time.  If you want to do this, make sure you understand the math of successful rentals and what is involved in managing them.

Agreed.   We, however, priced a hired property management company into our rent structure.   Once we have a property ready to rent we spend very little time on it - that's what the property management company is for.

The process for a rent-ready unit has proven to be almost completely passive.   We have four rent-ready properties that all together net us a bit less than $20,000 a year.   I'll take $5,000 an hour for 4 hours of my time a year.

We buy properties cheap because they need some work and the sellers can't or won't do it.   Getting a property ready to rent is a very active task because we do most of the work ourselves.   Other people do it differently and limit their "active" role to the finding and purchasing of rent-ready units.


I cannot agree too much with the recommendation to actually LEARN how to calculate the various financial measures on whether a property is a good investment or not.  Lots of people are too lazy to do that and lose a lot of money.

FITortoise

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Re: Pay down primary residence or invest in rental property?
« Reply #5 on: June 30, 2019, 03:58:43 PM »
Thank you, all. The "treat it as a business" reminder is important.

Here's also a helpful article for those who are interested:
https://wealthyaccountant.com/2019/05/17/the-best-rental-property-you-can-buy/