For some investors, the goal is to own properties “free and clear,” that is, with no mortgage debt. While this is a worthy goal, it does not necessarily make financial sense.
For example, consider a $100,000 property that brings in $9,600 per year in net income (net means gross rents collected, less expenses, such as property taxes, insurance, maintenance, and property management). The $100,000 in equity thus yields a 9.6 percent annual return on investment ($9,600, the annual net cash flow, divided by $100,000, the cash invested).
Three things you can take to the bank: