Free real estate calculator
Pay Off Rental Mortgage or Buy Another Property?
Compare whether your extra cash could build more wealth by paying down debt or buying your next rental property.
Inputs
Current capital
Debt payoff target
Rental purchase
Recommendation
Buy rental
Net worth delta
$103,003
Cash needed
$55,000
Rental purchase
Today
Current shortfall
$0
Buy Rental
Ending modeled net worth
$581,588
Ending debt
$253,211
Monthly cash-flow lift
+$419
New rental equity
$182,962
Interest paid
$200,884
Debt payoff
Not paid off
Pay Down Debt
Ending modeled net worth
$478,585
Ending debt
$0
Monthly cash-flow lift
+$900
New rental equity
$0
Interest paid
$6,244
Debt payoff
Year 3, month 11
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What this calculator compares
This calculator compares two uses of extra cash: paying down an existing debt faster or using that cash to buy another rental property. It estimates ending net worth, debt, interest paid, cash flow, and rental equity in each path.
When paying down debt can make sense
Paying down debt can make sense when the interest rate is high, the payment creates stress, you want more monthly margin, or the next rental deal does not compensate you for the extra risk.
When buying another rental can make sense
Buying another rental can make sense when the property has durable cash flow, reasonable leverage, enough reserves, and a return profile that compares well against the mortgage payoff return.
Example: Extra cash toward a 7% rental mortgage vs buying another rental
A 7% rental mortgage payoff can behave like a relatively direct return because every dollar of principal reduces future interest. Buying another rental adds potential cash flow and appreciation, but also adds vacancy, repairs, debt, and concentration risk.
Key tradeoffs to understand
Compare liquidity, risk, cash flow, interest savings, rental equity, and your ability to keep buying without weakening reserves. You can also compare this strategy against growing your rental portfolio over time.
FAQ
Is it better to pay off a rental mortgage or buy another rental?+
There is no universal answer. Paying off debt can lower risk and interest costs, while buying another rental can add cash flow and equity growth. Compare both with realistic assumptions.
What return do I get from paying off a mortgage?+
Paying down a fixed-rate mortgage generally saves interest at the loan rate, adjusted for taxes and your broader cash position. It is different from a guaranteed investment return, but it is a useful benchmark.
Should I pay off high-interest rental debt first?+
High-interest debt often deserves priority because the interest cost can be difficult for a new rental deal to beat after risk and expenses. Keep reserves and liquidity in the comparison.
Does buying another rental usually build more wealth?+
It can, especially when leverage, cash flow, appreciation, and debt paydown work together. It can also underperform if the deal is weak, expenses are understated, or leverage is too aggressive.
How should I compare cash flow, equity, and risk?+
Look at ending net worth, debt, monthly cash flow, liquidity, and how resilient the plan is under slower rent growth, higher expenses, or vacancy.